Three months ago, Amazon yanked over 5,000 IPG titles from the Kindle store after IPG refused to capitulate to Amazon’s demand for better terms. The titles were restored just before Memorial Day. IPG wouldn’t comment on those negotiations, but president Mark Suchomel wrote in a letter to clients at the time, “We will continue to work hard for every last sale so that all of our publishers stay healthy moving forward.”

Now, Suchomel says in a statement, “Whether or not to sell books with DRM is a decision publishers need to make. Since there was interest among our clients, we felt IPG could service them better by giving them an option.” Though Suchomel does not mention Amazon explicitly, anti-DRM advocates have argued that DRM keeps users locked to the Kindle store.

Cynthia Sherry, publisher of IPG client Chicago Review Press, says, “I do not believe that DRM prevents piracy, but simply frustrates paying customers and hinders sales. By removing DRM we are offering our customers the flexibility to read their e-books on whatever device they please.”

IPG’s announcement coincides with BookExpo America, the United States’ largest book industry event. Yesterday at the Publishers Launch BEA conference, Macmillan’s Fritz Foy announced that, in addition to removing DRM from all Tor/Forge titles, Macmillan is launching a DRM-free science-fiction digital bookstore.

See also:

“Why I break DRM on e-books”: A publishing exec speaks out 

DRM is crushing indie booksellers online

A kinder, gentler DRM?

Note to publishers: Your addiction to DRM is killing you

Will Hachette be the first big-six publisher to drop DRM on e-books?

See also: Why Amazon’s Kindle battle with IPG matters

Here’s IPG’s letter to clients:

Dear Publishers,

IPG and Amazon have agreed on terms; your Kindle editions will be available again through Amazon today.

I can’t thank you enough for your input, support, patience, sacrifice, and loyalty over the last few months. I only regret that we weren’t able to make up for all of the lost revenue when your Kindle titles were not available. We will continue to work hard for every last sale so that all of our publishers stay healthy moving forward. For the period from June 1 through August 31, 2012, IPG will not take a distribution fee on Kindle sales, and 100% of the revenue for these sales will flow through to our publishers.

IPG and our publishers also received a tremendous amount of support from much of the rest of the industry, for which we will be forever grateful. I feel that the experience has clarified some things for us and our clients, and that now we are all even better equipped to navigate through this rapidly changing industry. I look forward to sharing these insights with you in the coming weeks, and to continue to work on building your business through maximizing sales and reducing risk.

Sincerely,

Mark Suchomel

Image courtesy of Flickr / bfhoyt

Bryce Milligan is the publisher of the San Antonio-based Wings Press, which sells “multicultural books, chapbooks, CDs, DVDs and broadsides.” In an article posted on the Wings website and at Change.org, Milligan writes, “Amazon’s recent actions have already cut the sales of the small press I run by 40 percent. Jeff Bezos could not care less.”

IPG, the distributor of Wings Press, is “the second largest book distributor in the country, but still only a medium-sized dolphin in a sea of killer whales,” Milligan writes. He offers “a single practical example” of how Amazon’s actions hurt his company — even as Wings was benefiting from one of Amazon’s major promotional tools:

Wings Press had offered up one of its Kindle titles, Vienna Triangle by California novelist Brenda Webster, for the Amazon “daily deal”a limited time offer of 99 cents per download. The book zoomed to the top ten of one of Amazon’s several bestseller lists. While it was still listed as a bestseller, Amazon suddenly marked the title as “unavailable.” The trail of loss increases in impact as it descends the food chain: Amazon doesn’t notice the loss at all. IPG sees it as one of its 5,000 Kindle titles that vanished. Wings Press sees it as one of its 100 Kindle titles that vanished. The author sees it as the loss of her book, period.

Overall, IPG president Mark Suchomel says digital sales make up just 10 percent of IPG’s total revenues. But the percentage is greater for some individual client publishers. Milligan says “already e-book sales were underwriting the publication of paper-and-ink books at Wings Press.

Amazon hasn’t yet removed the print editions of any IPG titles, though I have to wonder if the company is holding that move in reserve. As more publishers like Milligan notice an effect on their sales, IPG runs the risk that its clients will start complaining not just about Amazon but about IPG’s refusal to come to an agreement with Amazon.

