Aug 9 2014

Amazon vs. Hachette—and YOU!

Book Prices

Amazon-Hachette Dispute

I won’t tell you what to think.

  • I will make some points for both sides.
  • I will mention ways that this may impact both authors and readers.
  • I will show you what you can do, no matter which side you favor.

The main point is that Amazon appears to be pushing for more e-books ordinarily priced above $10 to be priced at $9.99. Hachette (and other publishers) appears to want the freedom to price e-books as they see fit, including those in the $14.99 to $19.99 price range.

A little clarification:

  • Amazon openly acknowledged that some books, such as e-textbooks, should be priced $10 and up (see Reference 1 below). Amazon is NOT insisting that ALL e-books should be $9.99 or less.
  • Hachette is NOT asking to price ALL e-books $14.99 and up. The issue arose over specific e-books.

Whether YOU read books or write them, YOU  are affected by this:

  • Obviously, lower e-book prices would be more affordable to readers. Seems hard to dispute this point.
  • A less obvious question is what long-term impact lower prices on traditionally published e-books may have on reading, writing, and the arts in the future. The arguments regarding this vary (we’ll return to this point later).
  • It’s not so obvious where authors fit into this. In fact, authors themselves have differing opinions on this (see Reference 2 below).
  • Later in this article, I will show YOU where and how to express YOUR opinion.

Points for Amazon

Amazon posted an announcement on their website (Reference 1) and also sent an email entitled, “Important Kindle Request,” (Reference 3):

  • Pricing traditionally published e-book fiction at $9.99 (rather than $14.99 to $19.99) would make those books more accessible to readers.
  • Lower e-book prices would make them more competitive against games, videos, movies, television shows, social media, and other kinds of media that may draw the customer’s time away from reading. With so many other interactive options, higher e-book prices can adversely impact reading, writing, and the arts. (Recall that Hachette is concerned that lower e-book prices may adversely impact reading. When considering other forms of media, it may actually be the case that higher e-book prices adversely impact reading. It’s not so clear-cut.)
  • The cost of producing an e-book may be low enough to warrant lower retail prices:
    • no printing costs.
    • no out-of-stock issues.
    • no warehousing or transportation costs.
    • no need to forecast production.
    • no costs of returned books being destroyed.
    • no losses due to resale.
  • Amazon claims to have researched the elasticity of e-book prices (Reference 1), concluding that an e-book priced at $9.99 instead of $14.99 would result in:
    • 74% more readers for authors and publishers.
    • 33% savings for customers.
    • 16% more earnings for authors (more earnings for publishers, too).
  • Amazon cites the debut of the paperback book as a historical example where drastically lower prices (Reference 3):
    • didn’t destroy the culture of reading and the book industry.
    • were fought by bookstores, who refused to stock the cheaper paperbacks.
    • were NOT favored by some prominent authors, including George Orwell, who perhaps didn’t realize that lower paperback prices would actually help both authors and readers more than it would hurt them.
  • Hachette has illegally colluded with its competitors to raise e-book prices and has paid over a hundred million dollars in penalties and restitution (Reference 4). (On the other side, there may be a fear of a huge retailer like Amazon gaining price control.)
  • Amazon made three offers to Hachette (Reference 3).
    • Offer 1: Make author royalties whole during the dispute through joint cooperation.
    • Offer 2: Give authors 100% of all sales during this dispute.
    • Offer 3: Donate Amazon’s and Hachette’s normal share to a literacy charity.
    • Hachette refused all three offers (citing sanctions that were unilaterally imposed, as described in Reference 5).
  • With subscription offers like Kindle Unlimited, Scribd, and Oyster, customers can pay a low monthly fee like $9.99 for unlimited reading. Traditionally published fiction selling for $14.99 and up seems quite high by comparison.
  • Although $9.99 would be lower than $14.99 or $19.99, it’s still a high price for an e-book. It would still create separation between indie books and traditionally published books, as most indie fictional e-books are priced from 99 cents to $5.99.
  • Authors can choose their publishers and can also choose to self-publish, where they can earn up to 70% royalties on e-book sales and where they can be in charge of their own prices. More and more successful indie authors are succeeding in the competitive book industry, and some of the best indie books show very high quality. Many indie authors are among the best marketers in the industry. It’s no longer a slam dunk that traditional publishing is the best route to go. In fact, a traditionally published author with a large following might do very well with self-publishing. How to publish is an option.
  • Authors are NOT united against Amazon. Although some authors stand against, many are also supporting Amazon (Reference 2).

