by Catherine Song

Introduction

Since June 2014, more than 900 authors have formed a coalition called Authors United, criticizing Amazon for intentionally deterring Hachette book sales and harming the authors. Their newest tactic is calling on the Department of Justice (DOJ) to investigate Amazon for illegal monopoly tactics.  In the end, Hachette should win this case because first, Amazon’s monopoly will hurt the publishing industry dramatically and there will be no future in the creative intellectual field. Second, Amazon will not be able to offer authors what publishers do such as paying for authors to travel and giving generous time to write (Piesch, 2014). Third, Amazon does not care about authors, as the company is more concerned about profits. More publishers and authors support the DOJ and will not let Amazon conquer the publishing industry.

 

Background

The battle between Amazon and Hachette began in April 2014, after Hachette’s contract expired a month earlier. Amazon added new conditions to extend the contract including lowering most of Hachette’s e-book prices to $9.99. Hachette, however, was totally unhappy with these terms, and did not respond to it. Instead of terminating Hachette’s contract, Amazon extended the contract under its current terms by boycotting Hachette authors, refusing to discount the books and delaying delivery of Hachette’s books. They even went so far as to suggest that some Hachette authors’ readers might prefer a book from a non-Hachette author instead (Figure 1) (Piesch, 2014).

Figure 1. Churn Trends of Kindle Tiles that earn more than $10/day, by Publisher.(Source: The Effects of the Amazon-Hachette Negotiations)

http://authorearnings.com/the-effects-of-the-amazon-hachette-negotiations/

 

  Amazon’s Monopoly will Destroy the Publishing Industry

Hachette, understandably, wants to control the pricing of its products.  Amazon argues that e-books are highly price-elastic and everyone benefits from lower price-points because more copies are sold and more revenue is generated. For this reason, Amazon presently controls almost 50 % of the publishing industry (Greenfield, 2014). Amazon cites price-testing experiments that show when they drop the price of an e-book from $14.99 to $9.99 sales increase 74%.  Even at the lower price, everyone makes 16% more money (Cohen, 2014). Amazon originally pushed to increase its share of the selling price from 30% to 50%, which is consistent with the print model. Recently, it proposed a more radical formula: 35% for the publisher, 35% for the author, and 30% for the seller (Amazon.com) Hachette, however, refused to comply with that (Cohen, 2014).

 

Amazon is not a literary nonprofit organization. It is a large and powerful corporation that wants to sell everything to everyone. Lately, Wall Street has been unhappy with the company’s financial performance. In response, Amazon has started raising prices on its Prime memberships (Isidore, 2014). The cause of the dispute between Hachette and Amazon is Amazon’s need for higher profits. According to publishing sources, the core of the contract dispute is Amazon’s desire to keep fifty per cent of the revenue it generates on each ebook it sells, rather than the current thirty per cent. A statement by Amazon released in July, said that Amazon’s key objective was to lower the price point of most e-books to $9.99 or less. It added that the company has “no problem” with only thirty percent revenues on those sales. In other words, this is not about a “healthy reading culture.” It is about the company’s bottom line. That should not be hard to understand, but, in Orwell’s words, “to see what is in front of one’s nose [is] a constant struggle” (Packer, 2014).

 

The Amazon-Hachette dispute is not only about the price point, but also about the marketplace people want to create. If lower prices are good for readers, so is diversity in the marketplace of ideas. If there is just a single bookstore in the future that is totally dominated by one seller, then that lone retailer will have an even greater sway over what gets promoted than what does now.  The retailer will also have the ability to change, at its discretion, the terms it offers to authors, to the writers’ own detriment. This has already occurred more than once. Like Amazon, publishers such as Hachette and Penguin are businesses that must generate profits. However, when it comes to books, to literature and information, there is more than business at stake. Books, in whatever form, serve as a collective soul, a memory bank, for the culture, bigger than commerce, and something that should not be bought and sold (Ulin, 2014)

 

By lowering the price point of e-books, Amazon could ultimately harm both independent booksellers and the paper book market. According to a poll done by the youth marketing firm, Voxburner, young people are more likely to have read an e-book than their elders. Having said that, 62 % of 16- to 24-year-olds still prefer physical books to digital e-books (Ward, 2013). However, Tucker worries that customers will simply start buying e-books because they’re cheaper (Sydell, 2014).

 

Amazon will Destroy Authors’ Futures

In the long term, Amazon is likely to not only abuse authors’ rights, but also the power taken from publishers to protect authors and their creativity. Consequently, publishers should win this battle. On the other hand, one might think it would be better for consumers if Amazon wins because they can get more books at cheaper prices. However, since Amazon cannot replicate completely what publishers do, book choices will be less diverse and it will be difficult to ensure the content quality of books. Since Amazon only focuses on profits, it is likely to produce books that generate revenue. Eventually, consumers will only get better pricing, but nothing else.

