Amazon Calls for Hachette to Cut E-Book Prices

30 July 2014

From The Wall Street Journal:

Amazon.com Inc. on Tuesday described its dispute with the Hachette Book Group as a battle for lower consumer prices on digital titles and a bigger payday for writers.

In a posting on its website, Amazon said that it would be willing to accept 30% of digital book revenue, the same percentage it currently receives from Hachette, if the publisher agreed to lower digital prices on many of its titles to $9.99 from between $12.99 and $14.99.

. . . .

In the blog post, Amazon said that its internal data showed that when a book is priced at $9.99, it sells nearly twice as many copies as when it is priced at $14.99. It argued that, as a result, total revenue at $9.99 is more than when the book is priced higher. “At $9.99, the total pie is bigger,” stated Amazon.

A spokeswoman for Hachette didn’t respond to requests for comment.

. . . .

In its Tuesday posting, Amazon suggested authors should receive 35% of the e-book retail price. Many authors today receive 25% of net revenue on e-book sales, a point of contention for some who consider it too small.

. . . .

The Authors Guild, at least, didn’t appear to be mollified. It criticized Amazon’s suggestion for lower retail prices. “Lower e-book prices aren’t necessarily the best thing for writers,” said Roxana Robinson, president of the Authors Guild. “We get a percentage of the price as a royalty. You also have to take into consideration the price of the hardcover. Yes, it’s cheap to make a digital book but it’s expensive to present a book in hardcover.”

Link to the rest at The Wall Street Journal (Link may expire)

The Author’s Guild continues its never-ending quest to provide the most bewildered and unhelpful comments on the subject of Hachette/Amazon. PG wonders if they’re consciously trying to retire the Clueless Trophy.

Update re: Amazon/Hachette Business Interruption

29 July 2014

From The Amazon Books Team:

With this update, we’re providing specific information about Amazon’s objectives.

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. With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market — e-books cannot be resold as used books. E-books can be and should be less expensive.

It’s also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.

The important thing to note here is that at the lower price, total revenue increases 16%. This is good for all the parties involved:

* The customer is paying 33% less.

* The author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. And that 74% increase in copies sold makes it much more likely that the title will make it onto the national bestseller lists. (Any author who’s trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower.)

* Likewise, the higher total revenue generated at $9.99 is also good for the publisher and the retailer. At $9.99, even though the customer is paying less, the total pie is bigger and there is more to share amongst the parties.

Keep in mind that books don’t just compete against books. Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.

So, at $9.99, the total pie is bigger – how does Amazon propose to share that revenue pie? 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.

Is it Amazon’s position that all e-books should be $9.99 or less? No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99.

One more note on our proposal for how the total revenue should be shared. 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. We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call.

We hope this information on our objectives is helpful.

Thank you,

The Amazon Books Team

Link to the rest at The Amazon Books Team and thanks to lots of different people for the tip.

A couple of messages:

  1. Amazon knows more in its little finger about pricing ebooks than Big Publishing and its corporate overlords would know if they spent all year thinking about it.
  2. Speaking of math, Amazon is on the side of authors at least twice as much as Hachette is.

As we watch the responses to this message, we’ll see who really cares about the welfare of authors.

 

Amazon-Hachette Debate Yields Diverse Opinions Among Authors

24 July 2014

From The Authors Guild:

The Authors Guild is committed to an inclusive, big-tent approach to its mission as the published writer’s advocate. The recent clash between Amazon and Hachette Book Group has called attention to the contrasting viewpoints of traditionally-published and self-published authors. During this dispute the Guild has spoken out against Amazon’s tactics—which needlessly imperil the livelihoods of authors who are not involved in the negotiations—while also challenging the major publishing houses to revisit the parsimonious stance they’ve taken on authors’ e-book royalties.

The Guild recognizes all authors’ rights to make a living from their books and to pursue the most suitable audience for them. It is a sign of the strength and diversity of our membership that two of our Council Members, Douglas Preston and CJ Lyons, have taken different public stands in defense of serious authors.

. . . .

In response to Preston’s letter to Amazon, self-published authors circulated a petition to Hachette asking it to “work on a resolution that keeps e-book prices reasonable and pays authors a fair wage.” Authors Guild Council Member CJ Lyons was a prominent signatory. In a cover letter addressed to their readers, the self-published writers praised Amazon for keeping prices low and the Amazon platforms for “giving all writers a chance to reach an audience.”

After these letters had been circulated, Authors Guild co-Vice President Richard Russo published an open letter taking the long view, noting that the outcome of the present dispute is dwarfed by the need for a healthy publishing landscape that can support a diverse and inclusive community of authors. “The primary mission of the Authors Guild has always been the defense of the writing life,” he began. “What we care about is a healthy [literary] ecosystem where all writers, both traditionally and independently published, can thrive.”

