Hachette chiefs dismiss subscription model

7 April 2015

From The Bookseller:

The c.e.o of Hachette UK and the chairman of Hachette Livre have both dismissed the e-book subscription model, calling it “absurd” and “cannibalising”.

In an interview in this week’s Bookseller magazine, Hachette UK c.e.o Tim Hely Hutchinson said: “People are always pitching new models to me, and the first thing I say is that the existing model works really well. I don’t believe in subscription. I don’t see how it would do anything other than cannibalise the business we already have.”

Meanwhile Arnaud Nourry, chairman and c.e.o of Hachette Livre, also condemned the model in an interview with French book trade magazine Livres Hebdo,  run in The Bookseller this week.

Nourry said the subscription model was a “flawed idea” even though it proliferated the music business. “Offering subscriptions at a monthly fee that is lower than the price of one book is absurd,” he said. “For the consumer, it makes no sense. People who read two or three books a month represent an infinitesimal minority. And there are bookshops. If I seem like a dinosaur, so be it. My colleagues at Penguin Random House say the same thing.”

. . . .

Hely Hutchinson acknowledged some publishers saw value in the model. “I know other people take a different view,” he said. “Within the limits of the law, I hope [HarperCollins UK c.e.o.] Charlie Redmayne will explain it to me, because I don’t get it.”

Link to the rest at The Bookseller

Hachette Livre’s Nourry discusses Amazon and e-books

3 April 2015

From The Bookseller:

For a year, while you were negotiating with Amazon in the United States, you did not speak in public. Was this very tough conflict worthwhile? 

It took up most of my time during that period. I did not express myself in public in order not to exacerbate the situation. Yes, it was worthwhile, as always when essential questions are involved. In this case, the question was whether the publisher or the retailer should fix selling prices for electronic books, and take account of the fact that many decisions taken in the United States have an impact elsewhere. I regret that this discussion took the form of a conflict, and I am delighted that we have resolved it. But if it were to be done again, I would do it again. All media industries that have not maintained control over their production in the electronic sphere are in great difficulty. If e-books were sold for $5 a copy, it would only take a few years for everything to change, creating a market without booksellers and a general public accustomed to paying almost nothing. Through huge mergers, the music business is now centred on three major world players. Diversity has been hard hit. Innovation in the sound sector is nothing like what it was 30 years ago. We do not have to the right to let this happen to books, which is the medium for creation, education, culture and democracy.
Your agreement with Amazon calls for improved sales conditions when you reduce your prices: have you reduced them?

No, or at least only when we have wanted to. The principle is not to keep the same prices all the time. So, we reduce them, raise them, test them. This is a marketing technique, and has nothing to do with relations with any distributor.
The conflict revealed  an unexpected desire for price regulation in the United States. With its experience of fixed prices in France, how does Hachette Livre explain the fact that it was at the front of Amazon’s firing line? 

Hachette Livre has played a special role since 2009-2010, when the agency contract was introduced. But I have no answer to the question as to why Amazon opened sales negotiations with us first. In fact, I hear more and more American publishers and booksellers point out the merits of the (French fixed price) Lang Law. But thinking it might be possible to replicate it over there is another thing ! It is not at all in the American culture.
What lessons do you draw from this conflict for your relations with Amazon and the world’s other major digital operators?

First of all, these large companies contribute to the market for books. We must forget the moments of conflict and realize that these companies enable us to reach different customers. Amazon has been a driving force. The same goes for Apple and Google. We must not throw the baby out with the bathwater. Secondly, in terms of relations, even if they are infinitely larger than we are, our creative capacity through our authors gives us a symbolic strength and consequently bargaining power. Last year, I was impressed by the number of authors who mobilized to push us to resolve the conflict. The situation is the same in France when we negotiate with a partner, which makes me confident and optimistic for the future of this (publishing) profession. But we must be able to control prices. If not, holding exclusive rights of our authors’ work will do nothing for us.

