On the importance of Debate
After my latest blog post, I received emails from a lot of you who wanted me to expand my point of view on the Hachette v. Amazon dispute. I've decided to take a different approach with this in an effort to present impartial facts.
Below are a list of points in the dispute and the argument/thought process of Hachette and Amazon. After that I will present my own opinion. Feel free to skip my opinion until the end so that you can form your own without bias.
Issue 1: Price, the biggest issue in the dispute by far.
Hachette: wants to control their own prices and wants to release e-books at $14.99 to $19.99.
Amazon: wants e-book prices to be 9.99 and below. They claim that for every book that would sell at $14.99, 1.74 would sell at $9.99. Example: 1000 books at $14.99, 1740 at $9.99
My thoughts: Hachette has not stated why they want their books to be priced so high so this is speculation on my part. It is not unreasonable for Hachette to want to control the price of their ebooks, what is unreasonable is the reasons.
Amazon has shown a brilliance at using their algorithms to figure out price points, trends, etc... so I believe their claim that people would buy more e-books at $9.99. Of course, Amazon fails to mention that the additional e-book sales will take away from hardcover and paperback sales for the author.
My opinion is that Hachette wants to keep prices at $14.99 and above for two reasons. The first (which has been speculated before) is that it will serve to protect more expensive hardcover books. The second (which has not be speculated as far as I can see) is that authors earn 25% royalties from e-books and only 12.5% royalties on hardcover books. Publishers have a larger profit margin on hardcovers and so they want to discourage e-books overtaking hardcover and paperback books.
Issue 2: Amazon wants to become a monopoly
Amazon: Doesn't really address this issue, but does say they support the free market.
Hachette: Understands that Amazon has a huge percentage of the e-book market and is looking to win this fight and establish a dominate position.
My thoughts: This is a lot of speculation on the part of Hachette authors, who are all too eager to shoot their mouths off and isn't based on facts. Currently, Amazon controls about 80% of the e-book market, which is a big chunk of the pie.
Gee, I wish there was one or five giant, billion-dollar corporations with some stake in publishing that could help make a more competitive marketplace for e-books. Oh wait, I just thought of someone, the "Big Five" publishing companies.
If you don't want Amazon to become a monopoly I'm with you. Now do something about it. What prevents Hachette, Simon and Schuster and the other major publishing houses from launching their own websites to sell e-books? What's that you say? Some of them do?
I checked out Simon and Schuster's website where they do sell e-book editions of their author's books. Why aren't they chipping into Amazon's market share? Look at the prices. It's kind of a fun game (not really) I selected Stephen King and all of his e-books were more expensive on Simon and Schuster's site.
That's not how the free market works. You can't just price something higher and then complain when Amazon prices it lower. How about this: actually compete with them. Make your prices lower and steal some of their market share. You know, the basis of our economy.
Basically, Hachette is saying we have our e-books priced at $14.99 on our website, you should just do what we're doing.
Issue 3: Readers are better served with lower e-book prices.
Hachette: Doesn't directly address this issue, but I'd like to share with you a tweet from Sherman Alexie: "If you love books & authors so much then why would you want to pay pennies (or nothing) to read them?"
Amazon: Believes that since e-books cost so much less than printed books that readers deserve lower costs.
My opinion: Sherman Alexie believes that $9.99 is pennies. I love when famous writers tell me to give them more money. It's so down-to-Earth.
It's a balancing act to be sure. You want affordable pricing because we all deserve that and yet we don't want lesser-known writers to starve. Yet, $9.99 won't starve them, and according to all the data will actually make them more money.
What I can't fathom is the ignorance of people like Sherman Alexie, Donna Tart and even my favorite author Stephen King. Your gripe shouldn't be with Amazon (who pays me 70% royalties) it should be with your publisher who takes a disproportionate amount of the money for themselves.
Issue 4: Amazon has unfairly screwed with Hachette author's books by taking away pre-orders on some and not stocking print versions in their warehouses and delaying shipping.