. . . .

“We’re committed to supporting working writers,” says Authors Guild President Roxana Robinson. “Writers should be able to make a living at what they do – which is to provide an essential contribution to society. However the publishing world changes, writers will still be crucial to it. No matter how the written word is distributed, only writers can write. They deserve respect and support.”

Link to the rest at The Authors Guild

David Gaughran had a comment to this post on The Authors Guild website:

The Authors Guild is a joke. How can you link to two of the petitions and not link to the one which has had the most overwhelming support? The Authors Guild is on the wrong side of history once again, just like it was about e-books, price-fixing, and Author Solutions.

And a comment from MPMcDonald64:

What I haven’t understood through this whole mess, is why the authors aren’t demanding better contracts from Hachette. Hachette is the entity who determines how much the authors earn–not Amazon. It would be like actors storming into movie theaters and demanding that the theater charge more for the tickets. That would be silly, when if they aren’t happy with their compensation, they should go to the people who write the check and negotiate a raise.

While PG would never ever suggest being rude to a mouthpiece for Big Publishing, visitors to TPV might also have comments for The Authors Guild.

Amazon offers to donate Hachette book proceeds to charity

23 July 2014

From The Bookseller:

Amazon has reportedly offered Authors United, a group of writers protesting against the online retailer because of its dispute with Hachette Book Group, a new deal which would include restocking all HBG titles and donating the proceeds from sales to a literacy charity.

. . . .

The new offer made by Grandinetti would involve Amazon going back to stocking all HBG titles and paying authors standard e-book royalty rates, said Preston. Grandinetti also proposed that while Amazon and Hachette were still negotiating, all proceeds the companies normally earn from e-book sales would be donated to an agreed-upon literacy charity.

Preston told Publishers Weekly the new offer would have “the same effect of crippling Hachette” as the first offer. “If [Hachette] wasn’t making money for Lagardère, they’d shut it down,” he said.

. . . .

A spokesperson for Amazon told Publishers Weekly: “You have to look at the parent company–Lagardère Group–rather than just the Hachette division. Kindle books are only 1% of Lagardère Group’s sales. They can afford it, and should stop using their authors as human shields.”

Link to the rest at The Bookseller

Elites or freedom fighters: How the Amazon-Hachette battle took on the rhetoric of class warfare

14 July 2014

From GigaOm:

One side defends the ideals that this nation was founded on: Independence and freedom from tyranny. The other side is made up of elites who keep the little people down and take the money that is rightfully theirs in an attempt to control the message and maintain the status quo.

I’m talking not about the Tea Party and big government, but the worlds of self-publishing and traditional publishing. Yet the rhetoric in both debates often sounds very much the same. In 2009, the Tea Party movement took shape in the United States. At just around the same time, ebooks began gaining in popularity, and as the digital publishing revolution took off, so did the once-stigmatized practice of self-publishing. Authors were suddenly able to get their ebooks to large audiences without going through traditional publishers. On January 20, 2010, Amazon began offering 70 percent royalties on self-published Kindle books (priced between $2.99 and $9.99.) In doing so, it opened up a new revenue stream for thousands of people.

. . . .

The wildly differing rhetoric used on each side provides some insight into why the negotiations seem so momentous, and it is one explanation for why it can be so difficult for the supporters of each side to find any common ground. Some of the most outspoken leaders of the self-publishing movement have adopted Tea Party-like rhetoric benefiting Amazon that can make it difficult for those from the “elite” world of traditional publishing to sympathize. Those traditional publishers, bestselling traditionally published authors and literary folk, on the other hand, tend toward anti-Amazon arguments that the self-publishing movement finds preposterous.

. . . .

Amazon’s ability to pull this off reflects an underlying trend in the self-publishing movement: Its reliance on Tea Party-esque, “freedom fighter” rhetoric. Earlier this year, self-publishing site Smashwords published “The Indie Author Manifesto,” modeled after the Declaration of Independence and including the line “I shall not bow beholden or subservient to any publisher.”

. . . .

Meanwhile, statements that Hachette and Amazon released last week illustrate the ways in which Amazon has picked up on the voice of the self-publishing movement, while Hachette’s language is stilted and formal:

Hachette:

“Amazon has just sent us a brief proposal. We invite Amazon to withdraw the sanctions they have unilaterally imposed, and we will continue to negotiate in good faith and with the hope of a swift conclusion. We believe that the best outcome for the writers we publish is a contract with Amazon that brings genuine marketing benefits and whose terms allow Hachette to continue to invest in writers, marketing, and innovation. We look forward to resolving this dispute soon and to the benefit of the writers who have trusted their books to us.”

