Earlier this week, Amazon unveiled its latest tactic in the mega-company’s battle with Hachette, a dispute that’s become as much about PR as profit margins: transparency. A brief “update” outlines exactly how much of the proceeds from e-books Amazon wants (30 percent) and how much Amazon wants to charge for those e-books ($9.99). There are also Economics 101 buzzwords like “price-elastic” and internal numbers that claim lower e-book prices actually result in higher revenue for everyone. There is, of course, another side to this story — and a months-long dispute that won’t end because Amazon named names. Here’s the rundown on what the average book buyer needs to know.
Amazon’s Been Messing with Hachette Since Early May
That’s when the New York Times reported that negotiations with Hachette Book Group, the Big Five publisher that includes imprints like Little, Brown, & Company and Grand Central Publishing, had bled over into how Amazon handles HBG’s merchandise. (Amazon and Hachette’s contract had run out at the end of April after Amazon extended it from its original March expiration date.) At the end of the month, Amazon finally admitted to tactics such as cutting down on Hachette inventory — thereby stretching out delivery times to as much as three weeks — and disallowing pre-orders for some of its books. In the meantime, would-be readers of books like Stephen Colbert’s America Again: Re-Becoming the Greatness We Never Weren’t were left to wait it out.
This Kind of Thing Has Happened Before
Back in 2010, Amazon went way beyond taking pre-orders off the table in its face-off with Macmillan, another major publisher. The Internet commerce behemoth responded to Macmillan’s demands for higher e-book prices (from Amazon’s $9.99 default to $12.99 or $14.99) by pulling the plug on all Macmillan titles — not just virtual ones. Amazon capitulated to Macmillan in just a few days, however, bringing the dispute to a close far more quickly than the current war of attrition with Hachette. In 2012, the Independent Publishers’ Group saw 5,000 of its e-books taken off Amazon in yet another contract re-negotiation. IPG and Amazon settled a few months later, but didn’t share details, leaving it unclear whether Bezos or the booksellers came out on top.
Amazon Wants Customers to Think Hachette Is the Bad Guy…
One of Amazon’s main PR strategies has been to subvert the Big Bad Corporation vs. Literary Underdog narrative that’s predictably taken shape. The company’s fond of pointing out, for example, that in addition to being one of the biggest publishers around, Hachette’s also a subsidiary of multibillion-dollar French conglomerate the Lagardére Group. They also like to bring up the fact that it’s Hachette, not Amazon, that’s gotten into hot water with the Department of Justice before: last year, a district judge found that Apple had illegally colluded with every other major publisher except Random House (now merged with Penguin) to inflate e-book prices from $9.99 to $12.99 or $14.99. The intended takeaway? Hachette’s in the big leagues, too, and Amazon’s treating HBG like it would any other corporate equal.
… And That Amazon, Not Hachette, Has Authors’ Backs
Some of the most vocal critics of Amazon’s strong-arming have been authors, many of whom stand to lose a lot more than their publisher. (Colbert, for one, has done some quality public shaming.) Amazon attempted to change that in early July when it publicly offered to give authors 100 percent of e-book sales for the duration of the dispute — an offer made directly to authors themselves, not to Hachette. The idea is that by intervening, Hachette would have its own turn in the soulless-profiteer hot seat, cutting vulnerable authors off in the name of higher profits. That’s also the likely reasoning behind yesterday’s numbers reveal, which included a suggestion that authors should get 35 percent of the proceeds from e-books, a cut equal to Hachette’s.
But Amazon’s Spin Doesn’t Tell the Whole Story
Surprise! The New Yorker‘s Vauhini Vara has a helpful breakdown of why the “more money for everyone, so what gives?” argument is a bit misleading. For one thing, the 35 percent suggestion is just that, a suggestion; Amazon can negotiate how much it takes away from e-books, but it doesn’t control the division of what’s left between authors and publishers. Also, Amazon may sell more e-books at $9.99, but that doesn’t account for Hachette’s (and authors’) lost revenue on the more profitable hardcovers readers could be buying instead. Finally, there’s the fear that lower prices might make Amazon even more dominant in the market, and thus able to make even more extreme demands on publishers. As for the 100 percent-to-authors offer? Many criticized the move as an attempt to drive a wedge between authors and publishers with a short-term solution that doesn’t address the bigger issues at hand, and that happens to do massive financial damage to Hachette.
Hachette’s Still Doing Pretty Well for Itself
So, how have months of negotiations affected Hachette’s bottom line? The first half of 2014 has actually seen a 5.6 percent increase in HBG’s US sales relative to last year, so… not too badly, it would seem. Nonetheless, e-book sales have fallen, now making up 29 percent of adult book sales in the US versus 34 percent a year ago. So while the fighting shows no sign of winding down, Hachette — and the authors it publishes — doesn’t appear to be in dire need of throwing in the towel.