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.
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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.
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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.
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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