Hachette: Believes this is a dirty practice and shouldn't be tolerated.
Amazon: Claims that this was the only way to get Hachette to the bargaining table.
My opinion: Sorry Amazon but Hachette is right on this one. I don't know why Hachette failed to come to the negotiating table and I think it's wrong that they didn't do it sooner. However, Amazon could have easily claimed the moral high ground if they had left the authors alone and just pointed out that Hachette wasn't willing to talk.
Now they've lost that ability. I don't understand why Amazon did it but it has cost them a lot of good-will in this fight and it should. Messing with the authors was not the right tactic and I'll bet they regret it now.
My conclusions:
Amazon played it a bit heavy-handed at first and has since backed off a bit, but in the final analysis Hachette should be the one who comes off looking bad here. They are wrong in how they treat their writers, readers and business partners.
Amazon is not a perfect company and they are certainly out for higher profits, it just so happens that in this case their methods of earning higher profits is good for readers and writers. It's not good for bookstores and publishers.
The publishing world is changing. Everything is becoming electronic. Amazon can see that, Hachette cannot. That's what this fight is about. In the end Hachette will lose even if they win this fight because they don't seem willing to change their business model for a future that's inevitable.
You might not like it but e-books aren't only here to stay. They're here to dominate the marketplace. That's what's going to happen because it's what the majority of consumers want to happen. There is no stopping it, Hachette just isn't willing to accept it.
Below are a list of points in the dispute and the argument/thought process of Hachette and Amazon. After that I will present my own opinion. Feel free to skip my opinion until the end so that you can form your own without bias.
Issue 1: Price, the biggest issue in the dispute by far.
Hachette: wants to control their own prices and wants to release e-books at $14.99 to $19.99.
Amazon: wants e-book prices to be 9.99 and below. They claim that for every book that would sell at $14.99, 1.74 would sell at $9.99. Example: 1000 books at $14.99, 1740 at $9.99
My thoughts: Hachette has not stated why they want their books to be priced so high so this is speculation on my part. It is not unreasonable for Hachette to want to control the price of their ebooks, what is unreasonable is the reasons.
Amazon has shown a brilliance at using their algorithms to figure out price points, trends, etc... so I believe their claim that people would buy more e-books at $9.99. Of course, Amazon fails to mention that the additional e-book sales will take away from hardcover and paperback sales for the author.
My opinion is that Hachette wants to keep prices at $14.99 and above for two reasons. The first (which has been speculated before) is that it will serve to protect more expensive hardcover books. The second (which has not be speculated as far as I can see) is that authors earn 25% royalties from e-books and only 12.5% royalties on hardcover books. Publishers have a larger profit margin on hardcovers and so they want to discourage e-books overtaking hardcover and paperback books.
Issue 2: Amazon wants to become a monopoly
Amazon: Doesn't really address this issue, but does say they support the free market.
Hachette: Understands that Amazon has a huge percentage of the e-book market and is looking to win this fight and establish a dominate position.
My thoughts: This is a lot of speculation on the part of Hachette authors, who are all too eager to shoot their mouths off and isn't based on facts. Currently, Amazon controls about 80% of the e-book market, which is a big chunk of the pie.
Gee, I wish there was one or five giant, billion-dollar corporations with some stake in publishing that could help make a more competitive marketplace for e-books. Oh wait, I just thought of someone, the "Big Five" publishing companies.
If you don't want Amazon to become a monopoly I'm with you. Now do something about it. What prevents Hachette, Simon and Schuster and the other major publishing houses from launching their own websites to sell e-books? What's that you say? Some of them do?
I checked out Simon and Schuster's website where they do sell e-book editions of their author's books. Why aren't they chipping into Amazon's market share? Look at the prices. It's kind of a fun game (not really) I selected Stephen King and all of his e-books were more expensive on Simon and Schuster's site.