Points for Hachette

The Hachette Book Group posted an announcement on their website (Reference 5):

  • A free market naturally supports better pricing. If $14.99 to $19.99 is, in fact, unfavorable in terms of economic price elasticity, such pricing will naturally hurt publishers who use this price-point and will naturally favor any competitors who use a lower price-point. It may seem unnecessary to impose pricing constraints, when the outcome can come about naturally through economics in a free market. If, in fact, $14.99 to $19.99 is economically favorable to $9.99, then forcing a $9.99 may seem like a mistake. (There is a fear of price control both ways. Hachette was caught illegally colluding to raise e-book prices, as indicated in Reference 4.)
  • Writing is an art form. It’s difficult to put any price on art. Pricing art too low can devalue it. If an author invests years perfecting his or her craft and spends several months perfecting a book, is that book not worth $20 to someone who appreciates that art?
  • Publishers sell a great number of paperback and hardback books. Higher e-book prices may help to sell more print books.
  • The bookstore is one staple of literacy. It’s a great place for readers to visit. Lower e-book prices may drive more readers away from bookstores.
  • Print books also bring publishers helpful word-of-mouth publicity when people see the books on coffee tables, trains, airplanes, etc. From a marketing standpoint, a publisher that can sell print books on a large scale might prefer to sell more print books than e-books, and therefore may not be motivated to lower e-book prices much.
  • Although the cost of producing an e-book pales in comparison to the cost of producing a print book, publishers must look at the combined costs of all editions. A publisher risks losing money by overprinting and from returned print books, for which it may be wise to build some insurance into the price of the e-book. (Note that Amazon claims that a $9.99 price may actually result in greater e-book profit than a $14.99 price. However, this is a forecast, not a guarantee.)
  • There can still be significant costs associated with producing e-books. A traditional publisher may pay substantial costs, which ultimately helps to foster the needs of authors looking for support for their innovative writing:
    • pay a large advance (forecasting).
    • hire extensive editing.
    • pay professional graphic designers to make book covers.
    • pour much money into marketing (advertising).
  • Traditional publishers do not wish to devalue reading, writing, literacy, books, and art. They fear that lower e-book prices may do just this. (Although Amazon cited an example with the debut of low-priced paperbacks, it isn’t necessarily a perfect parallel with the introduction of e-books.)
  • Hachette’s business has been significantly restricted by Amazon during this dispute (Reference 6). It has become more than just a dispute through words, but has entailed action by Amazon, too. Many popular authors are suffering as a result. (It’s unfortunate that authors are suffering, and that authors have been used as leverage. Blame has been placed on both Amazon and on Hachette for this, as each party had opportunities to avoid it.)
  • Hachette claims that books are not like most other consumer goods, and values “audience, career, culture, education, art, entertainment, and connection” in addition to royalties (Reference 5).
  • In regards to Amazon’s proposal, Hachette invites “Amazon to withdraw the sanctions they have unilaterally imposed” (Reference 5).
  • While not all authors are supporting Hachette, some are. You can read about some of the authors supporting Hachette in Reference 7.

Additional Notes

  • Hugh Howey has an interesting article entitled, “Authors United? I Wish it Were So” (Reference 8). Author opinions on this dispute vary (Reference 2). It would be wise for authors to show a more united front.
  • Indie authors may actually benefit by having traditionally published e-books priced as high as possible. One of the major indie advantages is very affordable pricing.
  • Unfortunately, Hachette authors are losing out in the midst of this dispute. It’s easy to blame either side for this, but that blame doesn’t help those authors.
  • Other book retailers may be benefiting slightly during this dispute.
  • Amazon introduced Kindle Unlimited, offering a $9.99 monthly subscription for unlimited reading of 600,000 eligible e-books during this dispute. The big publishers aren’t participating in this (although Houghton Mifflin Harcourt is), but there are 100,000 titles from smaller publishers. There are popular titles in the mix, such as Harry Potter. Kindle Unlimited makes a powerful statement about the value of e-books, regardless of the outcome of the Amazon-Hachette dispute.

