Amazon to Hachette: Lower e-book prices and we won't ask for more of the revenues

Amazon recently extended a public challenge to Hachette, saying that if the publisher will lower e-book prices to $9.99, the company won't ask for a larger share of the revenues. This is the first time Amazon has publicly shared details of the dispute between the two companies.

Mark Lennihan/AP
Visitors walk through the Hachette Book Group's exhibition at BookExpo America, the annual industry convention in New York, in May 2014.

The latest round in the Amazon-Hachette dispute has opened with Amazon extending a public challenge to Hachette: lower e-book prices to $9.99 and Amazon won’t ask for a larger cut of the revenues, the e-commerce giant said in a post on its website.

This marks the first time Amazon has publicly shared details of its dispute with Hachette, including price points and revenue percentages.

In its post, Amazon said it will continue to take 30 percent of digital book revenue – its current share – if Hachette lowers e-book prices to $9.99, down from current prices between $12.99 and $14.99.

It is widely believed Amazon was previously seeking a larger share of e-book revenues – as much as 50 percent, according to some reports.

The retail and publishing giants have been engaged in a months-long standoff over a new e-book contract. The dispute, which has recently become more public, and more ugly, saw Amazon remove pre-order buttons from Hachette titles by authors like J.K. Rowling and James Patterson, slow shipments of some Hachette titles, and reduce the discounts offered on many Hachette books.

By doing so, Amazon alienated many bestselling authors whose book sales have been squeezed by the online giant’s tactics. Many authors signed a letter criticizing Amazon. In response, independent authors signed a letter in support of Amazon. 

This latest move by Amazon may be an attempt to win back those authors with a larger share of the revenue pie.

"We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call," said Amazon.

Amazon made a case for lower prices and its revenue-sharing model. 

"Keep in mind that books don't just compete against books," said Amazon. "Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive."

Amazon said internal data suggested e-books sell twice as well at a $9.99 price point compared to $12.99 or $14.99.

"If customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,00." 

“So, at $9.99, the total pie is bigger,” it argued. “How does Amazon propose to share that revenue pie? We believe 35% should go to the author, 35% to the publisher and 30% to Amazon.”

(Amazon did note that it doesn’t expect all books to be priced at $9.99, noting that "we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99.") 

At issue is a broader debate in the industry over fair pricing and profit sharing of e-books, which differ significantly from print books. 

Amazon says e-book prices have lower production costs, which should be passed on to customers. 

“With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market – e-books cannot be resold as used books. E-books can be and should be less expensive,” it said in its statement. 

Hachette could not immediately be reached for comment. 

The Authors Guild, however, did not seem enthused by Amazon’s offer.

"Lower e-book prices aren't necessarily the best thing for writers," Roxana Robinson, president of the Authors Guild, told The Wall Street Journal. "We get a percentage of the price as a royalty. You also have to take into consideration the price of the hardcover. Yes, it's cheap to make a digital book, but it's expensive to present a book in hardcover.”

Husna Haq is a Monitor correspondent.

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