That's not how the free market works. You can't just price something higher and then complain when Amazon prices it lower. How about this: actually compete with them. Make your prices lower and steal some of their market share. You know, the basis of our economy.
Basically, Hachette is saying we have our e-books priced at $14.99 on our website, you should just do what we're doing.
Issue 3: Readers are better served with lower e-book prices.
Hachette: Doesn't directly address this issue, but I'd like to share with you a tweet from Sherman Alexie: "If you love books & authors so much then why would you want to pay pennies (or nothing) to read them?"
Amazon: Believes that since e-books cost so much less than printed books that readers deserve lower costs.
My opinion: Sherman Alexie believes that $9.99 is pennies. I love when famous writers tell me to give them more money. It's so down-to-Earth.
It's a balancing act to be sure. You want affordable pricing because we all deserve that and yet we don't want lesser-known writers to starve. Yet, $9.99 won't starve them, and according to all the data will actually make them more money.
What I can't fathom is the ignorance of people like Sherman Alexie, Donna Tart and even my favorite author Stephen King. Your gripe shouldn't be with Amazon (who pays me 70% royalties) it should be with your publisher who takes a disproportionate amount of the money for themselves.
Issue 4: Amazon has unfairly screwed with Hachette author's books by taking away pre-orders on some and not stocking print versions in their warehouses and delaying shipping.
Hachette: Believes this is a dirty practice and shouldn't be tolerated.
Amazon: Claims that this was the only way to get Hachette to the bargaining table.
My opinion: Sorry Amazon but Hachette is right on this one. I don't know why Hachette failed to come to the negotiating table and I think it's wrong that they didn't do it sooner. However, Amazon could have easily claimed the moral high ground if they had left the authors alone and just pointed out that Hachette wasn't willing to talk.
Now they've lost that ability. I don't understand why Amazon did it but it has cost them a lot of good-will in this fight and it should. Messing with the authors was not the right tactic and I'll bet they regret it now.
My conclusions:
Amazon played it a bit heavy-handed at first and has since backed off a bit, but in the final analysis Hachette should be the one who comes off looking bad here. They are wrong in how they treat their writers, readers and business partners.
Amazon is not a perfect company and they are certainly out for higher profits, it just so happens that in this case their methods of earning higher profits is good for readers and writers. It's not good for bookstores and publishers.
The publishing world is changing. Everything is becoming electronic. Amazon can see that, Hachette cannot. That's what this fight is about. In the end Hachette will lose even if they win this fight because they don't seem willing to change their business model for a future that's inevitable.
You might not like it but e-books aren't only here to stay. They're here to dominate the marketplace. That's what's going to happen because it's what the majority of consumers want to happen. There is no stopping it, Hachette just isn't willing to accept it.
date
newest »
newest »
Merrill,Amazon provides a global marketplace to me. They provide advertisement of my book through their recommendations and simply by the fact that they are a huge marketplace. Amazon doesn't need me, but they have certainly helped me.
I have earned enough through Amazon sales to become a full-time writer. If Amazon didn't provide this venue then this would never have been possible. I do not believe that 30% is unreasonable for that service.
Look at the numbers, every factor you've talked about has been taken into consideration. There is a flood of information from various sources that back up the data.
As far as Hachette setting their own price, they do, on their website and the market does punish them because they sell far more books on Amazon where the price is lower.
Bookstores are allowed to set their own prices and discounts for printed books. Amazon, as a distributor, should have the same right.
The truth is, Hachette wants print books to stay on top of e-books because they make more money on print books even though the costs are higher. The same way that the music industry made more money on cds then they did digital downloads.
The difference is, the music industry took their heads out of their assess long enough to see the trends and they decided to get with the times. Hachette and the other major publishing houses will either come into the future or they will die.
Mark wrote: "Merrill,Amazon provides a global marketplace to me. They provide advertisement of my book through their recommendations and simply by the fact that they are a huge marketplace. Amazon doesn't n..."
