From The New Yorker:
In May, the publishing company Hachette revealed that the online retailer Amazon had been delaying shipment of physical books published by Hachette while the companies argued over how e-books should be sold on Amazon. Since then, the public-relations war between the companies has resembled an altercation between siblings who accuse each other of bad behavior while tacitly agreeing not to reveal what started all the hair-grabbing in the first place. But on Tuesday, Amazon broke the code of silence that both companies, despite their disagreements, had adhered to for nearly three months.
In a short Web post, Amazon named its objective (to lower most e-book prices to $9.99 apiece), disclosed what it was willing to offer to Hachette (Amazon would keep a thirty-per-cent share of the revenue from e-book sales, which is lower than it typically takes), and offered some arithmetic to support its position (by one calculation, cheaper e-books sell so many more copies that publishers—and, by extension, authors—can expect higher revenue). “This is good for all the parties involved,” Amazon’s representatives wrote.
. . . .
The facts, as presented in Amazon’s letter, seem persuasive at first glance. Many e-books are priced at $14.99; some reach $19.99. These prices are “unjustifiably high,” Amazon’s letter argues, because e-books don’t come with the expenses—printing, warehousing, transportation—that are required to get physical books into readers’ hands. Moreover, the company claims, e-books are “highly price-elastic”—that is, if the price of an e-book goes up, fewer people are willing to buy it.
. . . .
The upshot is a revenue increase of sixteen per cent for this hypothetical e-book—more money for the retailer, the publisher, and the author. Even authors who care less about money than about audience should be happy, because the number of books sold rises by seventy-four per cent.
Along with its proposal to take a thirty-per-cent cut of e-book sales—a lower percentage than people had believed it was seeking—Amazon suggested that Hachette give authors a thirty-five-per-cent share and keep thirty-five per cent for itself. This, too, looks good for authors: their share of e-book sales varies depending on several factors, but they traditionally get no more than twenty-five per cent of the amount left after the retailer has taken its share.
Given all this, it might seem surprising that authors have been generally unimpressed by Amazon’s announcement. On Wednesday, I called Brian DeFiore, a literary agent who has criticized publishers for giving authors relatively little money for each e-book sold; I thought he might find something to like in Amazon’s proposal. But he was not persuaded, and he explained why.
For one thing, he said, Amazon doesn’t actually get to decide what share of revenue publishers pay authors, a fact that the company is aware of. Its call for a thirty-five-per-cent share sounds nice, DeFiore said, but it means little.
. . . .
DeFiore also pointed out that Amazon doesn’t quantify what lower e-book prices would mean for sales of physical copies of the same books. Authors who work with traditional publishers like Hachette tend to make more, per copy, from hardcover sales than from e-books. If cheaper e-books draw people away from hardcovers, that could hurt these authors financially.
. . . .
Jeff Bezos, the C.E.O. and founder of Amazon, used to work at a hedge fund, and he has a mind for numbers.
. . . .
Amazon’s effort to win over authors might be doomed. But if Bezos and company want to try, they might do better to emphasize the idea that lowering prices will increase the audience for books—a minor point in Tuesday’s post. “The assumption from Amazon seems to be that authors are primarily motivated financially, but that’s crazy,” Preston told me. “No one becomes an author to make money—not even James Patterson became an author to make money, and I certainly didn’t.” While Preston was wary of Amazon’s financial argument, he was guardedly compelled by the notion that lower e-book prices could bring his books to a wider audience.
Link to the rest at The New Yorker and thanks to Bill for the tip.
When you’re in business (say as an author) and select business associates, PG suggests choosing associates who understand numbers.
The thesis of the article – that Amazon’s proposal to double royalties paid to authors for ebook sales has been rejected by authors because the New Yorker writer doesn’t know any authors who like the proposal – reminded PG of a famous statement made by New York Times film critic Pauline Kael many years ago following the 1972 Presidential election in which Richard Nixon won one of the most lopsided victories in US history:
I live in a rather special world. I only know one person who voted for Nixon. Where they are I don’t know. They’re outside my ken. But sometimes when I’m in a theater I can feel them.
Manhattan can be just as provincial as any other place. In PG’s experience Manhattanites tend to be less aware of this possibility than people who live elsewhere (excluding Paris).