For now, IPG recommends that publishers clearly state all of the other retailers where their e-books are sold. At the end of the Change.org petition, Milligan notes, “One can choose to buy ebooks from bn.com or from almost any independent bookstore rather than Amazon. One can buy directly from IPG. A free app will allow one to read those books on a Kindle. [Note: I think he means Calibre, which lets users convert other e-book formats into the Kindle-supported MOBI format, but in many instances this requires DRM-stripping plugins, making the process a little complicated for the average reader.] The resistance has already begun, and it starts with choice.”

A few thoughts:

Will Amazon (NSDQ: AMZN) try to grab distributors’ digital business for itself? Key sentence in IPG president Mark Suchomel’s letter to clients: “If anyone from Amazon calls you, please let them know that you are distributed by and contractually tied to IPG.” In other words, IPG believes Amazon may reach out to clients directly about selling their e-books.

Amazon’s e-book contracts for distributors are already a bit complicated. Jane Graf, the director of distributor International Publishers Marketing, told me in an e-mail:

The contract with Kindle is phrased in such a way, that as a distributor, you had to have documentation in hand that proved you had the rights to represent the e-book format — separately from the traditional book version — of each Kindle title.

As a result, after discussions with our clients that were doing e-books (and not all of them have books appropriate for the e-format), we opted to let each individual publisher establish their own Kindle account with Amazon, and post their own books to that account. To date it has worked smoothly for IPM and those of our clients with Kindle accounts.

Some of the small presses that work with distributors don’t sell many e-books. IPG president Mark Suchomel told Crain’s that e-books make up less than 10 percent of IPG revenues. And distributors whose client publishers focus on art, cooking and other nonfiction areas that e-books have yet to penetrate may not have much to worry about. But with the Kindle Fire, Amazon is making a push into publishing illustrated digital content, so as these e-book rights become more valuable Amazon may try harder to get those authors to sign up with it directly.

Will battles over terms spread beyond IPG? I’ve heard no reports of other distributors or publishers being affected yet, but as their contracts come up for renewal — usually every three to five years — there is no reason not to think that Amazon will demand better terms from them too. Publishers Weekly reported in December that Amazon is asking many publishers for bigger discounts.

These negotiations could eventually spread to self-published authors as well. Amazon currently pays authors who publish e-books through KDP a 70 percent royalty on each sale over $2.99 and keeps 30 percent for itself, but it has the power to demand a bigger cut and authors who are making most of their revenues through the Kindle Store will be in a tough spot.

Is this a sign that Amazon has it out for distributors? Distributors like IPG handle a variety of functions, from sales and marketing to distribution and digital services, for small and mid-sized publishers who can’t or don’t want to handle those things themselves. They are middlemen, and Amazon doesn’t like middlemen, right? Well, publishing consultant and former distributor and publisher Don Linn writes:

For a long time, Amazon has preferred to deal with aggregators (such as distributors) in dealing with smaller presses simply to avoid the aggravation of handling multiple vendors when one distributor can feed Amazon print and digital titles for a couple of hundred publishers. I remember well my days at Consortium when Amazon begged us to supply data feeds so they wouldn’t have to manage 125 accounts for each of our client publishers.

I suppose that with improved technology and the practice Amazon has had with the Kindle Direct and other self-publishing programs, they’re no longer intimidated…at least on the digital side…by the number of vendors. And of course that makes sense in the digital world. IPG and other distributors (and publishers) are just another intermediary in Amazon’s eyes and we know how they feel about intermediaries.

Amazon (NSDQ: AMZN) has turned off the buy button on nearly 5,000 Kindle titles from distributor Independent Publishers Group after IPG refused to capitulate to Amazon’s demand for better terms.

The story was first reported by Publishers Marketplace and was confirmed by IPG President Mark Suchomel, who told me, “We’re offering [the e-book sales terms] we offered last week, and somehow they think it’s not quite good enough.” As IPG’s contract with Amazon approached renewal, Amazon “told us [the move] was coming, and has been telling us what the consequences were if we didn’t change what we were offering.”

IPG’s full memo to client publishers is on page 2.

The Chicago-based IPG is a distributor, which means that it provides services like marketing, sales and distribution to smaller client publishers. The company represents around 400 publishers, and some of the titles it distributes have been bestsellers, including Nelson Walker’s Boardwalk Empire (published by Information Today).

