Two Things About Amazon vs. Hachette

In general, I’ve been happy to say very little about the ongoing Amazon vs. Hachette (publishers of I Hunt Killers) battle royale, instead pointing to others’ statements. It’s a big, thorny, ugly complicated issue and I don’t have the patience to do it justice, especially when others are writing so often and so well about it. Plus, quite frankly, I just don’t need to spike my blood pressure by thinking about it.

But reading a recent piece by Christopher Wright made me realize that there are two bits I do want to discuss, mainly because I don’t see anyone talking about them.

Wright’s article is well-thought-out and cogently presented, examining the kinds of nuance I enjoy. I don’t agree with everything he says, but he lays out a series of logical inferences in a manner that leaves little quibble room. I encourage you to go read it before you continue here.

So, here are my two problems with the Amazon vs. Hachette discussion, as thrown into stark relief by Wright’s piece:

1) Ebook pricing. Everyone has agreed that this fight is all about how expensive or not ebooks will/should be, but no one is digging below the surface of this discussion. Using Wright to summarize the argument:

There’s no legitimate reason an ebook should cost the same as a paperback. “Well we really want to” is not a legitimate reason. “Because we can get away with it” is only legitimate from a business perspective if you can actually get away with it, and the current fight between Amazon and Hachette suggests that they can’t.1

Now, I can’t speak for everyone, but…

Amazon.com_ barry lyga-1

Amazon.com_ barry lyga

I fully realize that two books do not a trend make, and that one author’s experience is not universal. But clearly some ebooks are less expensive than a paperback. Even from the evil, greedy, reader-haters at Hachette.

The problem isn’t “less expensive than.” The problem that no one seems to be discussing is “how much less expensive?”

Logic dictates that an ebook should be less expensive than a paperback because there are no printing, storing, or shipping costs involved. Far be it from me to argue with logic — that’s all true.

But the problem is that everyone (including Amazon) stops the argument there. As you can see, my Hachette ebooks are less expensive than my Hachette paperbacks. What’s the problem, then?

The problem is that no one is saying, “Ebooks should be less expensive than paperbacks by X amount.” Everyone just takes it as an article of faith that they should be less expensive, hurls insults at the publisher, sides with Amazon, and goes home.

Well, great — how much less expensive?

I have a sneaking suspicion that when people say less expensive, they’re thinking a huge amount. Like, say, half-off. But none of these people know if that’s actually viable.

Because, yes, printing, storage, and shipping costs should be deducted, but you and I don’t know what percentage of a publisher’s costs those things add up to!

Digital fans like to imagine that the electronic format is so wondrous that it compensates for the analog flaws to an almost infinite degree. But I’ve worked in publishing (as an author and in marketing) for my entire adult life, and I can tell you based on what I’ve seen and heard, this most likely isn’t true. In fact, given that physical production of books was — for a long time — the book industry’s only option, it makes sense to me to imagine that publishers long ago worked out the efficiencies and economies of scale of that particular piece of the puzzle, such that it is a much smaller percentage of the overall cost of producing a book than you would like to believe.

We don’t know, of course, because no publisher has opened up its P&Ls to public consumption. (I should state here that I’ve told at least one of my publishers that it should publicly explain exactly how expensive it is to produce a book, regardless of analog costs. I know such a disclosure could be risky, but I also think it would be illuminating.)

The rallying cry of the Amazon side is “$9.99 is too much!” Others have shown that Amazon’s math, well, isn’t really kosher, but let’s play the game anyway. Okay then. What about $9.49? What if it turns out that’s how the math works out? Or $8.99? Or $7.99?

They’re all less than a paperback and under $9.99, right? And hey, look — I have Kindle editions at both $8.99 and $7.99.

What are we fighting about, again?

In short: You don’t know what a publisher is spending and on what…so telling that publisher how to price its products is sort of like telling a restaurant how much the steak tartare should cost even though you have only the vaguest idea of what the ingredients cost…and absolutely no idea what it costs to run the kitchen.

And guess what — it’s like that with almost everything you buy! Almost every single product you purchase, you have no idea if you’re getting screwed or not. You decide based on its value to you and how much you want it.

So: Ebooks should be cheaper than paperbacks? As best I can tell, they often are, by a buck or so.2 If you want them even cheaper than that, you’re gonna have to show your math instead of just crying out, “Digital is cheaper!”

