Amazon forum post outlines position in dispute with Hachette
Online retailer says it wants eBooks priced at $9.99, but some believe fixed pricing will handcuff publishers and may lead to less interactive books
Everybody likes lower prices, and Amazon knows this. Everyone, also, likes to be paid more – something Amazon also knows. So, by publicly stating that its battle with Hachette Book Group is all about lowering prices for consumers, the online retailer hopes to gain some points with its customers, and put even more pressure on publishers to comply with its demands.
In an announcement posted to the Kindle forum, Amazon outlined what it wants out of its negotiations with publishers, a lowering of eBook prices from between $14.99 to $19.99, to a standard $9.99 per eBook.
“A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book,” the Amazon Books Team wrote. “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.”
According to Amazon, “e-books are highly price-elastic” – meaning that as the price goes up, sales go down.
“So, at $9.99, the total pie is bigger – 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 says.
“Is 30% reasonable? Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% — we did have a big problem with the price increases.”
The problem with the idea of fixed prices is that that costs, even with eBooks, is not always fixed. Between author advances – a diminishing thing, admittedly – royalty variation, and added costs such as for contributors, an eBook cost can vary, especially when one considers interactive eBooks (something that is simply not part of the discussion, apparently).
In fact, Amazon’s whole argument here rests on the industry remaining tied to standard ePub books that feature no new design or illustration work, and remain merely replicas of print. Amazon, after all, while pushing to be a source of publishing production through its CreateSpace and Kindle Direct Publishing, is not a leader in advancing new digital publishing technology. If you’ve ever tried to convert a complicated interactive eBook to a Kindle Edition you know that dealing with Amazon is like going back in time.
Nonetheless, Amazon’s position is that lower eBook prices will lead to higher total revenue.
“The important thing to note here is that at the lower price, total revenue increases 16%. This is good for all the parties involved.”
This sounds a lot like the argument for lower taxes, the idea that revenue will actually increase. It is a dubious argument when it comes to taxes, as state governments have discovered across the U.S., but sometimes does work with retailing.
But who controls list prices is what concerns many publishers, many of whom would be against Amazon fixing eBook prices even if Amazon wanted them higher, rather than lower. Their argument would be that if Amazon wants to lower prices, and thus take a lower amount in profits, that is up to Amazon. But as the latest earnings report reveals, Amazon is desperate to see some of its sales revenue reach the bottom line in black ink, rather than red – something that it hasn’t been able to accomplish quite yet.