They are certainly the largest online retailer of books and if you are a writer, provide access to a significant segment of the market. And at 30 points, you are paying very handsomely for the privilege of using their service. So I wouldn't weep tears of gratitude.
But they don't pay you any royalties. The charge you're paying comes right off the top. After they've taken their cut, you have 70% leftover to work with. You will receive no royalty checks from Amazon. If you don't have a publisher, you do all the work and receive all the income. That's true of any self publisher.
+++ Look at the numbers, every factor you've talked about has been taken into consideration. There is a flood of information from various sources that back up the data. ++++
I'm sorry, I've seen no numbers that cover the scenario I described to you. Can you point me to a link?
+++ Bookstores are allowed to set their own prices and discounts for printed books. Amazon, as a distributor, should have the same right. +++
That may be, though I notice Amazon doesn't like it when Hachette attempts to set their own prices. While collusion is illegal, the "agency model" is not.
But as an author, you should be very wary of Amazon attempting to dictate prices for you. It is not in your best interest. And Amazon's 35/65 punishment if you decide to price higher than $9.99 is simply predatory.
+++ The truth is, Hachette wants print books to stay on top of e-books because they make more money on print books even though the costs are higher. The same way that the music industry made more money on cds then they did digital downloads. +++
That is undoubtedly true. The print industry model is collapsing, the last Analog Empire to fall. The change in the author/publishing model is interesting to watch and I don't think anyone quite knows how it turns out.
In the meantime, it is not to your advantage for Amazon to put a lock on pricing anymore than it was in the interest of authors for publishers to have almost total control over access to the market.
And Hugh Howey is doing everyone a disservice when he blogs about Amazon paying "royalties" and silly stuff like Amazon is great because it doesn't fight with him over ownership of his books. And this is just embarrassing:
+++ So, no one has anything to say about the actual arguments and positions from either side? Is that what I’m hearing? To equivocate between Amazon and Hachette by saying both are corporations is absolutely absurd. Monsanto and Whole Foods are both corporations. So they’re the same, right? No need to look any further?
I’d rather dig deeper than that, if nobody minds.
* Amazon allows anyone to publish. Hachette doesn’t even allow unagented submissions, meaning they require you to pay 15% of your earnings to a third party just to talk to them, no matter how well you can represent yourself.
From the Amazon Publishing Website (This site is dedicated to Amazon's house imprints.)
Submissions
Amazon Publishing does not accept unsolicited manuscripts, proposals, or other submissions at this time. +++
I've been reading his blog for some time, but he's recently gone off the rails.
The publishers and retailers each have their own agendas. It's a mistake to stick a white hat on either. Especially if you're an author.
IMHO.
rick
I don't disagree that Amazon is not doing what they are doing to be "the good guy" or because they are trying to help little authors like me. They want lower prices because that makes more money for them.When someone buys a book online they don't say "I just bought this book from Hachette, man it was overpriced"
What they say is, "I bought this book from Amazon, man was it overpriced."
Because of that perception I think it's reasonable that they would like to set their own price. No publishing company is forced to sell through Amazon, they can sell their e-books on their own websites. In fact they do and they get killed by Amazon because Amazon is offering discounts.
There is a reason that Amazon owns 80 percent of the market and it's because they get the best prices for their customers.
If Hachette were smart, they would pull all their books off of Amazon's site, terminate their deal as soon as is legally possible and start selling the books only on their website. Hachette has some pretty big authors, like James Patterson and J.K. Rowling.
This isn't really related to this topic, but I don't think publishing companies pay authors enough. Not across the board anyway. I think that needs to change.
I really appreciate your interest in my blog and the lively debate. I respect your opinions and I hope that I have not be unkind in my responses. I love a good debate and I don't take any of this stuff personally, you strike me as someone who does the same.
+++ What they say is, "I bought this book from Amazon, man was it overpriced." +++How can that be? Was there a gun to their head when they bought the book?