Amazon:

“We call baloney. Hachette is part of a $10 billion global conglomerate. It wouldn’t be ‘suicide.’ They can afford it. What they’re really making clear is that they absolutely want their authors caught in the middle of this negotiation because they believe it increases their leverage. All the while, they are stalling and refusing to negotiate, despite the pain caused to their authors. Our offer is sincere. They should take us up on it.”

“We call baloney” is the master stroke: Brief, folksy and eminently tweetable. “Our offer is sincere. They should take us up on it.” Just 51 characters — easy to share that!

Hachette’s statement is written with more complex language and can’t be distilled into a single phrase; there is nothing there that you want to tweet and I had to think for a second about what they meant by “sanctions.” Both sides argue this is war, but Amazon is more charming about it and makes its message easier to spread.

. . . .

One of the main reasons that charges of “elitism” rankle the traditional publishing world, I think, is that most people who work in the industry — whether they are publishers, independent booksellers, editors or authors — don’t feel like one-percenters. And most of them aren’t: Book publishing pays notoriously low salaries and most authors — whether they are traditionally published or self-published — will never get rich.

Supporters of Hachette and traditional publishing fear Amazon’s growing power. They worry that its business practices will drive publishers into the ground, forcing them to consolidate or go out of business, and leading to a less competitive and vibrant marketplace for books.

But I think that many members of this group fear the loss of the “right” kinds of books. Thus far, all of the greatest self-publishing successes have been in genre fiction – thrillers, mystery, romance, science fiction — rather than literary fiction or narrative nonfiction, the types of books that win the biggest prizes and get serious reviews. There is a fear that in a world dominated by self-publishing and Amazon, it’s not just “books” that wouldn’t get published, it’s the “important” books that wouldn’t get published. (Robert Caro, anyone?)

There is, too, a fear that Amazon does not value or respect books as cultural objects. “To our knowledge, Amazon has never clearly and unequivocally stated (as traditional publishers have) that books are different and special, that they can’t be treated like the other commodities they sell,” the Authors Guild’s Richard Russo wrote last week. “This doesn’t strike us as an oversight.”

Link to the rest at GigaOm and thanks to Sharon for the tip.

PG understands the use of the term, Tea Party, in the article for timeliness, but suggests that Populist is a better description of some of the characteristics of the indie publishing community. Populist movements have arisen on both the right and the left in American politics.

Additionally, the self-publishing viewpoint is international and a uniquely American political term probably doesn’t describe similar feelings overseas.

Amazon-Hachette: The Sounds of Silence

14 July 2014

From regular TPV commenter William Ockham via Joe Konrath:

Everybody’s talking about Amazon’s latest move in the Amazon-Hachette kerfuffle and the reactions have been pretty predictable. Lots of confirmation bias going around. While the public broadsides, grand offers, and nasty anonymous leaks are full of sound and fury, I’m fond of looking for the truth in the silence. What the companies aren’t saying is as important to understanding the situation as what they are saying. I’m not sure if anyone has noticed, but neither side has denied any of the specific factual claims the other has made. In fact, if we read between the lines, we can cut through the noise and see what’s really happening. I have learned* the best way to do that is to make a timeline. Our brains have a tendency to remember the order in which we learned a set of facts and it has a hard to reassembling the chronological order of how things actually happened. We should be continually re-evaluating our understanding of this situation based on new information.

. . . .

What does the timeline tell us?

1. Hachette did not negotiate in good faith before the end of the contract.

They didn’t negotiate at all. Amazon and Hachette agree on this crucial point. The first Hachette offer was in April. Amazon says the original contract ran out in March and Hachette hasn’t denied it. In my view, the party that makes no attempt to negotiate during the term of the original contract is the instigator of the stand-off.

2. Hachette knew for months that their authors were being harmed and they did nothing.

Sullivan noticed that the usual Amazon discounts on his titles were gone on February 7. He saw the inventory issues on March 9. He let Hachette know about both issues. At that point Hachette had let their contract expire without so much as a counter-offer.

. . . .

4. Hachette was able to pull off a complex, multi-million dollar acquisition of a smaller publisher, but unwilling to fund either of Amazon’s offers to help the affected authors.

The publishing half of Perseus was estimated to have revenues in the $100 million range. That’s a pretty big deal in the publishing world.

5. Since the dispute became public, Hachette has essentially abandoned the negotiations in favor of a concerted public relations campaign.

Hachette’s last offer was in May around the time the affair became public. Amazon sent them another offer on June 5. Hachette has orchestrated a high-profile publicity campaign with big name authors, a popular TV host, and the publishing industry press taking up Hachette’s cause. Hachette has even enlisted the New York Times to play stenographer for them.

