In the latest on the dispute between America’s fourth-largest publisher Hachette Book Group and web-based retailer Amazon, a group of Hachette writers and supporters are poised to appeal directly to Amazon’s board of directors this week.
The clash between the two companies began more than four months ago over Amazon’s proposal to uniformly price digital books—a proposal that Hachette rejected. In response, Amazon delayed the delivery of Hachette books and halted pre-orders on new releases, among other tactics.
Authors United, allies of Hachette, countered last month with a full-page ad in the New York Times.
In the open letter written by author Douglas Preston, more than 900 writers called for readers to urge Amazon CEO Jeff Bezos to resolve the two companies’ contract problems without “further hurting authors.”
Amazon has since launched its own public campaign at ReadersUnited.com.
George Washington Today spoke to e-book production and publishing ethics expert Arnie Grossblatt about the dispute. Dr. Grossblatt is the director of the graduate programs in publishing at the George Washington University’s College of Professional Studies.
Q: What is the significance of Amazon shifting to a $9.99 uniform price model for e-books?
A: Amazon does not currently enforce a $9.99 price for e-books. On the current list of the New York Times best sellers, the e-book prices for Kindle readers range from $14.99 to $4.99. The shift suggests that the current dispute with Hachette has more to do with control than price.
According to Amazon, everyone wins with lower e-book prices. The company argues that lower e-book prices will increase total publishing revenue with more money for Amazon, authors and publishers. Amazon further claims that lower e-book prices are critical for the viability of publishing because e-books must compete with free web-based content including games, videos and blogs. The large publishing houses view lower pricing as an attack on their right to differentially price books and therefore, an attack on their profits.
Q: How will Amazon’s new e-book pricing model affect publishers, authors and customers?
A: That’s the big question, and there is no impartial answer. Publishers typically set the prices for best-selling works at a premium during a narrow window of popularity. Amazon wants to eliminate the right of publishers to do this. In so doing, publishers claim, Amazon will reduce the profits that allow publishers to take risks on new authors and to nurture talent. The impact on customers in the short-term will be lower e-book prices, but the impact for the long-term is not clear.
If publishers are correct, then there may be fewer new authors, less risk-taking and a decrease in the diversity of voices — more Stephenie Meyer, author of the “Twilight Saga” and less David Foster Wallace, author of the sprawling and serious "Infinite Jest." Amazon now controls more than 60% of the e-book market and as the company continues to gain power and market share, the reading public should be concerned about an Amazon monopoly.
Q: What is Hachette’s motivation in renegotiating its contract with Amazon?
A: Hachette is a large for-profit corporation, and I think they are primarily motivated by profits—as is Amazon. They are only secondarily concerned about authors. The costs of e-book production cannot be viewed in isolation. The full costs of e-book production include title acquisition, editorial, design and marketing—a set of costs the public generally doesn’t think about. It’s easy to see that costs of e-book production are less than the costs of print production because it does not include paper and ink, shipping, warehouses and returns. It is harder to grasp that printing costs are not the largest component in developing book prices. Currently, Hachette does price e-books below print books—as do almost all publishers. However, the dispute with Amazon is not solely over price points, but over the rights of publishers to set their own prices.
The industry as a whole is very concerned about the commoditization of books. To many in the publishing industry, uniform pricing seems unnatural because books are creative works.
Q: What outcome do you predict for the resolution of the e-book pricing “war?”
A: Amazon has the deeper pockets, but the company was also the first to blink in this dispute. Amazon has a history of providing “no comment” on controversial issues, but uncharacteristically, they did respond to criticism of their position on Hachette by issuing a “clarification” letter, proving that they are not immune to public pressure. For Amazon, the costs of “winning” are small in financial terms and could easily be overshadowed by negative publicity. For Hachette the costs of losing are large, and a significant threat to its business model. I expect Hachette to fight harder, but Amazon has more weapons. The final outcome, I suspect, will be some kind of face-saving compromise whose effects we won’t immediately understand.