Amazon released its most detailed explanation of their side of the Hachette feud, and it’s a pretty compelling argument. They manage to demonstrate how lower ebook prices will actually help Hachette sell more books and make more money which in turn will help the authors make more money.
It’s also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, 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 $1,738,000.
My favorite excerpt:
One more note on our proposal for how the total revenue should be shared. While we believe 35% should go to the author and 35% to Hachette, the way this would actually work is that we would send 70% of the total revenue to Hachette, and they would decide how much to share with the author. We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call.
BOOM GOES THE DYNAMITE!
Here’s the link to entire piece: Update re: Amazon/Hachette Business Interruption
Turn an actor upside down and zoom in on his pensive forehead and the laughs are inevitable.
The first rule of Book Fight Club if you’re Amazon is don’t talk about Book Fight Club.
Before you read this please keep in mind that this is an opinion piece. I am not privy to any inside information.
I haven’t weighed in on the Amazon/Hachette dispute yet because it is so confusing it’s hard to really gauge what’s going on. What the fight is even really about is fuzzy because Hachette has done nothing but spread over-the-top anti-Amazon crap that’s difficult to take seriously, and Amazon has said virtually nothing at all. This nothingness technique is a deep-seated corporate philosophy that takes Zen-like discipline to adhere to in this “must respond on Twitter immediately” world we live in. Amazon’s silence is all at once both maddening and admirable.
In the interest of full disclosure, I once worked for CreateSpace, an Amazon.com company, and currently I write freelance articles for CreateSpace’s online community of authors. In addition, I publish my books through CreateSpace. In short, I have ties to the Amazonians so keep that in mind as you read. I recognize I am not totally unbiased in this matter. I loves me them folks because they’re good people.
Here’s what you need to know about the fight between Amazon vs. Hachette from my perspective in a handy-dandy bulleted format. (This is all speculation and conjecture on my part)
- Amazon will win – To call this a fight is really inaccurate. Amazon holds all the cards, and they’ve got a legal team that is unmatched in the corporate world. Yes, Hachette is part of a multi-billion dollar conglomerate, and they are a formidable opponent, but they are really out of their depth. I know this has been a cause célèbre for a lot of famous authors, and they’ve been vocal in their support of Hachette, but trust me when I tell you Amazon doesn’t care about the public campaign being waged against them. They have a superhuman way of shutting out the noise and focusing on what matters most to them. What matters most? See the next item.
- Amazon cares about one thing above all else – What I am about to say will sound insane, but trust me when I say Jeff Bezos (and by extension, Amazon) truly only cares about one thing – the customer. That is not PR spin. It is a core belief that is at the center of every decision Amazon makes. This fight, whatever the specifics, isn’t about making more money for Amazon. It’s about Amazon’s customers. Bottom line. Period. Stick a fork in it. While I worked at CreateSpace, I saw some crazy decisions made that cost the company money all because it was the best solution for the customer.
- Amazon wants zero inventory – As I understand it, Hachette is upset because Amazon eliminated their pre-order and buy it now buttons. In order for either of these two buttons to be available, Amazon would have to either agree to carry or actually currently have books in one of their fulfillment centers. Amazon has been working for years to find ways to carry fewer products not more. Housing inventory costs money. They want to cut that cost as much as they can. They would prefer not to have to store any books at all. They’ve put tremendous amounts of money into CreateSpace because they’re trying to develop the perfect print-on-demand alternative. And in actuality, they are working towards a day when there are no physical books at all. Just Kindle versions. While I have no inside information on the Hachette deal, I wouldn’t be surprised if part of the issue is that Amazon does not want to carry physical copies of books by midlist and lesser known Hachette authors. It’s a cost they often can’t recover, and instead of absorbing that cost or passing it along to the consumer, they’d like to avoid it all together. Amazon has the capability to manufacture and deliver physical books in 24 hours. They more than likely would like all but a select few of Hachette authors to be non-inventory authors, a prospect that terrifies other publishers because they would have to eventually agree to the same deal. But who can really blame Amazon? In the end, it’s an arrangement that makes the most financial sense for the online retailer. I know at the center of this fight is the court mandated price negotiations after publishers got busted for ebook price fixing, but knowing what I know about Amazon’s long term long tail plans, my gut tells me inventory of physical books is a huge divide in the negotiations.
- Publishers and ebooks – What Hachette has to be careful of is dragging this fight out long enough for their authors to realize publishers are not only unnecessary in a world moving towards a dominate digital format, they’re a money-suck. There are a lot of authors who are losing money publishing ebooks with publishers, especially the way publishers currently have the system structured.
- Hachette doesn’t care about its authors – Traditional publishing companies are becoming increasingly less necessary simply because they are fighting to hold onto an outdated business model. Technology has changed the way books are written, designed, published, and sold yet traditional publishers have done little to keep pace with these changes. Amazon has not only embraced the changes, they’ve been the arbiter and creator of some of the most crucial changes. It is true that as a publisher Hachette takes on a significant amount of risk when they publish a title, but most of the risk is of their own making. Historically, 70% of books published by traditional publishers fail to make back the advances paid to the authors. And we’re not talking six-figure deals. Most deals are five-figures or less. How do they stay in business? The 30% that make money usually make a lot of money, and most of the money made goes to the publisher not the author. In addition, traditional authors are required to take on more and more of the financial burden when it comes to marketing their books. The primary role of a traditional publisher today is to place books in bookstores. That’s the real benefit they bring to their authors. But if Amazon is trying to reduce the number of books they’re carrying, and focus on digital and non-inventory sales, that makes traditional publishers close to obsolete. I refer you back to my “outdated business model” remark.