Suchomel noted that the print titles from IPG clients are still available on Amazon and that e-books are available from many other retailers. IPG’s terms are “acceptable to everyone else in the book business,” he said. “If half the accounts weren’t buying from us, I’d have to question it, but everyone else is.”

Client publishers have been “extremely supportive” of IPG’s decision not to capitulate to Amazon, Suchomel said. “We talked to many of them as Amazon was asking for more, and every one of them has said no, we can’t just keep giving more and more margin away.” Clients are “trying to direct people to other accounts [like Nook] where they can find their e-books.”

The move appears to be limited to IPG for now. Susan Reich, president of distributor Publishers Group West, told me, “We have an ongoing working relationship with Amazon and I have no reason to believe that our titles are at risk of being taken down.”

Amazon’s move against IPG is reminiscent of its battle with Macmillan at the beginning of 2010. When Macmillan switched to the agency model — in which it sets its own prices for e-books instead of selling them to Amazon and other retailers wholesale and letting the retailers sell the e-books at whatever price they want — Amazon turned off the “buy” button on Macmillan e-books, before eventually capitulating. All of the big-six publishers now use agency pricing for their e-books.

It is not clear what the outcome of Amazon’s actions against IPG will be or if the company is also turning off the buy button on other publishers’ titles. Publishers Weekly reported in late December that Amazon has been been demanding steeper discounts in negotiations with publishers, but this is the first time we’ve seen the ramifications for those who didn’t agree. I’ve asked Amazon for a comment and will update this post throughout the day.

IPG’s full memo to publishers on page 2.

Memo from IPG president Mark Suchomel to client publishers

I am disappointed to report that Amazon.com has failed to renew its agreement with IPG to sell Kindle titles. As of today, the Amazon.com website no longer offers for sale any electronic titles from any of IPG’s client publishers. All print editions are still available, as always.

As has been publicly reported, Amazon.com is putting pressure on publishers and distributors to change their terms for electronic and print books to be more favorable toward Amazon. Our electronic book agreement recently came up for renewal, and Amazon took the opportunity to propose new terms for electronic and print purchases that would have substantially changed your revenue from the sale of both. It’s obvious that publishers can’t continue to agree to terms that increasingly reduce already narrow margins. I have spoken directly with many of our clients and every one of them agrees that we need to hold firm with the terms we now offer. I’m not sure what has changed at Amazon over the last few months that they now find it unacceptable to buy from IPG at terms that are acceptable to our other customers. Hopefully Amazon will change their stance, but for now we need to make some changes. Please consider taking the following action today, or as soon as practically possible:

1. Every e-mail, ad, website, press release, author interview, and otherwise mention of an individual title needs to include the following: This book is available in print or electronic edition at your local independent bookshop, www.BarnesandNoble.com,www.indiebound.org, iTunes, Kobo, and elsewhere. It is not currently available in a Kindle edition.

2. Inform your authors of the situation and ask them to encourage traffic to those places that carry both print and electronic editions. Our website, www.ipgbook.com, is able to take direct consumer orders, but there is no better way to show our valued customers how much we appreciate doing business with them than to send orders their way.

3. Make available all electronic titles in all versions other than Kindle. Get those last remaining titles into electronic format so that the businesses that do support your titles can start selling them as soon as possible. IPG’s digital team can help you. Contact Digital Content Manager [redacted], for details.

4. Remind family and friends of the value to our society of independent voices and ideas, and that independent publishers and bookstores need to be supported or they will go away.

5. Practice what you preach. Support accounts that support your business. Ask the organizations you support to do the same.

6. Tell your local booksellers that they have access to some electronic books that Amazon no longer does. Accounts can contact Digital Content Manager [redacted], or Trade Sales Manager [redacted].

7. Seriously consider the implications of this action for the long run. If we don’t hold firm on your behalf, your margins will continue to erode. IPG will continue to represent you well to those customers that are happy to buy from us at reasonable terms. If you or your authors were working directly with any large vendor, you would not have the opportunity to push back on or even have a conversation about terms. Your continued support is appreciated.

8. If anyone from Amazon calls you, please let them know that you are distributed by and contractually tied to IPG.

Remember that Amazon continues to be an important account that sells a lot of units. This is a business decision on Amazon’s part, and hopefully they will soon decide to reverse it and buy at our standard terms. IPG will be informing our other electronic book accounts of their favorable competitive position on our electronic titles.

Mark Suchomel