On August 10, 2014, Authors United placed an open letter decrying Amazon CEO Jeff Bezos’ pressure tactics on Hachette to lower e-book prices. The letter — written by thriller writer, Douglas Preston, and placed as a two-page ad, costing $ 104,000 and signed by well-known names such as James Patterson, Stephen King, David Baldacci, Kamila Shamsie, Philip Pullman, Donna Tartt, Ann Patchett, Malcolm Gladwell, Paul Auster and Barbara Kingsolver — states, “As writers — most of us not published by Hachette — we feel strongly that no bookseller should block the sale of books or otherwise prevent or discourage customers from ordering or receiving the books they want. It is not right for Amazon to single out a group of authors, who are not involved in the dispute, for selective retaliation.” The writers printed Jeff Bezos e-mail id and asked authors to write to him directly.
This letter came after months of a public spat between publisher Hachette and online retailer Amazon. No one is privy to the details but it is widely speculated it is about the pricing of books, especially e-books. Authors began to feel the effect of these business negotiations once Amazon stopped processing sales of their books or were extremely slow about fulfilling the orders. It even removed an option to pre-order The Silkworm , by Harry Potter author J.K. Rowling writing as Robert Galbraith, prompting her to respond to the spat on Twitter where she encouraged her three million followers to order The Silkworm from high street stores and independent booksellers. Ironical given that Amazon’s motto is customer satisfaction.
Amazon defended its actions through a letter released on its website, Readers United (http://www.readersunited.com/) and circulated it to all the self-published authors using their Kindle Direct Publishing (KDP) platform. In it, the company said that for 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 is asking for all e-books to be priced at $9.99 or less. Misquoting George Orwell’s ironic comment on the popularity of new format of paperbacks in the 1930s, Amazon wrote that even Orwell too had suggested collusion amongst publishers. The corporate released the e-mail id of Hachette CEO, Michael Pietsch asking readers to write to him directly to make books affordable since it is good for book culture.
Pietsch replied to all those who wrote to him stating clearly “Hachette sets prices for our books entirely on our own, not in collusion with anyone… We set our e-book prices far below corresponding print book prices, reflecting savings in manufacturing and shipping. More than 80 per cent of the e-books we publish are priced at $9.99 or lower. Those few priced higher — most at $11.99 and $12.99 — are less than half the price of their print versions. Those higher priced ebooks will have lower prices soon, when the paperback version is published. The invention of mass-market paperbacks was great for all because it was not intended to replace hardbacks but to create a new format available later, at a lower price. As a publisher, we work to bring a variety of great books to readers, in a variety of formats and prices. We know by experience that there is not one appropriate price for all e-books, and that all e-books do not belong in the same $9.99 box. Unlike retailers, publishers invest heavily in individual books, often for years, before we see any revenue. We invest in advances against royalties, editing, design, production, marketing, warehousing, shipping, piracy protection, and more. We recoup these costs from sales of all the versions of the book that we publish — hardcover, paperback, large print, audio, and e-book. While e-books do not have the $2-$3 costs of manufacturing, warehousing, and shipping that print books have, their selling price carries a share of all our investments in the book.”
Amazon’s shareholders are getting tetchy with the massive losses the company has again posted. For the current quarter, Amazon forecast that the losses would only grow. It expects a healthy rise in revenue but forecast an operating loss of as much as $810 million, compared with a loss of $25 million in the third quarter of 2013. Losses increased as the firm spent heavily in a bid to expand its business with its first smartphone, the Fire Phone. Bob Kohn has pointed out “the monopsony power of Amazon, which has a current market share of 65 per cent of all online book units, digital and print, is not just theoretical; it’s real and formidable. When a company has dominant market power and sells goods for below marginal cost, it is engaging in predatory pricing, a violation of federal antitrust laws.” There have been articles in the U.S. for the government to enforce the Robinson-Patman Act of 1936, which prohibits a retailer from wielding its mere size to bully suppliers for discounts. But, as Colbert’s experiment of promoting debut author Edan Lepucki’s novel California showed, if readers want, they can procure a book from anywhere. His discussion about it, stemming from his anger for Amazon’s monopolistic practices, propelled California to becoming an NYT bestseller.
