Weighing in on the Amazon-Hachette Debate

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Weighing in on the Amazon-Hachette Debate

video 4, 4-20, stacks of books

In a column on writing advice, I tend to try to avoid certain topics. I don’t talk a great deal about the latest marketing tricks, for example, because I know that most of them will be out of date in a week or two. This is a post that will be out of date soon.

I’ve had a number of readers ask about the Amazon-Hachette debate. As you may know, they’re involved in a massive lawsuit. Amazon insists on setting low prices for e-books. Hachette is suing for the right to set its own (higher) prices. At stake, quite frankly, is control of the publishing market.

Now, if you’ve been reading about the controversy, you’ll see that Hugh Howie and many other Indie authors are favoring Amazon. Among authors, a few are championing Hachette. You should know that I’m a Hachette author (in the UK), but that the bulk of my income last year came from e-book sales.

So, what is this all about? Amazon has sent out press releases thanking us readers for reading, and reminding us that they are our good friends, and that they are championing low prices for e-books. On the other hand, Hachette has been "over-charging" for years, and insists on gouging the customers with inflated prices. So what is the truth?

The truth is that the two companies don’t do the same thing at all. It’s comparing apples with rocks.

Hachette is a book publisher. They hire editors to hunt down good manuscripts, then pay the authors in advance for those manuscripts. They then design, print, market, and ship the books. Many of those books don’t sell, so the publisher then has to either take the books back, or destroy them. At the end of the accounting cycle, they have to make an accounting and figure out whether they’ve made any money.
Now, a book publisher typically doesn’t make a lot of money. The high cost of printing, shipping, and marketing a book doesn’t really bring a high return. If you study the profit-and-loss statements of major publishers, you’ll know that as far as businesses go, this isn’t one that makes a lot of money.

Amazon.com is not a publisher in the same sense as Hachette. They’re a bookstore. They don’t edit the e-books that they put up online. They don’t have anyone select them, looking for quality or readability. No one designs or approves the covers. No author is paid in advance.

Amazon does print books and ship them, on demand. That means that they make sure that they make a profit on every book before they even print it. That’s not what traditional publishers do.

So they’re more of a bookstore, one where they create an electronic catalogue and let their readers buy the files with the push of a button. No inventory is created or stored in the traditional sense.

So the two companies are doing different things.

I happen to like Amazon’s service. There are plenty of good books that publishers miss. Usually the big publisher’s reject books for poor quality, but very often there are good books that are just too “quirky” for major publishers. Perhaps the publisher doesn’t see a good market for the book, or more often just doesn’t see how to market it easily.

So Amazon could serve as a nice niche publisher. But they don’t. There is no quality control on Amazon. As one reader recently put it, “Amazon is publishing other publisher’s slush piles—the manuscripts that others rejected.” For that reason, he said, he would not be buying any more self-published books.

I don’t feel that way. I personally think that there are a lot of times when the major publishers get it wrong. For example, Harry Potter was rejected by a dozen publishers before it got picked up and became the bestselling novel of all time. What’s with that? Are the publishers really doing that great a job at picking what we like? Obviously not. So I like the idea of having a wider market.

I don’t like Amazon’s pricing policies. Why? Amazon’s upper limits on book prices are too low. I’ve always felt that. Let’s say that you spent years writing a textbook, doing heavy research, double-checking all of the facts, and you want to publish the book electronically. Let’s imagine that this is a legal textbook for first-year law students. You know that the market is fairly small, so in order to make a profit on the book, you need $40 per book. With Amazon, you can’t do that. Since Amazon is trying to keep the prices artificially low, they penalize you for charging a high price for a book. They take 65 percent of any book that costs over $9.99. That means that for the writer of this legal text to get $40, he’d have to set the price of his e-book at $133, and Amazon would be taking the majority of the profit.

As a writer who does write non-fiction, I’ve been faced with that quandary. I wish that Amazon would allow writers who need to charge more to do so.

Now, paper publishers are finding themselves in competition with Amazon. Many avid readers, those who buy 50% of all books, have moved to e-readers, so the sales on hardcovers and paperbacks have dropped dramatically.

The traditional publishers feel that they should have something of a grace period on a well-written novel. After spending a lot of money on acquisitions and marketing, they want to make their money back. So they would like to charge a premium price for their product at first, then lower the prices later.

In other words, they want to treat a book as if it were a movie. You can either choose to go see a movie in a theater in its opening run—where you might pay as much as $10 for a ticket—or you can watch it on television in a couple of years.

During that “first-run” of the book, the paper publisher can’t afford to let Amazon.com undercut their prices, and under Amazon’s current contract, Amazon can do whatever they want. Amazon reserves the right to set its own prices on an author’s book, regardless of what the author wants to set it at. So, Amazon could set the price to a new release under its current contract as low as 99 cents. I know this to be true because I have had a couple of instances where Amazon has dropped my prices without notifying me, and when I complain about it, they remind me that “Hey, we can do that!”

If Amazon does this to a major publisher, it would “cannibalize the sales” on the hardback and paperback versions of the novel, causing the major publisher to lose money as they have to take in large numbers of returns or destroy paperbacks.

Now, would Amazon like to hurt the major publishers? Amazon is currently the largest bookstore in the world. It has already wiped out most of the other major brick-and-mortar chains. I’ve seen published rumors that it is trying to buy Simon and Schuster.

Yeah, Amazon would like to move into the space that the major publishers now occupy. They’ve already taken the majority of the e-book markets, started their own imprints, and have created a healthy model for on-demand publishing. They’re moving into movies and television now, too.

You see, book publishing isn’t just about books. A book publisher can control the rights to the movies and television shows that the books are based upon. And the merchandise generated by a big hit is worth far more than just the books or movies. Thus, with a book like Lord of the Rings, we saw that the merchandise earned the movie companies some 7 billion dollars while the book sales and movie sales together probably didn’t generate more than about half a billion (much of which was then spent on advertising. Note that Peter Jackson and the Tolkien estate have both sued the filmmakers because on the books, the movies still haven’t “earned out.”)

So what is the fight really about between Hachette and Amazon? It’s a fight over positioning. It’s a fight over control of the markets. In essence, this is a territorial battle between two t-rex’s. They’re in a grim battle over their food source.

The question is, should we as authors take sides?

Sure you should. If you want to try to create a market where bookstores thrive and traditional publishing thrives with it, throw your support behind Hachette. Go to a local bookstore and buy some paper books. There are a lot of people who still prefer to read book in paper, and I have to admit that I’m one of them. I spent a hundred dollars last week on paper books.

On the other hand, if you think that it’s time to let the paper book market die, and you do really prefer to read books in e-book format, then buy e-books. I buy books in e-book format plenty too, and have probably spent an equal amount on those in the past few weeks.

Me, I don’t have the time or energy to fight about it. Personally, I’d like to see both companies do well. You see, as a reader, I feel that I’m served better by having a healthy marketplace for both traditional markets and the Indie market.

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Matt Harrill's book Hellbounce recently received a glowing (real) review. Here is a part of it:

A truly mystery filled, suspense packed, on the edge of your seat, toe curling , blood curling, screaming my head off read, and an absolute masterpiece of a book. Best of all this is only part one, so there is a loads of more kick ass awesomeness to come. All I will say is Matthew Harrill get your ass back to writing as in NOW! -Desere

 

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