The Amazon/Hatchette war looks set to continue as both sides dig in their heels - recently Amazon posted an email out to writers and readers asking them to write to Hatchette asking for them to lower eBook prices. Hatchette recieved a large volume of emails and have now respoded with the following statement:
Hachette CEO Michael Pietsch
Thank you for writing to me in response to Amazon’s
email. I appreciate that you care enough about books to take the time to
write. We usually don’t comment publicly while negotiating, but I’ve
received a lot of requests for Hachette’s response to the issues raised
by Amazon, and want to reply with a few facts.
• Hachette sets prices for our books entirely on our own, not in collusion with anyone.
• We set our ebook prices far below corresponding print book prices, reflecting savings in manufacturing and shipping.
• More than 80% of the ebooks we publish are priced at $9.99 or lower.
• Those few priced higher—most at $11.99 and $12.99—are less than half the price of their print versions.
• Those higher priced ebooks will have lower prices soon, when the paperback version is published.
• The invention of mass-market paperbacks was great for all because it
was not intended to replace hardbacks but to create a new format
available later, at a lower price.
As a publisher, we work to bring a variety of great books to readers, in
a variety of formats and prices. We know by experience that there is
not one appropriate price for all ebooks, and that all ebooks do not
belong in the same $9.99 box. Unlike retailers, publishers invest
heavily in individual books, often for years, before we see any revenue.
We invest in advances against royalties, editing, design, production,
marketing, warehousing, shipping, piracy protection, and more. We recoup
these costs from sales of all the versions of the book that we
publish—hardcover, paperback, large print, audio, and ebook. While
ebooks do not have the $2-$3 costs of manufacturing, warehousing, and
shipping that print books have, their selling price carries a share of
all our investments in the book.
This dispute started because Amazon is seeking a lot more profit and
even more market share, at the expense of authors, bricks and mortar
bookstores, and ourselves. Both Hachette and Amazon are big businesses
and neither should claim a monopoly on enlightenment, but we do believe
in a book industry where talent is respected and choice continues to be
offered to the reading public.
Once again, we call on Amazon to withdraw the sanctions against
Hachette’s authors that they have unilaterally imposed, and restore
their books to normal levels of availability. We are negotiating in good
faith. These punitive actions are not necessary, nor what we would
expect from a trusted business partner.
Thank you again and best wishes,
Michael Pietsch
And below we have the original Amazon email which sparked the above response.
A Message from the Amazon Books Team
Dear Readers,
Just ahead of World War II, there was a radical invention that shook
the foundations of book publishing. It was the paperback book. This was a
time when movie tickets cost 10 or 20 cents, and books cost $2.50. The
new paperback cost 25 cents — it was ten times cheaper. Readers loved
the paperback and millions of copies were sold in just the first year.
With it being so inexpensive and with so many more people able to
afford to buy and read books, you would think the literary establishment
of the day would have celebrated the invention of the paperback, yes?
Nope. Instead, they dug in and circled the wagons. They believed low
cost paperbacks would destroy literary culture and harm the industry
(not to mention their own bank accounts). Many bookstores refused to
stock them, and the early paperback publishers had to use unconventional
methods of distribution — places like newsstands and drugstores. The
famous author George Orwell came out publicly and said about the new
paperback format, if “publishers had any sense, they would combine
against them and suppress them.” Yes, George Orwell was suggesting
collusion.
Well… history doesn’t repeat itself, but it does rhyme.
Fast forward to today, and it’s the e-book’s turn to be opposed by
the literary establishment. Amazon and Hachette — a big US publisher and
part of a $10 billion media conglomerate — are in the middle of a
business dispute about e-books. We want lower e-book prices. Hachette
does not. 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 and should be less expensive.
Perhaps channeling Orwell’s decades old suggestion, Hachette has
already been caught illegally colluding with its competitors to raise
e-book prices. So far those parties have paid $166 million in penalties
and restitution. Colluding with its competitors to raise prices wasn’t
only illegal, it was also highly disrespectful to Hachette’s readers.
The fact is many established incumbents in the industry have taken
the position that lower e-book prices will “devalue books” and hurt
“Arts and Letters.” They’re wrong. Just as paperbacks did not destroy
book culture despite being ten times cheaper, neither will e-books. On
the contrary, paperbacks ended up rejuvenating the book industry and
making it stronger. The same will happen with e-books.
Many inside the echo-chamber of the industry often draw the box too
small. They think books only compete against books. But in reality,
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.
Moreover, e-books are highly price elastic. This means that when the
price goes down, customers buy much more. 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 the lower price is good for all parties involved: the
customer is paying 33% less and the author is getting a royalty check
16% larger and being read by an audience that’s 74% larger. The pie is
simply bigger.
But when a thing has been done a certain way for a long time,
resisting change can be a reflexive instinct, and the powerful interests
of the status quo are hard to move. It was never in George Orwell’s
interest to suppress paperback books — he was wrong about that.
And despite what some would have you believe, authors are not united
on this issue. When the Authors Guild recently wrote on this, they
titled their post: “Amazon-Hachette Debate Yields Diverse Opinions Among
Authors” (the comments to this post are worth a read). A petition
started by another group of authors and aimed at Hachette, titled “Stop
Fighting Low Prices and Fair Wages,” garnered over 7,600 signatures. And
there are myriad articles and posts, by authors and readers alike,
supporting us in our effort to keep prices low and build a healthy
reading culture. Author David Gaughran’s recent interview is another
piece worth reading.
We recognize that writers reasonably want to be left out of a dispute
between large companies. Some have suggested that we “just talk.” We
tried that. Hachette spent three months stonewalling and only grudgingly
began to even acknowledge our concerns when we took action to reduce
sales of their titles in our store. Since then Amazon has made three
separate offers to Hachette to take authors out of the middle. We first
suggested that we (Amazon and Hachette) jointly make author royalties
whole during the term of the dispute. Then we suggested that authors
receive 100% of all sales of their titles until this dispute is
resolved. Then we suggested that we would return to normal business
operations if Amazon and Hachette’s normal share of revenue went to a
literacy charity. But Hachette, and their parent company Lagardere, have
quickly and repeatedly dismissed these offers even though e-books
represent 1% of their revenues and they could easily agree to do so.
They believe they get leverage from keeping their authors in the middle.
We will never give up our fight for reasonable e-book prices. We know
making books more affordable is good for book culture. We’d like your
help. Please email Hachette and copy us.
Hachette CEO, Michael Pietsch: Michael.Pietsch@hbgusa.com
Copy us at: readers-united@amazon.com
Please consider including these points:
– We have noted your illegal collusion. Please stop working so hard
to overcharge for ebooks. They can and should be less expensive.
– Lowering e-book prices will help — not hurt — the reading culture, just like paperbacks did.
– Stop using your authors as leverage and accept one of Amazon’s offers to take them out of the middle.
– Especially if you’re an author yourself: Remind them that authors are not united on this issue.
Thanks for your support.