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Amazon v Hachette: A Tale of Two Cities or Much Ado About Nothing?

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity” . . .but at the end of the day, it just might have been “much ado about nothing.” There… [Read More]

Amazon Hachette“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity” . . .but at the end of the day, it just might have been “much ado about nothing.” There are some universal truths in what Dickens and Shakespeare penned all those years ago – and their insight has transcended the ages to be apropos when reflecting on one of today’s current literary squabbles.

Camps Divided

Like the two cultural divides between London and Paris contrasted in Dickens’ Amazon HachetteTale of Two Cities, Amazon and Hachette have established two camps of thoughts affecting the livelihoods of authors and the revenue shares for publishers and eCommerce. Like the French revolutionaries of the late 1700s, there are those fighting for change and the desire to replace the old guard. On the opposing side you have the aristocracy wanting to maintain the status quo.

Now flash forward to 2014. On the one hand, there are the insurgents represented by the world’s largest etailer of books - namely Amazon- and on the other, the establishment spearheaded by the French publishing company founded by Louis Hachette in 1837. And smack dab in the middle lies the populace of writers attempting to discern the method for their madness.

Rallying the Troops

Amazon HachetteAt the core, the dispute between parties is hinged on economics. Amazon wants to lower the selling price of eBooks and in so doing targeted one of the “Big 5” Publishing Houses to make an example of. Amazon’s vision for the publishing industry is to have a space devoid of gatekeepers, where eBooks are reasonably priced, where any self-publishing author can publish what they want, and where there is no strong-arming by traditional publishers.

At the other end of the spectrum, Hachette wants the legacy agent terms they’ve grown accustomed to. In so doing, they want to control the list price of eBooks and earn 70% from each sale amounting to $14.99 or more. Amazon viewing this stance, as ‘predatory pricing’ wants the ability to discount books to $9.99 or less, in addition to a larger percentage of the publisher’s pie.

At the fulcrum of the dispute lie Kindle’s indie eBook authors who are happy with KDP’s royalty payouts versus the top-selling established authors who have long-standing relationship with all of the traditional publishing houses.

War of Words - Top Sellers v Indie Writers

As this debate has heated up over the course of the last several months, both writer Amazon Hachettecamps have used the pen versus the sword to fight this battle in the court of public opinion.

For those who have not followed these developments, my fellow colleague and blogger Victoria McNally provides an insightful overview in her blog, “Amazon’s Hachette Feud Divides Self-Published and Traditionally Published Authors.” In support of the legacy-publishing world, some of today’s most popular authors such as David Baldacci, John Grisham and James Pattinson follow lock-step in support of Hachette. In a joint letter addressed to their readers, they urged their fans to write to Amazon’s CEO Jeff Bezos requesting he cease and desist with his current strategy.

Rallying support for self-publishing authors, Hugh Hovey of Wool fame (who is actually considered a hybrid author) co-authored and launched a petition for others to sign. In it he commended Amazon for supporting the best interests of the independent writer, while denouncing Hachette for having a long history of paying their authors unfairly.

War of Words - Amazon v Hachette

Amazon HachetteWith targeted salvos of their own, the key players also joined the fray. At 2:00AM EST on August 9th, all of the Kindle Direct authors received a mass email missive from what Forbes’ Jason Bloomberg mockingly termed, “Amazon’s Mother Ship.”

In the email, it requested that Amazon’s loyal cadre of authors email Hachette’s CEO, Michael Pietsch, supplying them with bulleted talking points they could use to show their displeasure with the tactics of the publishing house.

To drive their point home, Amazon also compared the rise of eBooks to the ‘radical invention’ of the paperbacks, which debuted during World War II. When the established literati of the time including such luminaries as George Orwell lambasted the new format for attempting to supplant hardcover books, Amazon noted that, “readers loved the paperback and millions of copies were sold in just the first year.”

The lengthy email also accused Hachette of illegally colluding with its competitors to raise eBook prices, even while its eBook production costs versus hard copies was exponentially less.

“With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out of stock, no warehousing costs, no transportation costs, and there is no secondary market – e-books cannot be resold as used books. E-books can and should be less expensive,” Amazon stated.

As far as pricing, Amazon sees the eBook market as highly price elastic which means when the price goes down, customers buy more. They then note they’ve even quantified the elasticity with repeated measurements across many titles, and provide their authors with easy-to-understand dollar-and-cents example:

Amazon v Hachette

To counter the attack, Pietsch personally responded to these accusations in a statement provided to Digital Book World, titled, “Why We Price Books the Way We Do.”

In it, they justified their pricing model based on an author’s popularity (“we know by experience that there is not one appropriate price for all eBooks, and that all eBooks do not belong in the same $9.99 box.”)

They also countered Amazon’s point regarding their cost factors, indicating they invest heavily in “advances against royalties, editing, design, production, marketing, warehousing, shipping, privacy protection, and more.”

Pietsch concludes his rebuttal by turning the tables and accusing Amazon as the one that’s seeking “more profit at the expense of the authors.”

Separating the Signal from the Noise. . .

Amazon HachetteWhile I don’t think these disputes and negotiations between the two parties will end any time soon, it’s curious to me how a lot of this debate is based on principle versus whose bottom line it’s actually affecting.

If one were to siphon all this rhetoric through a funnel of reality – and Amazon is correct in what all of this means to Hachette financially – one would have to believe that there just might be a lot of jockeying for position versus legitimate concerns for returns on investments.

I’m talking about just how many eBooks are affected by this turf war. It’s a significant stat (buried somewhat) in Amazon’s original KDP email, but one that jumps off the page for the reader:

Amazon v Hachette

If truly, eBooks represent only 1% of Hachette’s revenues, doesn’t it appear that this entire issue – ballyhooed by so many in the publishing world as a game-changer – simply boils down to “much ado about nothing?” With a revenue factor that small, it’s a quandary to me as to how it’s caused so much angst amongst all parties, including the top-selling authors? If, I’m missing something, please comment below to keep the dialog flowing? If not, and you think too much ink has been spilled over this debate - let’s just move on - don’t you think?

Readers & Writers: I look forward to your feedback, comments and critiques, and please use BookWorks.com as your resource to learn more about preparing, publishing and promoting self-published books. My blogs appear bi-weekly on the 1st and 3rd Fridays of each month.

 


2 thoughts on “Amazon v Hachette: A Tale of Two Cities or Much Ado About Nothing?”

  1. TFH says:

    This seems like both sides simply trying to hedge their bets against what they think may be the future of publishing.

  2. Both Amazon and Hachette are trying to insure their revenues with a lot of noise (and maybe also keep their authors happy with lots of arguments). On a personal level I prefer ebooks to be below $10 and this should be fine with Amazon as well, I will still buy print copies when I really love a book.

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