In case you missed it, today Amazon issued an update on its stalled negotiations with Hachette. It’s a great read: short, clear, and devastating to the meme that Hachette is in any way the good guy in this fight. But if you want just the executive summary, it’s this:
Amazon wants most ebooks to be priced at below ten dollars; Hachette wants ebooks to be priced higher.
So far, so simple. But what’s critical to understand is that lower ebook prices create more revenue — a lower price for the customer, and more income for the retailer, publisher, and author.
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This is what Hachette opposes. This is what the “Authors Guild” and “Authors United” are fighting to prevent. More money for authors.
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So why do legacy publishers insist on high prices for ebooks?
As I starting pointing out about three years ago, “The current business imperative of legacy publishing is to preserve the position of paper and retard the growth of digital.” Why? Because although the legacy industry offers various value-added services (at least in theory), the only critical service they’ve ever offered — the only one an author couldn’t get any other way — has always been paper distribution. Paper distribution is the foundation on which the legacy industry built its agglomerated business model. That is: “You want distribution? Then you’ll have to take all the services you could have outsourced for a flat fee elsewhere (editing, jacket design, etc) along with it, and you’ll have to pay 85% of earnings for the agglomerated package.”
But in a digital world, authors don’t need distribution services from publishers. In digital, individual authors have exactly the same distribution reach as any corporate publishing partner, and for the same flat rate of 30%. Digital is changing the role of publishers from something authors needed to something authors might, for reasons separate from distribution, merely want.
Having the nature of your business go from “I’m a business necessity and the only game in town” to “If I can prove my value, authors might still want me” represents a cataclysmic change for legacy players. Remove the criticality of distribution from the equation, and the entire nature of the publishing business model dramatically changes, with services that once upon a time could only be had as part of a mandated and expensive prix fixe meal now available as low-price a la carte items authors can order from the menu however and from whomever they like.
If any of this sounds familiar, it’s because it is. Forcing someone to buy an unessential item as the price of being able to buy the essential one is called tying and it is frequently illegal, especially in the context of intellectual property. Or, for another example of tying, recall the pre-digital-distribution era way the music industry allowed you to buy the one song you wanted: by forcing you to buy the entire CD along with it. There are many other examples. What they all have in common is that in whatever context it develops, tying can only exist in the presence of disproportionate market power.
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To put it another way:
The legacy imperative of using high ebook prices in an attempt to maintain the primacy of paper costs legacy-published authors money.
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It’s going to be fascinating to see how the “Authors Guild” and “Authors United” try to spin this. Fascinating in no small part because Amazon is taking the very position on digital royalties you would expect — indeed, you would insist on — from any organization worthy of inclusion of the word “Authors” in its marquee. Instead we have Amazon championing authors, and “Authors” championing publishers!