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Who’s Right in the Amazon-Hachette Battle?

5 August 2014

From The Motley Fool:

The battle between Amazon and book publisher Hachette may serve as a test case for how the e-commerce giant and publishers will work together going forward.

The core of the dispute — which has affected availability of Hachette’s physical and digital books — is that Amazon wants almost all e-books to cost no more than $9.99. Hachette disagrees and is willing to lose short-term sales to win the war.

Amazon has been portrayed in the media as the aggressor, using its massive buying power to force a vendor to agree to unfavorable terms. It would certainly not be the first company to do that, but the dispute is not that simple.

. . . .

Amazon wants lower prices, while Hachette wants higher ones. That’s an age-old battle between retailers and vendors that is not unique to books. There is, however, a strong argument in favor of Amazon’s case that lower prices is better for everyone.

. . . .

Amazon is the 300-pound gorilla in the e-book world, and having some Hachette titles not available on the website has hurt the publisher.

Lagardère, the French publishing company that owns Hachette, reported in late July that e-book sales in the U.S. have declined. That is not true in the rest of the world. In England, where Amazon and Hachette are not in dispute, sales have risen, The Guardian reported.

Company executives placed the blame on a lack of best-sellers, but sales overall in the U.S. jumped 5.6% during the reporting period.

Lagardère executives did acknowledge “a limited impact from Amazon’s punitive measures,” The Guardian reported.

. . . .

Amazon will win this fight because the numbers make sense. In physical books, publishers have much higher risks because they must distribute the books. In the digital realm, they still have acquisition, editing, and marketing costs, but not having to print physical books removes much of the financial downside.

It’s better for more books to be sold overall, and a lower price point is the best way for that to happen. Hachette is fighting to protect a model that no longer makes sense. Authors don’t need publishers the way they used to. Amazon has seen that reality and will ultimately prevail. If Hachette concedes, perhaps the company can remain viable. If not, the book publisher will face the same problems its counterparts in the music world have.

Link to the rest at The Motley Fool

Amazon, Big Publishing

38 Comments to “Who’s Right in the Amazon-Hachette Battle?”

  1. It looks like the victims in all this are the Hachette authors not named Patterson, Preston, or Turow. Maybe they should sue to get the rights to their books back and go indie.

    It should be noted that Hachette has removed Amazon from their “buy ebooks” list.

  2. Didn’t that gorilla used to weigh 800 pounds? Congrats on the epic weight loss, gorilla!

  3. Why shouldn’t retailers be able to sell any product at any price in their own store? Why isn’t a manufacturer attempting to lock in prices at the retail level an anti-trust violation?

    M

    • It used to be. Per se illegal under the Sherman Act but SCOTUS fully opened the door on it in 2007. I firmly believe that was a mistake that will have profound consequences down the line both for books and other areas. I am in full agreement with the 1911 SCOTUS ruling that vertical price maintenance (suppliers controlling retail price) is indistinguishable from horizontal price fixing by a cartel, especially when you consider this specific group of publishers have long acted exactly as a cartel. Agency should have been shut down a lot longer than two years for these publishers by the DOJ, in my opinion.

  4. I don’t see why everyone has to make this more complicated than it really is.

    Whoever is on the side of the customer for whom the product for sale is being made, whoever is trying to benefit the reader, in this case, is the one who’s right.

    Amazon has given compelling evidence that they are both the one who is most considering the reader and the one who has the data to make the best decisions to benefit the reader. End of issue.

  5. The Motley Fool takes the long-term view and talks sense, as usual.

    • Short Lagardère, long Amazon.

    • It’s almost eerily sensible given what we’ve been reading from most sources. I only wish the fool hadn’t thrown in this…

      Amazon is the 300-pound gorilla in the e-book world, and having some Hachette titles not available on the website has hurt the publisher.

      …since all available titles were, in fact…available.

      And yeah, that gorilla should see a doctor. A sudden 500-lb weight loss can’t be healthy.

