Amazon is digging in for a lengthy fight with one of the Big Five publishers, Hachette, and flexing its extraordinary market muscle while the two companies negotiate a new contract. It’s understocking Hachette books so as to create shipping delays, cutting discounts, suggesting alternative titles to buyers, and even refusing to take pre-orders, foreclosing a major sales opportunity.
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Neither side is officially discussing exactly what it is they are fighting about. But all indications and industry chatter suggest that Amazon and Hachette are revisiting the pricing and revenue split for e-books—the same contentious issue that prompted the 2012 price-fixing suit against the Big Five publishers, from which Amazon emerged more powerful than ever.
The publishing industry is cheering for Hachette to hold the line and has denounced Amazon’s anti-Hachette tactics almost unanimously.
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But the publishing world that is speaking as one against Amazon is really made up of two principal factions: publishers and authors. Their interests are not identical, and authors should consider the possibility that the publishers have contributed to the difficult situation they now face. Literature could end up suffering for it.
The crux of the issue is that in recent years, e-books have been more profitable for publishers than print books, despite the substantially lower price tag. But they’re less profitable for authors of new releases. This is not a well-known fact, but one group to have noticed is literary agents, who are in the business of ensuring that authors (and they themselves) get their fair slice of the pie.
So when HarperCollins, another Big Five publisher, boasted about its digital profits in a presentation to investors last year, literary agent Brian DeFiore seized on Harper’s own PowerPoint slide to point out that authors of new releases get the short end of the deal. On the blog of the leading agents’ trade association, DeFiore published a post headlined “e-books and profitability—What we’ve always said and publishers have always denied.” He noted that Harper’s chart neatly demonstrated that for a given title, the e-book is more profitable than the hardcover edition precisely because the author makes less money on it.
“Look at Harper’s own numbers,” DeFiore wrote. “$27.99 hardcover generates $5.67 profit to publisher and $4.20 royalty to author. $14.99 agency priced e-book generates $7.87 profit to publisher and $2.62 royalty to author.”
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By leaving royalty rates where they are, publishers have left their nice digital margins hanging out there for everyone to see. And when Amazon sees someone else’s healthy profits, it’s like a dog smelling a steak. As Jeff Bezos has said, “Your margin is my opportunity.”
What I suspect is happening right now is that Amazon is telling Hachette that they want some of that margin. If Hachette had spread some of those digital profits to authors in the first place, it would not be vulnerable to this tactic. What’s more, if Hachette had been the first to raise author pay, it no doubt would have snagged some marquee writers.
Link to the rest at Slate and thanks to Randall for the tip.