NOTE:
Amazon and Hatchette are at each other's throat. This letter is Amazon/Kindle's point of view. Despite the "Dear KDP Author," I only have one book listed, enjoying better success with Smashwords. -SPO
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9 August 2014
Kindle Direct Publishing
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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