Amazon-Hachette War: Why Hachette should Win this Battle?

by Catherine Song


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.



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)


  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 ( 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).



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.



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A vision for the future of the book

Catherine, Eun Kyung, Song


Growing up, my brother and I always appreciated our mother reading countless storybooks from “Anne of Green Gables” to “The Life of Thomas Edison” at bedtime. There were hundreds of books in our living room, which made packing difficult for our family when we had to move to another place. When I visited my uncle’s place last year, he was using an ipad to read to my five year-old cousin. The sight of my uncle reading brought back happy memories of my childhood. At the same time, this made me reflect on how much our society has changed in the last several decades.

In the last twenty years, people’s reading behaviors have changed along with a rapid development of technologies. In addition to the traditional paperback and hardcover versions, digital electronic books have come onto the scene and paper books are in danger of being completely displaced from the market. In turn, digital electronic books are not only transforming the reading environment, but also the business model of vendors in the bookselling field. However, it may be premature to assume that the future will see an end to the paper-based book (Nunberg, 1996).

Devices and Reading Experiences

Recently, Google developed the Google Glass and Apple launched iwatch last week. Some people predict that these wearable devices will be the preferred way for people to engage in reading books. However, I would argue that neither of these would replace books. In the next ten years, people will mainly listen to recordings of books instead of reading the books themselves. Hence, we will have gone from oral storytelling to aural storytelling.

According to a new survey by the Association of American Publishers and the Book Industry Study Group (Sporkin, 2014), publishers made more money from digital book sales than sales from brick-and-mortar bookstores for the first time in 2013. In fact, publishers had predicted this tipping point for a long time. However, this shift in sales focus is not all bad news since vendors were able to balance the losses from paper book sales with increased profits from digital book sales. Hence, from a sales perspective, it can be said that e-books are just as profitable for publishers (Roose, 2014). Still, there is some bad news in that the e-book market is changing. Increasingly, when people read e-books, they are doing it on existing tablets and smartphones instead of using standalone e-reading devices (Abrams, 2014)

People now realize that once they buy a book, they own their personal edition of that story and, with the exception of breaking copyright laws; they are free to do whatever they want with their book copy. There are no limitations to what they can do with it or to it. There are no licenses (though early print publishers futilely tried to force this issue with some of their titles), and no terms and conditions that must be followed on how we use the book. In this way, keeping a book does not require any legal agreement (Losowsky, 2013).

As readers use multiple devices interactively, software matters. More specifically, if a user has a PDF file of a book on her laptop and she wishes to read a copy of the book file on her iphone, the transfer of the book file to the iphone may not go smoothly due to an incompatibility between the laptop software and the relevant iphone application. However, this limitation should not be a cause for worry because companies developing communications and computer technology will certainly take care of these glitches in the future.

Among other electronic devices, the smart future reading device might be “paper”. For instance, when a person is reading a long chapter in a book, it may be much easier for him to refer back to the earlier pages of the chapter if he physically has all the paper sheets of the chapter in front of him. Conversely, if one wants to do the same thing with an electronic version of the chapter, it would certainly be extremely awkward and difficult to go back to an earlier page of the chapter to review or refresh one’s memory. Furthermore, Anne Mangen, a literacy professor at the University of Stavenger in Norway, argues, “perhaps the tactility and physical permanence of paper yields a different cognitive and emotional experience.” She asserts that this is especially true for “reading that can’t be done in snippets, scanning here and there, but requires sustained attention.” Mangen analyzed how people read on different media and found that people tended to read slowly and somewhat inaccurately on early screens. Although the technology has improved with the introduction of “e-paper” to the point where reading speed and accuracy are no longer issues, the more critical aspects of memory and comprehension have not been studied extensively (Mangen, 2013).

Another limitation is the users’ emotional relationship with digital technology. In particular, in many postsecondary institutions, students are able to access journal articles and books electronically through the schools’ libraries. While this service provides much convenience for students, a limitation is that when students download some reading materials onto their computers, the files do not have numbered pages and sometimes readers are not able to see multiple pages of the resource simultaneously. In other cases, users are unable to decipher the length of the literary source when they start reading it. This causes the reader much mental pain and anguish, as he has no idea about the length of the source and the time it will take him to complete his reading (Oblinger, 2012)

Furthermore, other research suggests possible differences in readers’ mental engagement with paper based and e based reading materials. Mayers (2001) found that students more fully remembered what they had read on paper. Those results were echoed by an experiment that looked specifically at e-books, and another by psychologist Erik Wästlund (2007) at Sweden’s Karlstad University, who found that students learned better when reading from paper.