Link to the rest at The Bookseller

New Hachette HQ will be ‘talent magnet’

3 April 2015

From The Bookseller:

Hachette’s new London headquarters Carmelite House will become a “talent magnet” for authors and publishers, but the move will not compromise competition between the adult divisions, c.e.o. Tim Hely Hutchinson has said.

. . . .

“You have to go back to what’s right for the authors,” said Hely Hutchinson. “I believe authors really like the focus of being looked after by their publisher – be that Orion, Hodder or Quercus – and having an editor and a marketing and PR team concentrating on them, with the intimacy that this focus brings. But it is good and reassuring for them that they are allied with a group that can sit at the top table with those big customers.”

. . . .

On authors, Hely Hutchinson said he envisaged different types of author contracts in the future; one low advance, higher royalty, paying more often; another traditional high advance, lower royalty, paying less often. “I’d like to be able to offer those packages and within three years or so we will be able to – if there is demand,” he said.

Link to the rest at The Bookseller

Hachette Sales Down Nearly 5% in 2014

12 March 2015

From Digital Book World:

Full-year revenue dropped 4.9% in 2014, a year marked by Hachette Book Group’s bruising standoff with Amazon over ebook profit margins, which ended in November with a new distribution contract restoring a version of agency ebook pricing to the publisher.

Digital sales shrunk to 30%, down 3% since 2013, when ebooks and digital audiobooks together made up a third of Hachette’s overall revenue.

Hachette Livre, the division of parent company Lagardère that includes the U.S.-based Hachette Book Group, saw profits decline 11.7%, which the company attributes in part to an unfavorable comparison to an “unusually high number of major best-sellers” in 2013.

Link to the rest at Digital Book World

eBook Revenues are Down at Hachette

11 February 2015

From Ink, Bits & Pixels:

We’ll never have complete data on the ebook market, but if we had to judge by the reports from the major publishers then the news would not be good.

Both HarperCollins and Hachette have released quarterly reports this past week which show flat or declining revenues for the publishers.

According to PW, Hachette parent company Lagardère announced that its publishing revenues had dipped in the US, UK, and France:

Revenue at the Hachette Book Group USA fell 8.4% in the fourth quarter, and was down 4.8% for the year, parent company Lagardere reported. The drop, Lagardere said, was thanks to a stronger publishing lineup in 2013, as well as problems stemming from the publisher’s standoff with Amazon over sales terms. Total revenue for Lagardere dropped 5.5%, to 2.00 billion euros for the year, and declined 3% in the final quarter, to 537 million euros.

E-book sales took a big hit at HBG in the fourth quarter, comprising 19% of trade sales in 2014 down from 27% in the fourth quarter of 2013. Once again, Lagardere blamed a stronger publishing schedule in 2013 and the Amazon dispute for the drop in e-book sales. For the full year, e-book sales accounted for 26% of all trade revenue, down from 30% in 2013.

While the unresolved contract dispute with Amazon might be to blame for the dip in US revenues, Hachette Livre also saw similar dips in the UK (4.6%) and in France (8.6%).

Link to the rest at Ink, Bits & Pixels

After settling with Amazon, Hachette experiments with Twitter for book sales

8 December 2014

From GeekWire:

Want to buy Amanda Palmer’s “The Art of Asking” as a gift this holiday season? It’ll be as easy as reading her tweets starting later this week.

Hachette will start selling a handful of books on Twitter through a partnership with Gumroad, an online marketplace that handles payment processing for creative work. During set promotional periods, tweets from Palmer, Canadian ex-astronaut Chris Hadfield and The Onion will each have a “buy” button included that users can click to purchase a copy of their latest book.

Each book purchased through the program will be bundled with a special exclusive add-on. Palmer’s will include a manuscript page with notes from Palmer and her husband Neil Gaiman, while Hadfield’s book includes a signed photograph of the island Corfu taken from space.

. . . .