 

Writers want to work with publishers to print their unique literary works. Unlike publishers, Amazon treats books like television sets or toasters. If Amazon dominates the industry, it will likely be a factory, which produces books uniformly in terms of less content and fewer diverse book designs. On July 11, 2014, Richard Russo, novelist and co-Vice President of the Authors Guild, issued an open letter noting that Amazon provides a huge platform for authors to sell their works and for that the Guild is grateful. But he calls Amazon’s offer “highly disingenuous,” because it is short-term and that the Guild wants good ebook terms for all its authors, for the predictable future. As for Hachette, he says that although authors who publish in the traditional manner love their publishers, it is true that “[the authors have] not [been] treated fairly with regard to e-book revenues, and they know it. That needs to change”(writers write, 2014).

 

Although Amazon may pay better royalties than other publishers, if an author signs with Amazon, the book will be sold only on Amazon. In addition, Amazon will dictate and compel authors to publish only profitable books. Amazon’s goal is to remove all “gatekeepers” except for itself, which would ruin the infrastructure that allows good books to find readers while devaluing the worth of books to the vanishing point (Packer, 2014). Previously, Amazon has said authors should receive 35% of revenues for ebooks, but Scalzi points out that any benefit writers receive comes at the expense of Amazon’s greater goals of controlling the market. Walter Jon Williams notes that the standard contract language of Kindle Direct lets Amazon unilaterally change its agreement with a given author – hardly the terms of a negotiator with an author’s interests at heart (Yuhas, 2014).  Not only publishers and authors, but also readers should care about the progression of these events because the outcome will dramatically impact the publishing industry, the readers’ reading experience and their access to quality reading materials. If consumers concern themselves with book prices and support Amazon because of that, Hachette agrees to lower the price of their books. In a letter signed by more than 900 authors supporting Hachette, Hachette’s CEO, Michael Pietsch, wrote Hachette will set more than 80% of the e-books it publishes to prices that are $9.99 or lower. In addition, e-books that are priced higher will be lowered once the paperback edition of a book is published (Owen, 2014). A prominent literary agent declares, “If Amazon is not stopped, we are facing the end of literary culture in America.” A famous author refers to “censorship” and authors being “eliminated.” Although this is a business dispute, it is being treated as a battle for the soul of literary culture.

 

Many have tried to frame the debate as one between teetering dinosaurs of publishing, allied with pampered authors, and the “disruptive” agents of progress like Amazon, creating opportunities for hungry writers. However, publishers have survived past extinctions and have never pretended to be in it for authors. Amazon, with its history of paying minimal taxes, muscling out competitors and arguably monopolistic tactics, is hardly a friend to both authors and consumers (Yuhas, 2014).

 

Customers value their relationship with the author more than the service. Last Thursday, Amazon announced its worst quarterly loss in 14 years, losing $437 million in three months. In fact, one of its worst performing segments was North American book, movie and music sales whose revenues increased just 4.8% from 2013. This was the slowest growth for the category in more than five years. That compares with a 17.8% growth in that segment a year ago (Frizell, 2014). Evidently, the dispute has hurt sales of Amazon because customers realize that Amazon has arbitrarily disrupted the industry due to its self-interests. As a result, customers are turning away.

 

On May 28, 2014, Amazon said the battle would not be resolved anytime soon and it is gut-wrenching for authors to experience this (Picchi, 2014). Basically, the authors are suffering from an issue that has nothing to do with their books or writing. Amazon’s statement and behavior show that the company does not care about the authors. The bottom line may be that Amazon has a bigger prize in mind: winning profits from retailing, an industry known for its thin margins. While frequently a favorite with investors, the company’s failure to turn its hefty sales into sustainable and growing profits has hurt its stock, which has lost 20 percent of its value this year (Picchi, 2014).

 

As book sales continue to plummet, the battle is progressing toward a resolution. A statement released by Amazon claims that the company regrets any negative repercussions experienced by authors resulting from this negotiation dispute. Amazon has said, “Our focus for years has been to build a bookstore that benefits authors and readers alike. We take seriously and regret the impact it has when, however infrequently, a terms dispute with a publisher affects authors. We look forward to resolving this issue with Hachette as soon as possible.” (Tsukayama, 2014).

 

Publishers sometimes invest in books that they know will not earn money, simply because they believe in supporting talented writers. They also know that bringing a promising author to the list may pay off further down the line. This is true even of large corporations, and even more so of the many excellent independent publishers at work across the country. Amazon dominating the publishing industry means the death of literary culture (Ulin, 2014).

 

Conclusion

The war between Amazon and Hachette has not been resolved. Authors and readers should keep fighting against Amazon to sustain the publishing industry. Right now bookstores, libraries, authors, publishers, and books themselves are caught in the conflict of an economic war between two gigantic conglomerates. To be a winner, Hachette should offer better services with better terms through not only online platforms, but also through big retailers selling more physical and electronic books than Amazon. At the same time, Hachette needs to urge readers not to purchase books from Amazon.