Make YOUR Point

What to do if you’re pro-Amazon:

  • Email the CEO of Hachette and cc Amazon. Instructions for how to do this can be found at the end of Reference 3 below, which also outlines a few points that you might consider making in your email.
  • Click here to sign the Change.org petition to “stop fighting low prices and fair wages.” Fill in the info on the right column entitled, “Sign this petition,” and then click the Sign button.
  • Tweet using related hashtags to show your support for Amazon. This might include #Amazon or #Hachette. You might want to voice your opinion using #ReadHachette, even though that hashtag was developed in favor of support for Hachette. Unfortunately, Amazon doesn’t appear to have introduced a special hashtag yet in favor of Amazon in this dispute (#ReadersUnited would have been a good one, as that’s the domain name Amazon used to issue their recent letter).

What do to if you’re pro-Hachette:

  • Email the CEO of Hachette, making it clear that you’re supporting Hachette. You can find the email address at the end of Reference 3 below. Many people will be emailing Hachette in favor of Amazon, so if you support Hachette, you want to be immediately clear which side you’re on.
  • Contact Authors United or Douglas Preston to show your support, or contact the CEO of Amazon to express your opinion in favor of Hachette. You can find contact info for Douglas Preston at the top right of Reference 9 (find his email address below the physical address). Ask how you can add your name to any petitions against Amazon.
  • Tweet using the hashtag #ReadHachette to show your support for Hachette.

Regardless of where you stand:

  • Show your support for authors. They are the ones who work hard to make books possible in the first place.

References

  1. Amazon posted an announcement on their website regarding this dispute.
  2. The Author’s Guild shows how opinions from others differ drastically on this issue.
  3. Amazon sent an email entitled, “Important Kindle Request,” which is also available at Readers United.
  4. The Wall Street Journal has an article citing Hachette’s collusion to raise e-book prices.
  5. The Hachette Book Group posted an announcement on their website regarding this dispute.
  6. The New York Times has an article describing how Hachette books have vanished during this dispute.
  7. Some authors are supporting Hachette in this dispute.
  8. Hugh Howey wrote an article on author unity regarding this dispute.
  9. Douglas Preston has initiated a petition against Amazon. Also see a related New York Times article.

Chris McMullen

Copyright © 2014 Chris McMullen, Author of A Detailed Guide to Self-Publishing with Amazon and Other Online Booksellers

  • Volume 1 on formatting and publishing
  • Volume 2 on marketability and marketing

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Comments

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38 comments on “Amazon vs. Hachette—and YOU!”

  4. Great post. I was wondering about how this is affecting Kindle Unlimited. As you said, most of the big publishers aren’t participating in it. So it’s more small publishers and indie authors in that library. The plus side to this is it means people who join are more likely to go for these to get their money worth instead of the higher profile books. The downside is that people might not join because there aren’t that many high profile books. Honestly, this just feels like a mess that is going to continue for a while.

    Reply

    • Kindle Unlimited did create major changes on the bestseller list, notably in favor of indie books enrolled in KDP Select. It will be interesting to see what the traditional publishers do (if anything), and how well (or poorly) Kindle Unlimited fares without them. I feel that there is a market for it even if the traditional publishers don’t participate.

      Reply

      • It’s certainly interesting. My new book already has a bunch of borrows. I’m still leery about if they really count as a sale or not in regards to rankings, but I can’t do anything either way about that.

  5. I am not KDP Select and have always had issue with Amazon being so big and greedy…but they do sell books for me. I don’t really care to become a pawn in this plight and that is what Amazon is asking me to do. I am all for ebook prices remaining low enough to remain affordable while still giving the author a profit. Many ebooks by traditional authors are priced ridiculously high, but the authors are not typically reaping the benefits, the publishing houses are. So really, it is hard for me to get behind Amazon OR Hachette. It’s all about the money for either of them…NOT the readers or the authors.

    Reply

    • That’s a great point about Amazon’s email making indie authors feel like pawns. I’ve seen a few authors’ reactions to this along these lines, including Chuck Wendig’s interesting article, “In Which Amazon Calls You to Defend the Realm” (http://terribleminds.com/ramble/2014/08/09/in-which-amazon-calls-you-to-defend-the-realm).

      You have another great point about authors not necessarily reaping the benefits of high-priced e-books.

      Definitely, it’s easier to get behind readers and authors, but there doesn’t seem to be a voting button for either of these. 🙂

      Reply

      • Mark Coker predicted all this a while back. Obviously he wanted to profit also, which is why he went from simply offering a publishing platform to offering a distribution platform. I do believe, though, that he has always had the underdog at heart.

  6. It will be fascinating to see how the Amazon vs Hachette battle unfolds. Hachette appear to me at least to have presented themselves as the voice of the literary world, which as you point out is not the case in reality. An interesting post. I RT’d it on Twitter.

