Hachette vs. Amazon: Do Writers Benefit?

P1000708_JPGJeff Bezos spoke at the Stanford Publishing Course for several years running in the ’90s. At the time, the only thing Amazon was selling was books, and we loved books.

But he tipped his hand one day as he was leaving campus. “I don’t know why you ask me back every year,” he mused before ducking into a town car headed to the airport.

What an odd comment, I thought. Now, of course, it has become clear. We saw him as a highly inventive book distributor. He saw himself as something entirely different.

Now there’s a wicked fight going on between Hachette and Amazon over the price of ebooks. Hachette wants to keep those prices higher than Amazon does, and since they can’t come to agreement, Amazon has slowed the sale of Hachette books by various means-including blocking preorders and removing listing of some titles.

If you want a roadmap of the current controversy, which is now being debated by Clay Shirkey, Mike Shatzkin and Brian O’Leary, start with Jane Friedman’s excellent summary here.

Bezos himself has been mum on this issue, but his team did respond-somewhat obliquely. On August 8, they sent a mass email to their Kindle authors, asking them to rally around Amazon’s efforts to keep ebook prices low. Here’s the crux of Amazon’s argument:

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.

(Read the entire email here).

It’s unusual for Amazon to provide hard numbers such as these. But the argument is a cogent one, and that’s probably why Amazon decided to open the kimono.

I do not think traditional publishers have it right when they argue that Amazon threatens the future of literary culture. I believe that we are seeing the birth of a new publishing business model that offers serious authors greater control and a better shot at connecting with their readers-and lower prices for ebooks are part of that model.

But having worked for the past four years with authors who publish directly through Amazon, I also see how slim the profit margins are for these authors after all the bills are paid. (See my post here. ) I would love to see Amazon seize this crucial moment not by strong-arming Hachette, but rather by rethinking its own business model and sharing more of the revenue with authors. If we’re talking about “promoting a healthier reading culture,” wouldn’t this would be a far more powerful and effective tactic?

So—take the high road, Jeff. Support a healthy reading culture. Don’t block the sale of Hachette books. Rather, spend your time and money nurturing the authors who are experimenting with it and with you. Share more of the profits generated under the new publishing model with the entrepreneurial authors who are building it together with Amazon.

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