    • Back in the ’90s, I followed their enthusiastic pumping of their “Dogs of the Dow” strategy and converted several thousand dollars into several hundred. Then they dumped their posts down the memory hole and pretended to forget their advice.

      I’m amazed they got it right this time.

      • Owww!

      • Classic:

        Q: How do you make a small fortune?

        A: Start with a large one.

      • Luckily, I read Andrew Tobias before I got into the Motley Fools.

        And ironically: if you read their books carefully, most of their advice was actually good — and the things they did with Dogs of the Dow and other risky investing strategies actually went against their basic advice. (Which was to play the long game and not time the market.)

        If I hadn’t read Tobias first, though, I might not have known to ignore their risky stock picking advice. As it was, I had the opposite result of Bill. I started with 2k and have retired on the results.

  6. Gorilla fur soaks up a lot of water. :)

    Sounds like the MF looked at Amazon’s share of the trade publishing business (30%) and guessed their dry weight from there. They really need to grow to 80% before you can list them at 800lbs dry weight.

  7. Hachette is fighting to protect a model that no longer makes sense. Authors don’t need publishers the way they used to. . .

    Are we that smart? How is it that respected financial sites are making the same arguments that indie authors have been espousing—right here—at TPV.

  8. I think that the readers are the only ones who are “right” in this battle.

  9. I just tweeted this to Daniel Kline ( @worstideas ) :

    @worstideas @themotleyfool Good article but one error. Authors aren’t “united” in support of Hachette. 7,500+ signed http://www.change.org/petitions/hachette-stop-fighting-low-prices-and-fair-wages

    I’ve noticed several journalists with integrity update their stories to include a less one-sided portrayal than “authors are universally condemning Amazon and supporting Hachette,” once a bunch of folks clue them in that the story isn’t so simple.

    Anyone else who wants to reinforce this message, please tweet him, too :)

  10. One real problem with a lot of these articles is the formulation that “Amazon wants almost all ebooks to cost $9.99 or less”. That is more or less true if “ebooks” means units sold. If “ebooks” means “titles offered for sale”, I don’t think Amazon really cares. I happily paid more than $50 for an ebook once. The print version was about 30% higher. Amazon has no issue with a book like that.

    • The book I bought used (“Writers, Readers and Reputations”, gossip about British authors 1880-1914) runs 1,000+ pages. It sells for $60 in trade, and about $55 ebook.

      I can understand why Oxford priced it this way. I’m sure Amazon would, too.

  11. I’ve been having my own (quite minor) issue with Amazon through Createspace, but it’s changed my perspective. Createspace’s technical team changed the title of my book from Initiation of the Lost (Sympathy-B 1.1) to Initiation of the Lost (Sympathy-B) without even consulting me. They removed the 1.1 AFTER the book was published, and they had already approved the first formatting. I explained that 1.1 is the reading order number (Volume 1, book 1) that’s unique to my series. They said I would have to buy a new ISBN, republish my book, and add the 1.1 to the title on the cover. Or they could add the 1.1 as the subtitle leading to the formatting: Initiation of the Lost (Sympathy-B) (1.1). This was after four days of back and forth. At one point, someone changed it back to the original 1.1 formatting just to have the technical team undo it again.

    No matter how hard I explain that book numbers don’t have to go on the cover’s title, they just tell me in their nice way, “Too bad. Do it our way or else.” As the author, I understand my series best and should have the ultimate say in how my book titles appear unless it’s some extreme case where completely different words are appearing on the cover and title description. But for something that may be minor to most but is important to the catalogs organization, I should have the ultimate say.

    Essentially, Createspace wants me to change the way I format my title on covers (adding the 1.1 to the title, after the “B” which will alter the consistency of branding my series) or change the title formatting on all sites if I want them to match. In other words, Amazon would be dictating how my titles appear on Apple, Kobo, and particularly BN where the paperback will be distributed to.

    The kindle version has the correct format, but CS won’t budge. I’ve already published the second book in my series with the original formatting, and CS approved. But now I worry if I make any edits that require another proof review, they will change that title too. So for the moment, book one and book two have different formatting for the titles, and from here on out paperback titles will appear differently than ebook titles. It’s a small thing, but when you are trying to create the most professional of appearances and optimize discoverability, it’s a frustration. And the underlying principle, that Amazon can tell me how to format my own volume numbers is a big deal.

