Today I Received an Interesting Email from Amazon Kindle…

amazonhachetteYes, Amazon Kindle services sent me an email (twice) today in which they called me to action. The issues: the price of eBooks. The culprit: Hachette Books.

Now, let me start off by saying that I believe readers should have the right to have a say in what the standard price for eBooks is. I don’t believe that eBook prices should be equally as high as the printed copies. This is Amazon’s argument.

In fairness to the issue at hand, I thought I would share the entire email with you. Skim and read what you want (or all of it) and see where you stand. I will then take a few minutes to explain what I think they are saying right, and where I think they are so wrong. One these points, I believe everyone could agree.

The Email

I have changed the color of text in important parts of the email to take note of. These are issues which I will revisit. While I could just focus on those and cut out the rest, I believe that it is important for everyone to see the entire article (the big picture) so that it doesn’t look like leading.

Dear KDP Author,

Just ahead of World War II, there was a radical invention that shook the foundations of book publishing. It was the paperback book. This was a time when movie tickets cost 10 or 20 cents, and books cost $2.50. The new paperback cost 25 cents – it was ten times cheaper. Readers loved the paperback and millions of copies were sold in just the first year.

With it being so inexpensive and with so many more people able to afford to buy and read books, you would think the literary establishment of the day would have celebrated the invention of the paperback, yes? Nope. Instead, they dug in and circled the wagons. They believed low cost paperbacks would destroy literary culture and harm the industry (not to mention their own bank accounts). Many bookstores refused to stock them, and the early paperback publishers had to use unconventional methods of distribution – places like newsstands and drugstores. The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.” Yes, George Orwell was suggesting collusion.

Well… history doesn’t repeat itself, but it does rhyme.

Fast forward to today, and it’s the e-book’s turn to be opposed by the literary establishment. Amazon and Hachette – a big US publisher and part of a $10 billion media conglomerate – are in the middle of a business dispute about e-books. We want lower e-book prices. Hachette does not. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. 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 and should be less expensive.

Perhaps channeling Orwell’s decades old suggestion, Hachette has already been caught illegally colluding with its competitors to raise e-book prices. So far those parties have paid $166 million in penalties and restitution. Colluding with its competitors to raise prices wasn’t only illegal, it was also highly disrespectful to Hachette’s readers.

The fact is many established incumbents in the industry have taken the position that lower e-book prices will “devalue books” and hurt “Arts and Letters.” They’re wrong. Just as paperbacks did not destroy book culture despite being ten times cheaper, neither will e-books. On the contrary, paperbacks ended up rejuvenating the book industry and making it stronger. The same will happen with e-books.

Many inside the echo-chamber of the industry often draw the box too small. They think books only compete against books. But in reality, 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.

Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more. 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. The important thing to note here is that the lower price is good for all parties involved: the customer is paying 33% less and the author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. The pie is simply bigger.

But when a thing has been done a certain way for a long time, resisting change can be a reflexive instinct, and the powerful interests of the status quo are hard to move. It was never in George Orwell’s interest to suppress paperback books – he was wrong about that.

And despite what some would have you believe, authors are not united on this issue. When the Authors Guild recently wrote on this, they titled their post: “Amazon-Hachette Debate Yields Diverse Opinions Among Authors” (the comments to this post are worth a read). A petition started by another group of authors and aimed at Hachette, titled “Stop Fighting Low Prices and Fair Wages,” garnered over 7,600 signatures. And there are myriad articles and posts, by authors and readers alike, supporting us in our effort to keep prices low and build a healthy reading culture. Author David Gaughran’s recent interview is another piece worth reading.

We recognize that writers reasonably want to be left out of a dispute between large companies. Some have suggested that we “just talk.” We tried that. Hachette spent three months stonewalling and only grudgingly began to even acknowledge our concerns when we took action to reduce sales of their titles in our store. Since then Amazon has made three separate offers to Hachette to take authors out of the middle. We first suggested that we (Amazon and Hachette) jointly make author royalties whole during the term of the dispute. Then we suggested that authors receive 100% of all sales of their titles until this dispute is resolved. Then we suggested that we would return to normal business operations if Amazon and Hachette’s normal share of revenue went to a literacy charity. But Hachette, and their parent company Lagardere, have quickly and repeatedly dismissed these offers even though e-books represent 1% of their revenues and they could easily agree to do so. They believe they get leverage from keeping their authors in the middle.

We will never give up our fight for reasonable e-book prices. We know making books more affordable is good for book culture. We’d like your help. Please email Hachette and copy us.

