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Aug 12 2014

Amazon & Hachette, What’s the Deal?

amazonLogohachette_book_logo

 

I got the email. The one from the Amazon’s Book Team, urging me to write a letter to the CEO of Hachette Book Group (HBG) to remind them that e-books are not paperbacks or hardcovers and shouldn’t be priced as such.

Here are just a couple of the points I will make in this post:

  • This issue is not about authors or publishers but about the consumers, the readers. Even though some Hachette authors are affected, Amazon and Hachette seem to forget that this is about readers who buy e-books. Happy readers make happy business and a profit for author, publisher and retailer. Readers want low prices. Eventually, readers will not buy high priced e-books and Hachette will be forced to adapt to publishing’s changes or fail.
  • Although Amazon is strict about carrying e-books with low prices, maybe the way they are going about it is all wrong. Yes, I agree e-books should be priced lower than physical books as there are no warehouse costs, shipping cost, printing cost, etc., to offset. However, is preventing preorders and sales of these overpriced books the best tactic? Maybe, if that compromises your brand as the largest online retailer with the lowest prices. Read on.

So what’s up with Amazon?

Amazon wants to be the next Walmart and cater to their online buyers by guaranteeing low prices. Amazon’s mission is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.” As a bookstore this goal helps them beat out the competition, driving more readers to Amazon.com for low priced reads. How can they brand themselves as a “customer-centric company that offers its customers the lowest possible prices” if they are distributing digital books priced as high as the paperback?

So their statement to Hachette, in my words, are “You want me to help sell your books? You gotta play by my rules. Because I don’t want you exploiting my customers and taking advantage of them by charging them ridiculous fees.” Because even though Amazon gets a piece of the earnings of each e-book sold (30%), they’re reminded of their brand and their mission, the thing that makes them the go-to place for e-books and, well, everything else. Low prices. That’s essentially their thing. And they seemingly care a lot about their customers to prevent the sale of some titles to ensure their customers aren’t being overcharged.

Is this right? That’s the main question. And the answer varies from “yes” to “no” to “I don’t know and don’t care,” depending on who’s most affected by their tactics.

Why shouldn’t publishers play by Amazon’s rules?

Seems like a simple business maneuver (or bullying, depending on who’s talking). Want to work with me? Abide by my rules. Amazon is a business. The way they build their brand is by offering books at a low cost. I said it before, but it bears repeating. This is the difference between Amazon and Barnes and Noble, for instance. Barnes and Noble lists books at the price the publisher chooses. Amazon lists books at the price the publisher decides IF it’s a favorable price for their customers.

So what’s up with Hachette?

Maybe Hachette is a little behind the times. Maybe they don’t understand how publishing has evolved. Maybe they do, but don’t care. Maybe they’re just greedy and it’s all about money, money, money. Who really knows? In response to the letter by Amazon, chief executive of HBG, Michael Pietsch, had this to say:

“Unlike retailers, publishers invest heavily in individual books, often for years, before we see any revenue,” he wrote.  “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 e-book.

“While e-books 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.”

The bottom line is that Hachette wants to charge high fees for their e-books and that doesn’t fit with Amazon’s business model.

So what if Hachette said, “Screw you, Amazon,” and only sold their books through other online retailers, leaving Amazon in the dust?

They would probably lose money from Amazon’s customers, or face complaints from readers who prefer Amazon’s one-click buy now convenience, and enjoy adding to their collection of books on their Kindle readers.

So what if Hachette lowered they’re e-books on Amazon.com?

Hachette would be forced to lower prices of their e-books at other retailer’s sites too. Otherwise readers would flock to Amazon to get the lower priced books, which is good for Amazon and good for Hachette because it’ll probably increase  sales from Amazon, but the sales will come from lower priced books. Meaning less profit for Hachette (not so good from their point of view).

But money is the name of the game.

Greed aside. Money keeps a business afloat. Sure. Plenty Kindle Direct Publishing (KDP) authors, including myself, complained about the royalty difference when pricing our books. KDP authors can select from two royalty options.

E-book priced at $0.99 – $2.99 = 35% royalty to the author

E-book priced at $2.99 – $9.99 = 70% royalty to the author

*$0.00 (FREE) e-books are only an option for Kindle Select participants = books are exclusively sold from Amazon

*All e-books to be priced under $9.99 

Here’s a more detailed explanation at this link.

OK, let’s think business here. Amazon crunched numbers to make sure when every book sells, they make a profit. Makes sense from a business standpoint, right?

I used to wonder, if Amazon really cared about the customer why not add to their database of free e-books by making it easy for KDP authors to upload free reads. I still have a book on Amazon (not enrolled in Select) that is free everywhere else, even Amazon UK and CA, but is still listed at .99 cents on Amazon.com US and other countries. This is so because Amazon uses price matching. If another retailer (competition) provides the book for free Amazon will (usually) do the same to stay on top of the competition.

However, by (definitely) offering the free option to books that are exclusive to Amazon through Kindle Select, they now eliminate the competition of Select titles altogether. As frustrating as this can be to authors not enrolled and want to distribute free e-books on Amazon, including myself, I get it. Business, remember?

Hachette—who I am not familiar with as a business, and never worked with—have an agenda and a profit to make too, to recoup the overall cost of producing the books, as stated above by the chief executive of HBG. If they make bad decisions by overcharging for e-books, over time, those mistakes will correct themselves one way or another. Readers will stop buying overpriced e-books, Hachette will be forced to adapt to the times, or buckle.

Bottom Line

Amazon must learn that although they are currently big and bad in the book industry, they are not the face behind a publishing revolution and they shouldn’t strive to be. They should do what they do best and provide e-books at a value by focusing on the consumer’s wants, but not tossing them in the middle of legal negotiations. Is going public really going to change the fact that these two companies want to do business together but can’t agree? How is a letter from little ol’ me to the CEO of Hachette going to change his or anyone’s opinion, especially if what I say is:

1) Bullet points at the bottom of their lengthy email Amazon prompted me to say

2) Things Mr. CEO already knows

Bestselling Hachette authors placing a $100k ad against Amazon in the New York Times, and Amazon mass emailing all of their readers, is simply putting us in the middle of a war that none of us deserve. The folks choosing sides are most likely the ones directly affected by the Amazon-Hatchette battle. Those on the fence are most likely the ones thrown in the middle and have nothing to do with either parties.

Frankly, both sides are publicly presenting themselves as unprofessional. To go so far with their tactics to start a war over the rights and wrongs of e-book pricing. What should have been a private matter has now spiraled into authors and readers and others in publishing from all over, taking sides and pointing fingers. When if only Amazon and Hachette focus on the reader’s wants (which is a huge factor to consider in the publishing industry) this war would have been nonexistent.

This has been my two cents. Mind sharing yours?

[Image credit: Claudio Toledo]

About the author

Leslie Lee Sanders

Leslie is a publishing Industry blogger, freelance writer and an author of over a dozen erotic romance & thriller titles. She self-published over two dozen works of fiction since 2004. Her blog was a finalist in the first annual Goodreads Independent Book Blogger Awards in 2012, and her story Benefits of Sharing is a finalist for the 2013 EPIC Award in the short story category. Her work has been included in the following Writer’s Market books: 2016 & 2017 Writer’s Market, 2016 & 2017 Novel and Short Story Writer’s Market, and the 2014 & 2015 editions of Guide to Self-Publishing. As well as online blogs like Be a Freelance Blogger. She resides in Arizona with her husband and 3 daughters.

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