These sales are an end run around Amazon’s typical dominance of holiday book sales, and have the potential to redistribute the balance of power during a time when people are doing a lot of shopping. Of course, there’s one wrinkle: Hachette is selling the books at full retail price, which is well above their current prices on Amazon.

Link to the rest at GeekWire 

Hachette Had An EBookstore Which Could Go Head-To-Head With Amazon, But They Won’t Launch It

6 December 2014

From The Digital Reader:

As the year draws to a close many are looking back at 2014 and reflecting on the year’s events. Today I would like to take a look at an event which would have been a huge news story if it had ever happened.

As you may recall, for much of 2014 Hachette and Amazon were in a nasty contract negotiation here in the US. As we all know from following the news, Hachette fought a vicious media campaign against Amazon as a way of pressuring Amazon to give in, but what no one else knew was that Hachette had a second string to their bow.

Just so you know: I have very little evidence to back up the following post. I trust my sources, and I do have a little evidence, but you should take this report with a grain of salt.

Earlier this year Hachette secretly started developing an ebookstore calledwww.eBooksForAll.com. That store never launched, but my sources tell me that it would have sold Hachette titles in both Epub and Kindle formats.

Yes, Kindle. Hachette’s new ebookstore was going to use digital watermark DRM on the ebooks it sold.

. . . .

In short, Hachette nearly launched a site which could have directly competed with the Kindle Store. I can’t tell you why it was not launched, but I do have some more background details.

The site was developed by an Australia-based ebook company called eBooks.com, which would operate the site on behalf of Hachette. The  watermark DRM would have been supplied by Booxtream, which also provides a similar service to Pottermore and other ebook retailers.

eBooks For All was supposed to go live in the summer, and then in the early fall, but now that December has rolled around I figure the idea is probably dead, and thus it is safe to tell everyone about what would have been the biggest digital publishing story of the year.

. . . .

Hachette apparently acquired the domain in April 2014, not too long after their previous contract with Amazon lapsed. Is it just me, or does that raise some new questions as to why the contract was allowed to expire?

Link to the rest at The Digital Reader and thanks to SFR for the tip.

PG would have liked to see what Hachette’s idea of an ebook store looked like.

As PG has said, based on some personal ecommerce responsibilities in a past life, Amazon’s web site  is a work of sublime genius, the Mona Lisa of ecommerce sites.

(PG understands that appreciation for the art of ecommerce is a taste that most people never acquire. The Mona Lisa is easier to enjoy. He will note that Mona Lisa and Amazon share an enigmatic smile, however.)

Amazon Is No Threat To Authors, Despite Its Fight With Hachette

28 November 2014

From The Federalist:

The extended dispute between Amazon and small publisher Hachette finally came to an end earlier this month. Amazon had wanted Hachette to price its e-books lower while giving Amazon a bigger cut; and when Hachette didn’t comply, Amazon slowed delivery of Hachette books and removed the pre-order option for them.

During the contract disputes, we learned that publishers have become relatively sympathetic in the public eye now that a behemoth like Amazon is bigger than they are. Yet it seems not so long ago that many exulted that the web would allow authors to circumvent publishers and go to readers directly. In this scenario, publishers were often painted as monopolistic gatekeepers. This image is still embraced by writers such as Matthew Yglesias, but during the dispute most observers voiced a concern thatAmazon has simply become too powerful, and that it would be bad for readers and worse for authors. I think this whole incident was overblown, on all sides; Amazon has made things drastically better for readers and writers, and while publishers will have to adapt to new technological realities, they are still likely to have an important role.

. . . .

Even while putting out books with a publisher, Sigler continued to put out books independently. Using an online service, he and his partner put out a high-end hardcover a year for around $30 a copy. In the middle of beginning to tinker with this, however, something hit the independent writing scene like a bombshell: the Kindle store arrived, and eventually opened to anyone who wanted to publish there directly.