6. Hachette has a powerful incentive to drag this out.

To achieve its goal, Hachette needs to delay the final agreement until late 2014 or early 2015. That is the earliest time they will be able to conclude an agreement with Amazon that restricts Amazon’s ability to discount ebooks. Moreover, developments in Apple’s ongoing appeal could substantially impact Hachette’s negotiating position. An Apple loss or settlement would make reaching an agency deal (with no discounting) almost impossible because Amazon is not going to agree to let Apple underprice them on ebooks.

Link to the rest at Joe Konrath

Amazon Gave Panelists Talking Points to Answer Questions About Hachette

12 July 2014

From Time:

On Saturday, Amazon Studios, Amazon’s original video content production arm, will present its upcoming slate of original programming to the Television Critics Association. That line-up will include Bosch, an adaptation of Michael Connelly’s best-selling series of books about LAPD detective Harry Bosch, which happen to be published by Little, Brown and Company, which is part of Hachette, the media company involved in an ongoing and public dispute with Amazon. The dispute has most noticeably manifested itself in shipping delays for Hachette titles on Amazon, but it looks like the retailer is prepared for Bosch to be another reason for consumers and critics to be curious.

TIME received a copy of the talking points provided by Amazon to the Bosch panelists, with suggested answers for questions about the show as well as about the Hachette dispute.

. . . .

-  For a question about how the dispute has affected the series, the suggested answer is that there has been “zero disruption in Michael [Connelly’s] involvement in the series or our filming schedule.”

- For a question about personal feelings about the dispute, the suggested answer is “I don’t know the particulars on that situation.”

Link to the rest at Time and thanks to Patricia for the tip.

Will Amazon’s Revenues Rise $11.2 Million If Hachette Caves?

11 July 2014

From Forbes:

Amazon is trying to force Hachette to accept a smaller share of the cash Amazon gets when consumers use it to buy e-books written by Hachette authors. Although the war of words is loud, what investors need to know is how much the outcome of that war is likely to affect Amazon’s financial condition.

My guess is that it will be worth $11.2 million in additional revenue for Amazon — .014% of Amazon’s $78 billion in revenue. In other words, from an investment perspective, this wordy dispute is much ado about nothing — unless winning this dispute forces all the other publishers to cave.

Amazon is trying to change the terms of its e-book contract with Hachette — I am guessing for the purpose of putting more of the reader’s money in its pocket — which means Hachette gets less.

. . . .

This situation would make a great business school case.

. . . .

And to analyze the financial impact the outcome of this dispute is likely to have on Amazon, it is helpful to trot out the idea of expected value — where an analyst envisions different possible outcomes of the dispute, estimates the payoff of each outcome, and guesses at the probability of each scenario actually happening.

The expected value is what you get by multiplying the probability of each scenario by its payoff. Of course applying the expected value concept is made difficult by the fact that nobody can predict the future — casting doubt on the realism of the numbers made up to do the analysis.

My conclusion is that the expected value of Amazon’s e-book battle with Hachette is $11.2 million in additional revenue for Amazon. This is based on a 10% probability that Amazon will get Hachette to give it 50% — worth $32 million plus the 50% probability that Hachette will agree to give Amazon 40% — worth $16 million, plus the 40% chance that Hachette will stand firm — worth nothing more to Amazon.

. . . .

According to Amazon.com’s Brittany Turner, “You have to look at the parent company — Lagardère Group — rather than just the Hachette division. Kindle books are only 1% of Lagardère Group’s sales. They can afford it, and should stop using their authors as human shields.”

Link to the rest at Forbes

Amazon/Hachette

11 July 2014

Smashwords CEO on Why He as an Indie Author Supports Hachette Against Amazon

10 July 2014

From Digital Book World:

Mark Coker, the CEO of self-publishing distribution business Smashwords and an indie author himself, is rooting for Hachette in its current business dispute with Amazon.

Unlike many indie authors, Coker is rooting for Hachette to prevail against Amazon because he believes that a Hachette loss now would make it harder for big publishers to eventually switch to the old “agency” model of selling ebooks (where the publisher sets the price and takes 70% of the proceeds) and that the agency model is good for indie authors.

. . . .

Coker believes that the agency model:

1. Has allowed indie authors to price ebooks lower to consumers, creating a favorable price comparison with traditionally published ebooks, while still earning a large royalty.

. . . .

3. Benefits authors (giving them more sales channels to pursue), publishers (same as authors) and readers (who get more choice when it comes to how and where they purchase ebooks).

Link to the rest at Digital Book World and thanks to Loretta for the tip.

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