I can understand wanting to buy a book for little or no money. But no one has a right to buy title Z for $X price as opposed to $Y. That's what markets are for. What business is it of you, me, Amazon or Hugh Howey or anyone as to how a writer or publisher prices their books?
+++ Because of that perception I think it's reasonable that they would like to set their own price. No publishing company is forced to sell through Amazon, they can sell their e-books on their own websites. In fact they do and they get killed by Amazon because Amazon is offering discounts. +++
I agree, but I think this is off the point. I don't mind if Amazon discounts. I don't mind if Hachette wants to agency price their books. I can make up my own mind what to buy at what price. And there are plenty of titles out there to compete for my dollar.
I do mind Amazon trying to control pricing for E-books. Believe me, they're not doing that for the writer's benefit. That's part of their battle with the publishers.
+++ There is a reason that Amazon owns 80 percent of the market and it's because they get the best prices for their customers. +++
That's what they say, but I'm for the writers. And Amazon's pricing policies are not in our best interest. It depends on many factors as to what best pricing is. Take the below scenario:
+++ But a quick analysis of the Amazon's statement reveals their claims are incomplete and also nonsensical in certain respects.
The first problem is it lumps all books together into one big pot leading to what I call a median stew. Let's take a look at a single example, author Stephen King, whose pricing I will defend even though he did write Insomnia. (Don't ask. Just...don't ask.) Stephen has lots of books available on Amazon at different price points. I see The Stand is on Kindle for 5.17. The Shining for $1.99. And here's his latest book, not yet released, The Revival, $14.99 on Kindle. God, what a fool Stephen and Simon and Schuster are. First, the 35/65 split. Oh, wait. I'll bet real American dollars that Simon and Schuster isn't paying 35/65. That's for the little people. The split is more likely 75/25 or even 80/20. King's got clout in the business.
Also, I don't think Stephen King is losing ".74" copies at that $14.99 price because Stephen King is a brand. There are lots of people who can't wait to get their hands on his books and will happily pay an extra five bucks to get them as early as possible during the novel's roll out period, probably sixty days. After that, it might make sense to drop the price back to $9.99 or whatever careful testing indicates is optimal. Certainly, over time, the price will continue to decrease and to give Amazon all credit, I'm sure King has seen increased residual sales of his earlier works because of the long tail effect.
But the reality is at $9.99 during the launch, King will be leaving money on the table. The revenue generated by the increased number of people who will buy more copies at $9.99 will not be offset by the money lost by not satisfying the market desire of a significant number of readers to get their hands on the book ASAP and who will willingly pay a premium for the privilege. That's the power of a brand and you should all strive to become one.
Or consider book publishing's biggest brand, JK Rowling. Imagine she's just announced a new Harry Potter book. Harry Potter and the Adventure of the Golden Franchise. Think those millions of fans out there wouldn't shell out a few extra bucks to get their (virtual) sweaty palms on the latest tome about the boy wizard? And if you want to see what real clout does for you in the book business, go click on her E-book links on Amazon. Welcome to "Pottermore." (Somewhere, Jeff Bezos is weeping.)+++
Rest up at http://www.rule-set.com/blog
+++ This isn't really related to this topic, but I don't think publishing companies pay authors enough. Not across the board anyway. I think that needs to change.+++
I agree. I think we may see more pay for performance deals, with more limited ownership rights.
And, oh, BTW. Don't you just love Amazon's noble declaration that there may be "legitimate" reasons for books to be priced higher than $9.99. How nice of them. Where's the codex of the "legitimate" reasons? Who do I go to, cup in hand, to say "Please sir. Can I price a little higher?"
Sheesh.
+++ I really appreciate your interest in my blog and the lively debate. I respect your opinions and I hope that I have not be unkind in my responses. I love a good debate and I don't take any of this stuff personally, you strike me as someone who does the same. +++
Of course I don't take it personally! And all that aside. when Re-Test is ready, send it to me for a review. I do them up at the blog. Got a new one coming this week on a sci-fi book, "Second Chance."
