Really, Amazon?

I signed up for Kindle Direct Publishing a couple years ago when Kindle was experimenting with blog subscriptions.  I had forgotten about it entirely until this morning, when I got the following e-mail about the Amazon/Hachette debacle.

Dear KDP Author,

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.

The Amazon Books Team

P.S. You can also find this letter at www.readersunited.com

What the actual fuck?  I’m convinced that there’s no right side in this argument.  On one hand, I understand the fact that publishers want to make money via e-books, and that the cost of producing a book includes far more than just the cost of printing it.  Even though e-book production doesn’t involve high marginal expenses, you still have to pay the author, editor, publicity staff, cover artist, etc.

I’m not the kind of person who would spend $10-15 on an e-book, and I’m also not the kind of person who would spend $30 on a hardcover.  I’m a mass-market paperback kind of gal, because otherwise my book expenditures would become unsustainable.  When e-book prices are low, I’m more likely to buy the book. However, I don’t think that people should be forced to keep their prices low.  If an e-book is too expensive, I’ll either get the book from the library or read a different book.  If enough people do that, publishers will get the hint and lower prices to sell more copies.  That’s how the free market works.  If you don’t do that, you’ll lose money and won’t be able to compete.

Amazon is trying to force Hachette to lower prices.  I think that Hachette’s prices are unreasonable, but that doesn’t mean that it’s Amazon’s place to tell them that.  Amazon is overstepping its bounds as a retailer, and the actions it has taken to reduce Hachette’s sales are hurting authors and readers.  Now, it would be different if Hachette were actively colluding with other publishers to keep e-book prices artificially high across the board, but I don’t think that’s the case here.

Sending a mass-letter to everyone who has ever self-published anything with Amazon asking them to jump into the fray is inherently ridiculous, and only furthers my opinion that Amazon is going way out-of-bounds in its tactics.

In summation:  If corporations are people, both Amazon and Hachette are acting like petulant children.  Both parties need to grow the fuck up.

Comments make me happy! Please feel free to leave a reply.

12 comments

  1. This comes because of the full page ad in the times. Hatchet got together it’s wealthiest authors and got them to contribute against Amazon. This e-mail is amazons salvo BACK, trying to get their authors to stand up to them.

    http://www.nytimes.com/2014/08/08/business/media/plot-thickens-as-900-writers-battle-amazon.html?_r=0

    I’m on Amazon’s side here, and have been watching this one closely. The outcome literally could alter how I feed my kids.

    1. I’m on nobody’s side. I’m irritated at the fact that the authors are caught in the middle, and I don’t appreciate getting letters asking me to spam people before I’ve had my coffee. I want Amazon and Hachette’s leadership to act like the adults that they are. It’s getting ridiculous.

      1. “Please email Hachette’s CEO and complain to him” reminded me of something I saw on an author’s blog once. She mentioned she’d sent her manuscript to Publisher X and was naturally anxious and hopeful. Then she added, “Any of my betas reading this, please go to Publisher X’s Facebook page and tell them how much you liked my story!”

        At least the author was new and inexperienced. Amazon has no such excuse. Seriously, are these emails from strangers (not even from Hachette’s own authors) supposed to make Michael Pietsch cry or something?

        1. More likely to make him change his e-mail address than anything else. It reminds me of when 4chan gets mad at someone and orders hundreds of pizzas to be delivered to their house.

  2. ::facepalm:: Orwell was never against paperback books!! He was talking about how wonderful they were for authors and readers because of their low price, and he was saying that Penguin was so ahead of the curve that the other publishers would have to collude to compete. Also, any time someone tries to draw an irrelevant comparison to anything around World War II, a historian dies of apoplexy. And let’s not even get started on how this letter pretends that the only possible ebook prices are under $10 or over $15. I was reasonably good at math in school and seem to recall some numbers in between 10 and 15.

    I’m not on either side in this fight. But this letter is freaking stupid.

  3. “If corporations are people, both Amazon and Hachette are acting like petulant children. Both parties need to grow the fuck up.”

    Although I agree, it’s a sort-of situation. They’re both acting like activists on one side of a political view. And they’re going to the people they believe will have something to say about it and are invested in it, basic grassroots activism.

    I’ve managed to stay out of it and probably will continue to – I’m with you, I’d rather support my local library and check books out and mostly just buy e-books on sale.

    1. I don’t think I can currently find a meaningful difference in methods between a political activist and a petulant child….

      I’m pretty committed to the Amazon ecosystem currently. I generally buy ebooks cheap, and am piling them up faster than I can read them. (Amazon and Steam have definitely tapped into the same source of addiction….)

      This letter…. oy. I’m staying as far away from this as I can, but it tempts me to put my miniscule amount of support somewhere other than Amazon.

      1. Of course there’s no difference! 😀 I was just observing that Amazon isn’t the first, or the last “organization/business” to do this and that’s why I find it funny and irritating.

        Personally, I didn’t think the letter was that offensive – I’m sure Hatchett’s authors received something similar, but we’ll never know.

        1. Although it is kind of amusing that Amazon sent it to the KDP authors, which seem to be a group of people who are almost exclusively NOT Hachette authors.

        2. Offensive, no. Just annoying and full of logical gaps that advertise they have no high horse. 😛

          I generally agree with the idea that Amazon should be a retailer, let Hatchett set their prices, and let the market decide whether to choke them. I’m split as to whether Amazon’s primary motivation is to take control of pricing so they can continue to dominate the retail space, or if they’re scared that letting such a large chunk of supply as Hatchett set the prices they want will end up with everyone else following suit and wrecking the Amazon economic model (collusion-by-imitation rather than collusion-by-conspiracy). I’m sure something like each of those is there, just not sure which led the charge….