    Reply

    • Yes, it will. Hachette is certainly becoming more well-known through this. The consequences of this dispute and any resolution to come will be interesting, too. Thank you for the retweet. 🙂

      Reply

  12. Why does this have to be a one or the other argument? Two multinationals squabbling over the bottom line, neither care about authors or readers. It’s all about their own business models.
    I can understand authors wanting to side with Amazon for creating a self-publishing outlet, but there are other self-publishing outlets. And I can see the attraction in supporting a big company taking a stand against a powerful retail force like Amazon. But I’m concerned there are too many short-term blinkered views in all this.
    In the long run we’re seeing a move towards the Spotify model of ebook reading, and we’ve all heard the gnashing of teeth caused by the pitifully low royalty rates paid to artists. Amazon wants to move in that direction.
    And big publishing continues to hang on to the old business model; even being caught with their pants down by trying to fix prices.
    These are two unsavoury antagonists I won’t be supporting.

    Reply

    • Okay, I guess option three is to stay out of it. 🙂

      I see many indie authors who don’t care about Hachette at all—if they won’t be publishing with them and won’t be reading their books, it may be hard to feel strongly toward or against Hachette.

      But it’s hard for indie authors not to care about Amazon. Maybe they don’t care much about this particular issue, as it doesn’t seem to directly impact indie authors (well, for indies, it may indeed be better to let the publisher price as high as they want, as that makes low indie prices all that much more attractive). However, indies who rely on Amazon for much of their business certainly want to see Amazon continue to be a successful business, so they must at least root for this much.

      Reply

  13. I’m really sitting on a barb wire fence on this one. I tend to side with Amazon when I read something like this from Hachette: Writing is an art form. It’s difficult to put any price on art. Pricing art too low can devalue it. If an author invests years perfecting his or her craft and spends several months perfecting a book, is that book not worth $20 to someone who appreciates that art?

    As a writer I want people to read my stories. I would stand on the street corner and give them away for free as long as they enjoyed them. Money is no factor in my decision to self-publish. I honestly just can’t break in to the publishing houses lock on the publishing industry. I have many positives reviews on my work, and without Amazon I would never know that I effected that many people with my writing. Sure my books are free at times, cheap as well, but I am being read. That’s all I ever wanted to be.

    Nice post. Here’s mine on this subject if you want to read it (not nearly as grand as yours though): http://wp.me/p4PG7D-2M

    Reply

    • There are self-published authors who are using low price-points quite effectively. For those who succeed with this strategy, it’s hard for me to view their art as being undervalued by the low price—what they have done is sell more books and draw higher a net royalty in the process. Under-read makes the book under-appreciated rather than undervalued, right? Higher prices don’t necessarily value the art more.

      Your article gives a concise introduction. Thank you. 🙂

      Reply

  15. GREAT outline of points being made in this negotiation! Thank you!
    Regarding Points For Amazon, the cost of producing an ebook is certainly lower than a print one, but an ebook still has the same cost for content. I like to think that the price difference between books (of the same format) is due to content value, primarily. I’m glad that you cover that in your Points For Hachette.
    Also, I like to trust forecasts of price vs sales volume, but I know better than to do that. Forecasts are simply educated guesses, and different forecasters can be certain of different outcomes, especially when different forecasters consider different factors, and weigh each factor differently, as in this scenario.
    Regarding Points For Hachette, I see one point being overlooked across the web in these debates: Amazon is so ginormously big, it shouldn’t have the right to overpower/bully/excessively/unfairly pressure another company during negotiations. When I consider how large and diverse and thus powerful Amazon is, this puts me on Hachette’s side of the argument. I want Hachette to have the freedom to run its business as it chooses, not do what Amazon dictates.
    “word-of-mouth publicity when people see the books” oooooooooooooo good point. I hadn’t considered this before. You make me realize how invisible ebooks are.
    “Show your support for authors. They are the ones who work hard to make books possible in the first place.” I like this line. It is something that we can do, regardless of what Amazon or Hatchette or anyone else does, and it increases sales, which is what everyone wants.

    Reply

    • Thank you for adding many points in your comment. 🙂

      You’re right that forecasts have inherent limitations and uncertainty. The bullying issue is another important point (and goes both ways, as Hachette also engaged in a bit of this through collusion). To many, both are heavyweights who have thrown some weight around (influence). Definitely, we the readers can truly put the authors first, in spite of this controversy.

      Reply

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