For aspiring writers, especially those who did not already have book deals, the Kindle ecosystem provided a number of substantial improvements. First, it provided a place where most readers could purchase a copy of a work by clicking one button. The transaction cost savings of this cannot be overstated. Services like Paypal and its rivals lowered transaction costs to donating, but you usually have to log into your account each time you want to send money through them. It’s clear now that there are big nonlinearities in consumer behavior—one-click purchasing is not that great a transaction cost reduction over Paypal in the scheme of things, but it clearly moved a ton of people beyond a threshold. Sigler, who had been building a substantial audience for some time, was finally able to make a substantial amount from his independent work due primarily to the rise of the Kindle and competitors.

The Kindle also got dedicated reading devices in the hands of a large base of consumers. Prior to the Kindle, the only method available to most people for reading an e-book was to do it on their computer screen, which was not nearly as pleasant an experience as reading regular books.

. . . .

Just as the ability to directly publish clearly empowered authors, the ability to own your relationship with your audience is important leverage. If Amazon singled out or banned an author like Sigler, he could direct his audience to other methods of supporting him. There are rival like iBooks and the Nook, of course, but payment services continue to innovate and lower transaction costs there, as well. Never mind crowd-funding services like Kickstarter, which can fund a book in advance of writing it, or Patreon, which provide an ongoing revenue stream for creators. And, again, the fact that people have Kindles means Amazon cannot exclude the e-book files Sigler sells directly. Moreover, it’s not clear why it would ever be in Amazon’s interest to exclude authors. They run a business on razor-thin profits that frequently tips into the red. Their hyper-competitive model makes it a necessity for Amazon to take what it can get.

Link to the rest at The Federalist and thanks to Dave for the tip.

The Amazon Hachette Dispute Comes to a Pyrrhic End

18 November 2014

From Mark Coker via The Huffington Post:

Amazon and Hachette announced a settlement last week in their long festering contractual dispute. The publishing industry breathed a collective sigh of relief. But is it really over? The dispute signals a new chapter in Amazon’s strategy to favor suppliers that bow to its desires.

. . . .

In carefully worded statements last week issued by Amazon and Hachette – neither of which boasted of victory – we learned Hachette will retain Agency pricing control yet conceded to certain unspecified Amazon contract stipulations intended to encourage Hachette to offer lower ebook pricing.

It’s not easy to pick winners and losers. As with most wars, even winners can be losers.

Here’s my score card of winners and losers, along with speculation on long term implications.

  • Hachette *mostly* won, but is now boxed into a position where faithful authors will expect higher net royalty rates for ebooks as well as other perceived reforms from publishers. The Author’s Guild has already hinted as much. In a blog post last week commemorating the agreement, Authors Guild president Roxana Robinson took the opportunity to urge Hachette to raise ebook royalty rates for authors.
  • Amazon mostly lost, because it appears Agency wasn’t dismantled or critically injured. Amazon will likely seek revenge through other means (see below).

. . . .

  • Author affinity for publishers damaged. Amazon partisans orchestrated a rage-fest against traditional publishers, further eroding the once divine reputation of traditional publishers. Amazon partisans used this dispute as an opportunity to paint all publishers with the broad brush that publishers don’t care about authors, want to exploit authors, collude on pricing, want to overcharge customers for ebooks to protect their print businesses and protect brick and mortar bookstores, and who knows what else, strangle kittens? All good conspiracies are grounded in a small amount of truth. Yes, no doubt, publishers have much opportunity to bring reforms that benefit authors, though the vitriol was excessive and toxic. I also believe that indie authors are well-served by a thriving and profitable traditional publishing industry because it creates more publishing options for all authors. When indies go too far to tear down publishing houses, they risk tearing down their own house as well.
  • Authors attacking authors. Successful traditionally published authors – in the form of Douglas Preston’s Authors United initiative – who stood by publishers were attacked by the Amazon partisans. This, to me, was one of the most unfortunate outcomes. When authors are attacking authors, you know the world has gone mad. It was all the sadder that most of these attacks came from the indie author community. Indies should be better than this.