I love amazon.com, they wrote the book on opening the publishing gateway to writers like Mark and me. Look, no system is perfect, both Hachette and Amazon.com have been hurt by negative publicity, let's just hope that the situation works out.
T.A. wrote: "I love amazon.com, they wrote the book on opening the publishing gateway to writers like Mark and me. Look, no system is perfect, both Hachette and Amazon.com have been hurt by negative publicity..."
No question that Amazon saw the channel opportunity and ran with it. But, never love a channel. Love yourself, your work, and your books. Be dispassionate and analytical when figuring out the best way to market and sell your writing. Hold on to your margin as tightly as possible if self publishing.
Rick Chapman
Author "Rule-Set: A Novel of a Quantum Future." Just Released. More info at http://www.rule-set.com
rick
I respect your opinions and there is much truth in everything you said, but, if it wasn't for Amazon.com, I'd still be waiting to hear back from agents/publishers who said they'd contact me. So for now, I have to love the fact that they gave me a chance to voice my work.But I plan on taking your other advice and I wish you the best.
T.A. wrote: "I respect your opinions and there is much truth in everything you said, but, if it wasn't for Amazon.com, I'd still be waiting to hear back from agents/publishers who said they'd contact me. So for..."TA, don't waste time kissing AMZ's rear. If it wasn't them, it would have been someone else.
In "In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters," I discussed the coming disruption in print publishing. This is 2005. AMZ was not the leader in pushing the technology, though their timing was great in building out the channel for E-books.
+++ I'd still be waiting to hear back from agents/publishers +++
I fully sympathize. When I decided to write Rule-Set, I decided to just get it out there and screw the formal publishing channel. And I'm a published author.
But the obverse of this is that everyone can just get it out there and screw the formal publishing channel. I've been writing reviews of indie books and believe me, many people are writing stuff that's just not that good.
I just took a look at an author who submitted a book that had an intriguing premise but also used about six exclamation points in four paragraphs. A problem.
So, was I being cruel when I told him to get back to work and clean this up? Clean out the excess commas and redundancies in his prose?
How about the very nice person who uses quotes to break up a single paragraph into three? ALL the time?
Am I being a mean old gatekeeper?
You decide.
BTW, reviews up here: http://www.rule-set.com/blog.
If you do the math, that's a revenue increase of about 15%. Which is nice but not historic.
+++ Amazon has shown a brilliance at using their algorithms to figure out price points, trends, etc... so I believe their claim that people would buy more e-books at $9.99 +++
This number is a median stew.
You need to take into consideration many other factors. Author's brand equity. Lifecycle of the book. Promotional strategy. Bundling. Etc.
+++ Basically, Hachette is saying we have our e-books priced at $14.99 on our website, you should just do what we're doing. +++
Yes. And Amazon is saying they don't want Hachette to price their books at anything above $9.99. Shouldn't that decision be left up to Hachette? If it's a bad decision, the market will punish them.
+++ Yet, $9.99 won't starve them, and according to all the data will actually make them more money. +++
The data does not say that.
+++ Your gripe shouldn't be with Amazon (who pays me 70% royalties) it should be with your publisher who takes a disproportionate amount of the money for themselves. +++
This is a huge misstatement, and it's being promulgated by Amazon.
Amazon pays you zip in royalties. Zero. Nada. Zilch.
Amazon CHARGES you a 30% stocking or usage fee on your book. Amazon provides no publishing services. They are not a publisher as far as you are concerned. They provide an expensive downloading service.
You need to fully understand that before you can understand the dynamics of what's going on.
Rick Chapman
www.softletter.com
www.saasuniversity.com
Author "SaaS Entrepreneur: The Definitive Guide to Success in Your Cloud Application Business"
Read Excerpts from all 10 chapters at http://www.saasentrepreneur.com
Author "Rule-Set: A Novel of a Quantum Future." Just Released. More info at http://www.rule-set.com