 

References

 Bertrand, Natasha (Oct, 7 2014). 2014How Amazon’s Ugly Fight With A Publisher Actually Started. Business Insider. Retrieved on Oct 22, 2014 from http://www.businessinsider.com/how-did-the-amazon-feud-with-hachette-start-2014-10

 

Cohen, Steve (2014, Oct 17). Taking Sides in the Amazon-Hachette Battle. Forbes. Retrieved on Oct 23, 2014 from http://www.forbes.com/sites/stevecohen/2014/10/17/taking-sides-in-the-amazon-hachette-battle/

 

Frizell, Sam (Oct 24 2014). Amazon’s Dispute With Hachette Might Finally Be Hurting Its Sales. Time. Retrieved on Oct 24, 2014 from

http://time.com/3537365/amazon-hachette-book-sales/

 

Greenfiled, Jeremy (2014, May 28). How the Amazon-Hachette Fight Could Shape the Future of Ideas. The Atlantic. Retrieved on Oct 22, 2014 from http://www.theatlantic.com/business/archive/2014/05/how-the-amazon-hachette-fight-could-shape-the-future-of-ideas/371756/

 

Grogan, David (2014, Oct 22). Krugman: Amazon’s Bookselling “Monopsony Is Not O.K.”. American Booksellers Association. Retrieved on Oct 22, 2014 from

http://www.bookweb.org/news/krugman-amazon’s-bookselling-“monopsony-not-ok

 

Isidore, Chris (2014, Mar 13). Amazon increases price of Prime. CNN Money. Retrieved on Dec 8, 2014 from http://money.cnn.com/2014/03/13/technology/amazon-prime-price-increase/

McDowell, Gayle Laakmann (2014, Aug 15). Why Should We Care About Hachette In The Amazon-Hachette Dispute?. Forbes.  Retrieved on Oct 22, 2014 from http://www.forbes.com/sites/quora/2014/08/15/why-should-we-care-about-hachette-in-the-amazon-hachette-dispute/

 

Owen, H. Laura (Aug, 10 2014). Hachette CEO: “More than 80% of the ebooks we publish are priced at $9.99 or lower”. Gigaom. Retrieved on Oct 20, 2014 from https://gigaom.com/2014/08/10/hachette-ceo-more-than-80-of-the-ebooks-we-publish-are-priced-at-9-99-or-lower/

 

Pietsch, Michael (Sep, 19 2014). Letter to Amazon.com, Inc. board of directors. Hachette. Retrieved on Oct 22, 2014 from http://authorsunited.net

 

Sullivan, Margaret (Oct 4 2014) Publishing Battle Should Be Covered, Not Joined. International New York Times. Retrieved on Oct 24, 2014 from

http://www.nytimes.com/2014/10/05/public-editor/publishing-battle-should-be-covered-not-joined.html?_r=0

 

Sydell, Laura (Sep, 4 2014). In E-Book Price War, Amazon’s Long-Term Strategy Requires Short-Term Risks. NPR. Retrieved on Oct, 25 2014 from http://www.npr.org/blogs/alltechconsidered/2014/09/04/345825538/in-e-book-price-war-amazons-long-term-strategy-requires-short-term-risks

 

Packer, George (Aug, 14 2014). Amazon Vs. Hachette: What Would Orwell Think?. The New Yorker. Retreived on Oct 23, 2014 from http://www.newyorker.com/news/daily-comment/amazon-vs-hachette-orwell-think

 

Picchi, Aimee (May 28 2014). Amazon says Hachette dispute won’t end quickly. CBS News. Retrieved on Oct 28, 2014 from http://www.cbsnews.com/news/amazon-says-hachette-dispute-wont-end-quickly/

 

The Amazon Hachette War: For Authors, It’s Personal Now (July, 11 2014). Writers write. Retrieved on Oct 28 2014 from http://www.writerswrite.com/the-amazon-hachette-war-for-authors-its-personal-now-71120141

 

Ulin, L. David (2014, Oct 28). Why the battle between publishing and Amazon matters. Los Angeles Times. Retrieved on Oct 28, 2014 from http://www.latimes.com/books/jacketcopy/la-et-jc-amazon-publishers-20141028-story.html

 

Ward, Gerard (2013, Nov 25). 62% of 16-24s prefer books as physical products. Voxburner. Retrieved on Oct 28, 2014 from http://www.voxburner.com/publications/347-62-of-16-24s-prefer-books-as-physical-products

 

Yuhas, Alan (Aug, 12 2014). Amazon vs Hachette: readers and authors take sides in publishing dispute. The Guardian.  Retrieved on Oct 22 2014 from http://www.theguardian.com/books/2014/aug/12/amazon-hachette-readers-authors-publishing-dispute