Link to the rest at The Huffington Post

In Amazon/Hachette deal, ebook agency pricing is a winner

17 November 2014

From GigaOm:

In the deal that Amazon and Hachette Book Group finally reached Thursday after months of bitter negotiations, we don’t really know which side “won,” if one side did. But one survivor — perhaps surprisingly — was agency pricing for ebooks, the practice through which the publisher sets an ebook’s price and the retailer takes a commission.

Hachette said in a letter to authors and agents:

The new agreement delivers considerable benefits. It gives us full responsibility for the consumer prices of our ebooks. This approach, known as the Agency model, protects the value of our authors’ content, while allowing the publisher to change ebook prices dynamically to maximize sales.

That wasn’t a foregone conclusion. In 2010, Amazonwas vehemently opposed to agency pricing, though it ultimately capitulated. Agency pricing was at the heart of the of the Department of Justice’s lawsuit against Apple and book publishers in 2012, in which the DOJ accused Apple and the publishers of colluding to set ebook prices.

The DOJ never actually said that agency pricing was illegal; rather, it alleged that Apple and the publishers illegally conspired to adopt the model at the launch of the iBookstore in 2010.

. . . .

While we obviously don’t know all of the details that Amazon and Hachette agreed on, here are the things that Amazon publicly said about ebook pricing at various times during the negotiations:

  • “A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book.” [Kindle Forums post attributed to “The Amazon Books team,” July 29, 2014]
  • “This discussion is all about e-book pricing. The terms under which we trade will determine how good the prices are that we can offer consumers.” [Amazon exec Russ Grandinetti to the Wall Street Journal, July 1, 2014]
  • At an ebook price of $9.99, “we believe 35% should go to the author, 35% to the publisher and 30% to Amazon. Is 30% reasonable? Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% — we did have a big problem with the price increases.” [Kindle Forums post, July 29, 2014]
  • “While we believe 35% should go to the author and 35% to Hachette, the way this would actually work is that we would send 70% of the total revenue to Hachette, and they would decide how much to share with the author.” [Kindle Forums post, July 29, 2014]

Here is what we know about the deal announced Thursday:

  • “We are pleased with this new agreement as it includes specific financial incentives for Hachette to deliver lower prices.” [Amazon’s David Naggar, press release] (This is the same thing that Amazon said about the deal itreached with Simon & Schuster in October.
  • “Importantly, the percent of revenue on which Hachette authors’ ebook royalties are based will not decrease under this agreement.” [Hachette CEO Michael Pietsch, press release]

. . . .

Hachette said in its letter to authors that the percentage of revenue on which they take a cut won’t change. But since we know that Amazon is giving Hachette financial incentives to keep its ebook prices low, perhaps Hachette will be penalized with a smaller cut of the sale if it prices ebooks above that previously set ceiling, even if it passes on the same amount to authors that they would have gotten previously.

Link to the rest at GigaOm

Nobody who really knows is talking about the Amazon/Hachette deal, but it appears that Hachette will have the ability to prevent Amazon from doing at least some of the discounting of Hachette’s books that it does now.

Since Big Publishing has attempted to use ebook pricing to protect the sales of physical books in physical bookstores in the past, PG suspects it will continue to do so in the future. If this is the case, Hachette ebook prices on Amazon will be higher than Amazon would set those prices if the folks in Seattle had unfettered pricing discretion.

If PG’s suspicions are anywhere close to correct, it appears that indie authors will continue to be able to undercut the price of ebooks from Hachette while earning royalties from KDP that are much higher than Hachette authors receive.

PG says that indie authors are much smarter about pricing ebooks on Amazon that Big Publishing is, if for no other reason than indie authors are not concerned about anything other than selling the most ebooks possible. Like Amazon, indie authors don’t have any legacy sales channels to distract them from setting an optimum price for ebooks.

Trying to protect a legacy business with legacy margins is a classic mistake that established business organizations make when faced with a technology disruption that allows lower-priced competitors into a marketplace. Doing so allows the lower-priced competitors to survive and thrive. And eventually put the legacy model out of business.

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