Amazon claims to have the best interests of readers at heart. In addition, they make a case for the idea that lower prices will actually result in greater revenue for everyone:
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 (from Amazon Letter to Kindle Direct Publishing authors)
Traditionally published authors, however, believe Amazon has used strong-arm tactics, which bodes ill, or evil, depending how you look at it, because of Amazon’s growing position of power in the book industry. For instance, Amazon delayed delivery of some books—readers waited up to three weeks—then took down the pre-order button of other titles. Finally they stopped selling some books by some Hachette authors.
Things started warming up because those authors have experienced a sizable loss in income. Best-selling author Douglas Preston took it upon himself to write an open letter about Amazon’s negotiation tactics, and more than a hundred other writers signed it with him:
“Without taking sides on the contractual dispute between Hachette and Amazon, we encourage Amazon in the strongest possible terms to stop harming the livelihood of the authors on whom it has built its business. None of us, neither readers nor authors, benefit when books are taken hostage.
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. Moreover, by inconveniencing and misleading its own customers with unfair pricing and delayed delivery, Amazon is contradicting its own written promise to be ‘Earth’s most customer-centric company’.” (As quoted in “Amazon-Hachette fight deepens as authors take sides,” The Guardian).
What’s more, 900+ authors took out an ad in the New York Times that was to run on Sunday again calling for Amazon to stop their hardball tactics.
Amazon countered by sending their letter to their KDP authors, specifically asking them to write Hachetter (or “spam” them, as one online site characterized it).
Now the analysis is underway. The Los Angeles Times, for instance, published an article examining Amazon’s “everyone makes money if the ebook prices are lower” claim. Here’s a sampling:
The assumption underlying Amazon’s statement is that 1.74 more books will be sold for any and all books. In the real world, it would be delightful if this could work, but it implies that if only publishers dropped the price of e-books by $5, millions more books would be sold. In fact, the book-buying pool probably isn’t that expandable. At some point, readers are going to reach the end of their book budgets. (“What Amazon’s e-book numbers are and aren’t telling you,” The LA Times)
That’s only one of several criticisms about Amazon’s approach to pricing.
In all this, the issues seem a little murky. I, as an author who is benefiting from Amazon’s publishing and as a reader who enjoys inexpensive ebooks (or free ones during promotions), think Amazon is right about keeping the price of ebooks as low as possible and giving authors as high a percentage of the pie as possible.
Of course Amazon has no say about what percent of the pie Hachette will give their authors.
And they shouldn’t. But should they have any say about the price the publisher sets for his product? In their dealings with Hachette, Amazon is essentially acting as a bookstore. Do bookstores tell the publishers to drop the price of their product by a third?
I imagine they can determine that their clientele won’t buy at a higher price, so they could decline to carry the product. That should be their right. But literary agent Brian DeFiore articulated what traditionally published authors see and fear:
Authors who work with traditional publishers like Hachette tend to make more, per copy, from hardcover sales than from e-books. If cheaper e-books draw people away from hardcovers, that could hurt these authors financially. Plus, DeFiore said, Amazon has a huge share of the e-book business, through its Kindle e-reader—even more than it does with physical books. If lower e-book prices were to eventually destroy the market for physical books entirely—or even shrink it enough so that it wouldn’t make financial sense for traditional booksellers to publish them—that would help Amazon consolidate its power, which would ultimately be dangerous for authors. “What happens if, and when, there’s one retailer for e-books left, and they just decide, ‘You know what? We want to price books at four-ninety-nine.’ (“Amazon’s Failed Pitch to Authors,” The New Yorker)
These fears do not seem unfounded:
Journalist Brad Stone writes that [Amazon CEO Jeff] Bezos once suggested that the company should approach small publishers—among the most vulnerable of the company’s suppliers—“the way a cheetah would pursue a sickly gazelle.” Amazon is able to pursue this strategy because it is responsible for the sale of forty per cent of all new books and sixty-four per cent of e-books in the United States, according to the Codex Group, a research firm. The more powerful Amazon becomes, the greater becomes its ability to make demands of its suppliers—in this case, publishers and authors. (Ibid., emphasis added)
In such a scenario, I think readers should be concerned, too. Instead of dropping the price to $4.99, what’s to keep a company dominating the market from raising the price to $19.99? That’s the way monopolies of old ran their businesses. First they lowered prices so far that they forced smaller companies to sell out. They, when they were the only game in town, they raised prices and started bleeding customers.
Amazon could change the rules for authors like me, as well. I’ve already experienced that on a small scale as they have automatically included me in their new lending program—and I have no say and no idea if it will increase my revenue or reduce it.
Companies like Walmart are accused of this same type of, “drop the price lower than the competition can match,” tactic. In fact, so were the big box bookstores—Crown and Borders and Barnes & Noble—which pushed out any number of independent bookstores. While there wasn’t any price gouging (that I’m aware of), holding the corner on books in a town or community, was a powerful role.
The questions, as I see them, are these:
- What’s best for authors (without whom there would be no books) on the short term, so our society doesn’t lose writing as a profession?
- What’s best for independent writers who had no opportunity to publish prior to digital publishing? (Amazon makes an interesting comparison between ebooks and mass market paperbacks in the last century).
- What’s best for readers (who right now are limited from buying some titles they wish, at least for their Amazon reading device, but who may benefit in the long run from cheaper ebooks)?
- What’s good for the book business in the long run? What will keep book content as free as possible from gatekeepters and dominant publishers/booksellers that can squeeze out whatever they desire for whatever reason they determine?
So, is Amazon the godfather of the book business or a visionary entrepreneur? I’m interested in your thoughts.