In India, commercially-successful author Ashwin Sanghi draws parallels between the music industry of 2002 and publishing of today. He says, “Books are at an inflection point in 2014; somewhat in the way that music was in 2002. Music producers were accustomed to selling CDs whereas Apple wanted to sell singles at 99 cents. It is impossible to say who the winners are but one clear winner is the customer who no longer needs to buy entire albums to hear a single song. There are those who say that Apple ‘destroyed’ the music industry. My view is different. Apple changed the industry and those who have adapted to the change are better off than those who didn’t. It’s also interesting to note that Apple itself is now under pressure from music streaming services which are threatening to change the game yet again. The face-off between Amazon and publishers/authors is similar. Publishers wish to charge prices that the industry is accustomed to while Amazon wishes to charge prices that customers will like, thus inducing more customers to buy on Amazon. The unfortunate repercussion of this could be the disappearance of the neighbourhood bookstore. The jury is still out whether the publishing industry will go the music way. One thing is certain though: the role of technology as a disruptive force is a given. And in the manner that Steve Jobs carried out his legendary negotiations with the music titans, I think the time has come for Jeff Bezos to sit across the table with publishers. There is no alternative.”
Another author, Rahul Saini writes “I have never supported the idea of monopoly and that is what Amazon is clearly trying to do here. Diversity is the way to evolution and the idea of monopoly is exactly opposite to that. Looking at the argument Amazon is making, it does make sense - buyers are always driven by low prices and heavy discounts (Indian book market is a perfect example) but I very firmly believe that the retailer does not own any right to dictate the pricing of a book. It has to be a mutual consent between the author and the publisher. Its their baby after all. Others can only suggest.”
Popular author Ravinder Singh adds: “Just like any product/service company has the sole right to decide the cost of its product/service, a publisher too has the right to decide the cost of its books (in any format). Once the publisher has decided the price and has made its margin, it depends on the retailer at what discounts he wants to sell the books. If the retailer really wants to bring down the price of the book, he can discount on his margins and he should be free to do so. The publisher should not stop him from doing that. (Note: I somewhere read that Hachette had an issue with the kind of discounts Amazon was offering on its e-books. Hachette’s point was that Amazon should not sell below certain minimum price point. And, if this is true, then I disagree with this philosophy of Hachette.) To decide the price of a book is a publisher’s (and not retailer’s) prerogative. Having said that, knowingly delaying shipment of titles of a particular publisher (and its authors) just because it did not accept the demand leaves a bad taste in everyone’s mouth — readers, authors and publishers. It’s like disturbing both the worlds; the demand and the supply side. Amazon may be a giant today but such practises will give birth to newer giants, especially when other publishers notice and understand that what Amazon is doing to Hachette, it can do to them as well. No publisher would like to keep all its eggs (in this case 60 per cent of their volumes) in Amazon’s basket. There will be newer baskets in the ecosystem. Amazon may be quite right in the price-demand elasticity of the e-book and in saying that it can certainly bring more readership and thereby more money (offsetting the drop in price). But Hachette has all the right to decline it, even if it means letting go money. As far as authors are concerned, they would not like to see one particular entity in the entire chain (that has accumulated huge powers), be it a publisher or a retailer, to decide their fate. They want to reach out to as many readers as possible, on time and make the royalties that they deserve.”
Writing in the Guardian , Kamila Shamsie says, “All writers should be deeply concerned by the strong-arm tactics Amazon is using in its contractual dispute with Hachette — similar to tactics used in 2008 with Bloomsbury titles. Writers want their books to reach readers; and we want to be able to earn a living from our work — it's a great irony that the world's largest bookseller is prepared to trample over both those wants in order to gain a business advantage even while claiming to stand up for readers and writers.
Other authors disagree, with a petition to Hachette launched by major names in self-publishing including Barry Eisler and Hugh Howey asking the publisher to “work on a resolution that keeps e-book prices reasonable and pays authors a fair wage” gathering over 7,600 signatures.
Publishing is not like selling biscuits or furniture. It isn’t a question of taste and preference but an exercise in social philosophy. Amazon is primarily a tech-company whose dominance in the book industry is unprecedented. There may be some similarities with what happened in the music industry ten years ago but publishing thrives on editorial tastes, a subjective point of view, requiring human intervention and not a series of algorithms promoting and recommending books. The book industry relies upon editors who know the business in “discovering” authors and converting them into household names. This public outrage against the ongoing battle between Amazon and Hachette proves the point that books are important to the cultural dimension of society.