Business Model

As readers’ behaviors change, publishers need to respond to the shift by formulating and implementing new business models. Today, fewer people use e-book devices to read literary sources and many will use their existing devices to fulfill their reading pleasures! Essentially, readers will use their smartphones or tablets to read books because readers prefer carrying fewer devices if they can. However, a major downside of using those devices is they are prone to push notifications, which can be distracting. As a result, the software one uses matters.

Next, Ruppel (2010) argues the contextual upsell will be a business model to watch that allows e-book publishers to interact with their customers in new ways. Imagine the scenario where customers are trying to learn statistics and they get stuck on a particular formula. They ask friends, but no one can explain it well. They then click a help button that guides them to the publisher site where they can download relevant tutorials about specific formulas for $2.99. They download the one they need and get a new learning tool that helps them progress and move forward in their class. Then, taking into account the hundreds of thousands of students who share similar learning gaps and who will purchase through the book (“in-book app purchase”), one sees that it eventually becomes a very lucrative marketing opportunity.

In addition, publishers will become more important. In spite of the hype around self-publishing via the web, publishers will play a greater role in an e-book business. Since commodity content is available free everywhere, top quality vetted and edited content – which takes meticulous work from expert staff, will be at a premium (Ruppel, 2010). For example, at McGraw-Hill, production of the average technical reference book engages teams of editors, copy editors, proofreaders and designers. In the digital world, the role of publishers will expand as new technologies provide an even greater user learning experience.

Furthermore, with skyrocketing amounts of content being served on the web, customers will seek and pay expert content providers that efficiently amass and contextualize information for them, providing highly accurate and specific search options. Indeed, publishers with expertise and resources in these and other emerging areas will be the ones that write the new rules of e-book publishing.

Eventually, many publishers will become service organizations. They will offer integrated services from content to interactive reader tools like one-on-one online chatting that is directly linked to authors, and extending to fulfill the needs of the readers.

As users are exposed to increasingly sophisticated and interactive online content, publishers should be able to provide more added values. This means the revenue it produces grows, while the online business becomes more exclusive and profitable (see Figure 1). This involves moving from static/dynamic content and smart tools to integrated workflow solutions. Static content is the simplest executable material that consists of ‘traditional’ online reference materials like encyclopedia entries on various broad subjects, where the Internet functions as a ‘super library’. Dynamic, multimedia online content is usually hyperlinked, navigable and ‘smart’, requiring live feeds and constant updating. Smart tools can include compliance and workflow tools, with integrated reference content. The richest and most executable content provides the greatest value for readers and consists of integrated workflow solutions. For instance, business books are equipped with software and content that is fully integrated, providing seamless workflow and business solutions (PricewaterhouseCoopers, 2009).

<Figure 1: The added value of increasingly rich online content>

In addition, educational institutions frequently require the creation of the teaching resources they use. They also require continuous support from providers to ensure that the learning process stays creative. In this regard, gamification, which involves adding elements from games to help students learn core concepts in academic subjects ranging from history to mathematics, will be an important factor in product development for educational publishers in the future (Schilling, 2013).

Next, the publishers’ changing roles from content to service providers must enhance their organizational cooperation and improve synergy. In order for their roles to become a reality, communication amongst people in various departments will be important. This includes bridging the gap between sales, marketing, content providers, and the editing departments in an iterative process to have a “cook to order” production. In this way, the risk of creating titles that do not sell well is avoided. Still, the entire process demands an agile publication process and a visionary IT infrastructure that creates an overview of the process and a strong connection between customer needs and the publishing process (Schilling, 2013).

Role of Publishers

As the market progresses from the traditional print model with an integrated value chain to the new online model, the value chain becomes disjointed and the value of pure reference content is weakened (see Figure 2). Historically, the print model epitomized a domain where important segments of the value chain were ‘owned’ by publishers of paper-based products. Their established brands not only provided competitive advantage, but also brand value derived from quality content and packaging. Since the value chain of the online model is discombobulated, partnerships and alliances between publishers and technology service providers are important to reach the market successfully. As the information provided has become increasingly rich and executable, pure content and packaging is losing its value. Consequently, navigation, analysis and execution have become the highest value-added areas that have emerged as branded segments.

<Figure 2: The reduced value of pure reference content in the online value chain>

The future survival or demise of the book will be an issue of communication between readers and the medium. Inevitably, more and more electronic devices will be released over time. However, electronic devices will be unable to completely replace paper books until technology is further developed to mitigate the limiting factors of eyestrain and portability. As technologies change the entire publishing industry, readers’ experiences will be greatly affected. If past experience with technology development and application is any indication, the trajectory looks to be moving in the positive direction. More specifically, technology should move forward to make it easier and more convenient for people to read digital books. Furthermore, along with this transformation, publishers’ roles as service providers will become more important as consumers become more demanding of their digital reading experiences. Consequently, publishers will have to become more creative when it comes to producing and marketing and they will need to provide diverse resources online and offline to attract readers.


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