Hachette CEO, Michael Pietsch: Michael.Pietsch@hbgusa.com

Copy us at: readers-united@amazon.com

Please consider including these points:

– We have noted your illegal collusion. Please stop working so hard to overcharge for ebooks. They can and should be less expensive.
– Lowering e-book prices will help – not hurt – the reading culture, just like paperbacks did.
– Stop using your authors as leverage and accept one of Amazon’s offers to take them out of the middle.
– Especially if you’re an author yourself: Remind them that authors are not united on this issue.

Thanks for your support.

The Amazon Books Team

P.S. You can also find this letter at www.readersunited.com

The Issues

Now I would like to take a few minutes to examine the issues that are imbedded in this email.

They believed low cost paperbacks would destroy literary culture and harm the industry

I just wanted to highlight this section of the email because it does seem like an outrageous thing; however, it could just as easily be a concocted claim. While I don’t doubt that paperbacks had some impact in history on the cost of books and the publishing industry, it would be nice if they could include some reference or evidence here.

Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. 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 and should be less expensive.

There is so much wrong with this statement. While the prices may admittedly be a little high, there is justification for the cost of eBooks. True: there is no printing cost or runs, warehousing, transportation, or secondary market costs. Also true: there are still editors, copy-editors, design, artists, and a host of others who have worked to create that eBook. Reducing cost reduces their pay in the long run (and they don’t make nearly as much as you might think; in fact the average editor makes about $53,880 per year). These proofreaders and copy-editors have to create a manuscript in a completely different format to prepare it for eBook conversion.

On the contrary, paperbacks ended up rejuvenating the book industry and making it stronger. The same will happen with e-books.

This I don’t dispute. With technology changing the way we do everything, eBooks could very well help make the book industry stronger. With that said, it is important to understand that printed book sales have not been dying. In fact, hardcover sales have had a stronger growth than eBooks.

They think books only compete against books. But in reality, 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.

Hmm… This is a tricky statement. First of all, yes, eBooks do compete with other forms of media, just like books have always competed with things like movies, video games, and television (since at least the 1980’s). The only thing that has changed to gain the attention of readers is the internet. Some social media and blogs do distract readers from actually reading books (printed or eBook); however, some of this “competition” is much more highly priced than eBooks. Video games are anywhere from $39.99 to $69.99, depending of the company that created it, the popularity of the game, and the current market. Satellite or cable cost anywhere from $29.99 to $99 per month for services, but people still buy them. People pay upwards of $50 per month to have internet access on their phones. Books are already competitively priced.

Yes, if we want a healthy reading culture, we have to make books more readily available to people. We also need to find ways to interest more people in reading. (And by the way, the film industry has done just as much to rejuvenate the sale of books as eBooks, probably more.) We can’t give books away for free, Amazon, like social media and online articles are.  That’s hardly a fair comparison.

For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99.

Okay, so lower prices will attract more attention from readers than higher prices. That’s a given. People want to pay less to get more. It doesn’t matter if we’re buying an eBook or a house. The big problem I have with the scenario here is that Amazon is assuming their numbers based on 100,000 copies sold. So let’s talk new author and not someone who is likely to sell hundreds of thousands of copies:

  • @ $14.99 * 500 in sales = $7,495
  • @ $9.99 * 870 (500*1.74) in sales = $8,691.30

The numbers are indeed higher, but we are assuming that Amazon is right about the 1.74 per book increase.  The truth is, these sales are also dependent on exposure of the author.

Then we suggested that authors receive 100% of all sales of their titles until this dispute is resolved. Then we suggested that we would return to normal business operations if Amazon and Hachette’s normal share of revenue went to a literacy charity.

Don’t be ridiculous. As an author and an editor, I can see both sides of this issue. What author wouldn’t want 100% of the sales? But notice they didn’t say sales profits. That means that those people who worked so hard to prepare that book and make it available for the author to the readers are now not getting paid for their work.

As for donating revenue to literacy charity, it sounds brilliant. What a great idea, Amazon! Except then all those people who worked for the production of that eBook are still not getting a paycheck for the work.

Fairness to readers. Fairness to authors. Fairness to the people who created that eBook.

They believe they get leverage from keeping their authors in the middle.

Authors in the middle, huh? And Amazon isn’t doing the same thing? If you don’t think so, note that the email sent to me starts with “Dear Author.” Amazon is doing the exact same thing, just in a different way.

My Two Cents

While I do believe that eBooks should be affordable to readers, and I agree that $9.99 isn’t an unreasonable price for authors, publishers, and readers alike, I don’t agree with the tactic and statements Amazon has utilized here.  What I encourage all of you to do is be educated about the facts in the debate and draw your own conclusion. Don’t let either of them lead you.

If you agree with Amazon, by all means do what they asked of me in my email. You can also sign the petition on Change.org.

Advertisements

Participate!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s