- Why are big name authors coming to Hachette’s defense? – Authors like Stephen King, James Patterson, John Green, and Malcolm Gladwell have taken Hachette’s side in this fight. If what I just said about Hachette not caring about their authors is true, why would authors be defending them? Because, to borrow a phrase from Mr. Gladwell, they are outliers. They are part of an elite group of authors making bank in the traditional publishing business model. I’m not suggesting they are being disingenuous with their support. They truly think Amazon is making unfair demands even though they probably aren’t even completely aware of what Amazon’s demands really are. The system works for them. They don’t want to change it. Again, who can really blame them?
- Amazon’s offer to Hachette Authors – Recently Amazon broke their silence. Not to give their side of the dispute, but to offer Hachette authors an olive branch. Among other things, it included 100% of the profits made from the sale of their individual titles provided that Hachette shared the burden of such a deal. Hachette declined, and I have no doubt Amazon knew they would. Was it a PR move on Amazon’s part? Yes. Does that make it a hollow offer? Yes. But it does illustrate the point. Hachette is in this for the company’s self-interest. They don’t care about the authors. In fact, I’d go so far as to say they’re glad that the authors are caught in the middle. It gives them a sympathetic public face in this fight. If Hachette was smart, they would have taken the deal and forced Amazon’s hand. It would have given them some leverage because in the end Amazon isn’t an altruistic entity. They are a business designed to make money. Paying J.K. Rowling gobs of money without any return would not have been a sustainable strategy.
- Wait for Jeff to speak – Nobody in the blogosphere knows what’s really going on in this fight. In an effort to steer public opinion in their favor, Hachette hasn’t been completely honest. Amazon has kept a muzzle on everybody in the company. As one of the previously muzzled, I know the warnings that have been surely issued to all public facing employees. As one of the previously muzzled who foolishly ignored those warnings, I know the wrath of upper management when they discover your foolishness. It’s been about six years since I got pummeled over a speaker phone for replying to a New York Times reporter via email, and I still dream about punching the two guys who yelled at me for doing so. I was clearly in the wrong, but as an adult, I’ve never been spoken to in that way. I say all that to say this. We won’t know Amazon’s side of the story until Jeff speaks, and I’m guessing he’ll do it in a big way. Barbara Walters may even come out of retirement (again) to do the interview. I’ve never met Jeff, and I’ve heard conflicting second-hand stories about his demeanor. So I don’t know what to believe about him. But, I do know this; he’s the captain of that ship. I’ve been to Seattle, and I’ve walked through the cubicle mazes at HQ. I saw a lot of over-worked, gray-complected employees working on special Jeff projects. Nobody wanted to disappoint him. When he wants this issue to be resolved, it will be resolved, and he won’t want it resolved unless the customers’ interests have been given the greatest consideration.
I can’t give specific opinions about the details of the dispute because I don’t know the specifics. I’ve tried to layout what I think is going on in general terms. I lean towards Amazon based on what I know about the industry and its future. Indie authors really don’t have a dog in this fight, but from my indie-author colored glasses, Amazon has given me the greatest opportunity I could have ever hoped for, an opportunity nobody else would. I’d be hard pressed to ever turn my back on them. I don’t think Hachette is an evil company. I do think they are doing an excellent job of manipulating public opinion, and they aren’t being forthright about their motives, but that’s the world we live in. They’re just playing the game like everyone else plays the game.
You’re damn right I’m speaking out loud.
It took some time, but I got my Writers Speaking Out Loud t-shirt, and decided to wear it to my day of art festival hopping in Laguna Beach , California over the July 4th holiday. My understanding is that the Tea Party backed wing of South Carolina’s Republican party offered a so-called compromise to the state’s higher education funding debacle. In case you’re not aware, ultra-conservatives in the legislature were outraged that the College of Charleston and the University of South Carolina-Upstate included two gay and lesbian themed titles on their required reading lists. These lawmakers were so outraged that they pulled a significant amount of funding from the budgets of the two colleges.
Their attempt to level government sponsored censorship on these two institutions of higher learning was appropriately met with even more outrage by sensible members of the human race. The GOP-run legislature balked at first and tried to turn a blind-homophobic eye to the protests, but pressure mounted so they decided to put funding back in the budget with a caveat. The two colleges are required to teach documents about American ideals, including, but not limited to the Constitution. I’m guessing in their pea-sized brains they saw this as alternate teachings that would thwart the homosexual agenda.
Calling this a compromise, our Tea Party backed governor Nikki Haley signed the legislation. This is not a compromise. It is still censorship because they are forcing the colleges to spend funding on a curriculum that is meant to counterbalance what they deem as un-American ideals and even worse, it paints the homosexual lifestyle as something that is not protected by the Constitution. Nothing could be further from the truth.
I grow increasingly weary of the notion that religious ideals trump individual freedoms in this country. I try to steer away from politics on this blog as much as possible, but I fear the need for me to be more politically active is becoming increasingly more necessary. I don’t have much of a voice, but I feel a calling to lend what I do have to the principled protests over the religious extremists’ creep of influence into our lives.
A castle for a king
I haven’t posted updates on The Actuals lately because I’m doing deep research on setting. Stay tuned.