    Amazon can be micromanaging, but the ends do not justify the means. Indie publishers are just like Hachette; we are publishers (even if Hachette would never say so). I agree ebook prices from major publishers are too high, but Amazon should not get to stronghold content producers. The right to price should remain with publishers. I want the right to price my books; so Hachette should as well. The anti-trust case proved that two wrongs don’t make a right. You can’t fight a monopoly illegally. Publishers price, retailers can discount, checks and balances. Amazon wants: Retailer tells publishers what to price, retailer discounts, retailer does everything and publisher should just be happy when the money flows in. Effective, sure. For now. But it’s also patronizing and suggestive of a superiority/savior complex.

    The interests of Amazon and self-publishers may be aligned now, so we side with Amazon. But what happens if Amazon and self-publisher’s find themselves on opposite sides of an issue? Amazon will tell us what to do, and we’ll just deal. It’s amazing how this Hachette/Amazon battle has been circulating through the self-publishing community for much longer than when Amazon cut the royalties for indie audiobooks. When they dropped the royalties by almost half, it was done without warning and we could do nothing. We just got used to it and continued championing Amazon over the Big 5. Really, we need to champion a competitive market. We need to champion iBooks, Kobo, and Lightning Source. Diversification is the first rule of good investing. If publishers like us and Hachette become codependent on Amazon (any many indie publishers are) it means we can’t negotiate.

    If Amazon will tell me how to number my work, what else will they micromanage? Once they think they’re right, that’s it. Case closed. This may work for some people now, but it’s false security to think of Amazon as the representative of writers. They are business, representing themselves and their interests first and foremost. Even when they claim to represent readers and writers, it’s always through the lens of their own self-preservation and growth. This is expected. We know this. Yet we make jokes how Amazon is an Author’s Guild.

    Hachette is trying to find the balance (even if futilely) between ebooks and print books, because they need print books to work. Amazon would not mind an all ebook market, because print books are their loss leaders. An all ebook market, where digital has cannibalized print, would benefit Amazon more than anyone else. Most indie publishers are indifferent, because they do not sell well in print. However, siding with Amazon now, can be detrimental down the line.

    If Amazon got it in their mind that authors are wrong on an issue and they are right, there will not be much of a dialogue happening. They will impose their will.

    Like many, I see Amazon as the best option for books (at the moment). But like with politicians, it always feels like a lesser of two evils situation. The big 5 will not get their issues in order to create a proper competitive market, which is what will truly be best for writers and readers. Amazon winning this pricing war at the expense of a major publisher losing its autonomy to Amazon does not bode well for self-publishers in the long run.

    If indie publishers want the freedom to price books without interference or punishment, then so should Hachette (even if they are ridiculously out of place). The market (not Amazon) is the entity (and should be the only entity) providing feedback to Hachette and us on our pricing. When readers seek out cheaper alternatives, then that’s the sign that prices are too high. No one should act like the answer to pricing is absolute. It’s relative. Whatever people will comfortably pay is what should be charged, and if content producers ignore that then the market (not the retailer) should dole out the consequences by buying another producer’s goods.

  12. Amazon will win this fight because the numbers make sense.

    Amazon will win this fight because book suppliers will undercut Hachette in the market and supply zillions of low priced books to Amazon. This isn’t a prediction. It is happening now. Follow the progress on the Author Earnings report. Publishers are losing market share to lower priced independent books.

  13. One thing I don’t understand.

    I would expect Amazon, as a reseller, to be able to price ebooks at whatever it wants. After all, they did in the past.

    What does Hachette care once they’ve been paid? UNLESS, the aggressor is in fact Hachette, who is trying to get around the anti-trust ruling by emplacing a minimum sell point for their releases into the new agreement. And,acting as the ‘first contract’ for the rest of the ‘big 5′ negotiations.

    What am I missing?

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