And last but not least: If this whole thing is about ebooks, then why is Amazon making it more difficult and more expensive to buy print books? I mean, I get it — they don’t want to kill their cash cow. But isn’t it just plain weird that Amazon’s logic goes like this: “Hachette is making ebooks too expensive! Therefore, we will cut discounts on print books and take longer to send them to you! But we’ll leave ebooks alone.”

I could sort of respect Amazon’s consistency and integrity if they decided to stop selling Hachette’s ebooks, standing on principle to their own detriment. But print books? That’s sort of like your local grocer saying, “My produce wholesaler charges too much for lemons, so I’m raising the price of limes.”

Again: What are we fighting about?

2) Wright’s second point with which I quibble is this:

Amazon can articulate a solution to a problem, and Hachette can’t articulate anything other than “Amazon is bad.” …. They have no vision on how to create a market that effectively competes with Amazon that answers any of the claims Amazon has made about how their vision is better for consumers, or about how their vision is better for other publishers, like me.3

Well, guess what? That’s because the last time Hachette tried to “create a market that effectively competes with Amazon,” they got slapped in the face with a bullshit anti-trust lawsuit that everyone in the world except for Amazon and the DOJ know was a counterintuitive exercise in idiocy. The result of this lawsuit, according to the Wall Street Journal:

Some publishers said the government’s action could harm consumers by giving Amazon excessive control of the industry.

And here we are, in the post-lawsuit world, and readers of Hachette books can’t preorder them from Amazon. The books cost more from Amazon. And they take longer to arrive.

Amazon has control and consumers are harmed. Go figure. Who could have guessed…other than everyone in the world except for the Department of Justice?

Wright says Hachette has offered no vision of the future, no competing idea. Well, yeah, that’s because they can’t. The most obvious solution is to back a competitor to Amazon, to team up with other publishers and sell direct to consumers, maybe. But when publishers back an Amazon competitor, they get sued. And when they dare talk to each other…they get sued.

Hachette’s only option is to resist Amazon. Every other avenue has been cut off by the misguided actions of some clueless federal prosecutors, to Amazon’s advantage.

Pick whichever side you like. But I ask you to think about both of these points. When someone cries “Lower prices!” but doesn’t say how much lower and/or how it’s possible to get there, maybe there’s more to it. And when one side has its arms tied behind its back in the fight, but still refuses to give in…maybe there’s more to that, too.

 



  1. Emphasis in original.
  2. Sometimes retailers — including Amazon — discount paperbacks to less than the price of an ebook. But you can’t expect a publisher to compensate for discount decisions made at the retail level. If Amazon discounts a print book below its equivalent ebook cost, that’s on Amazon, not on the publisher.
  3. Emphasis in original.

Comments

  1. I think your first point is a pretty good one — “how much less expensive” is a pretty fair question that nobody is bothering to answer, and I admit it’s one I really didn’t consider when I wrote my piece. Other people have also touched on the costs that exist for all books, regardless of format (editing, marketing, design) that would make up a minimum price threshold you’d have to clear in order to make a profit on a book. This is an important set of points and I haven’t addressed them well, and neither have a lot of other people. They deserve more attention.

    I disagree with your second point, though. Hachette’s original response was not a real solution. It was, in fact, genuinely illegal. You can’t collude with competitors to engage in price-fixing. I understand why they did it, but at the time that group was the only party engaging in behavior that fell under antritrust laws — it’s convenient to refer to Amazon as a monopoly, it helps frame the conversation, but technically they’re not there yet. I admit there’s a certain symmetry to fighting a monopolist by adopting the tools of a monopolist (fighting fire with fire, etc.) but you’re still not allowed to do it, and it’s worse when the monopolist you’re fighting doesn’t actually meet the legal definitions of the term yet.

    (Though I need to clarify I am not a lawyer — I don’t *think* it meets the legal definitions of the term, but I’m not formally qualified to actually make that call.)

    • Hi, there, Christopher!

      First of all, let me make sure everyone knows — I really enjoyed your piece, and I hope mine didn’t come across as attacking you. Far from it! You happened to crystallize two things I’d been thinking about in a way that made it easy for me to put into words, so I’m grateful!

      On that first point: Yeah, everyone is so focused on the what that no one thinks about the how. Or the how much. You’re certainly not the only one!

      On the second point: I admit my lingering outrage at the lawsuit colored this bit and I didn’t explain as well as I could have. I’m not a lawyer, either, so let’s stipulate for the sake of argument that the DOJ was right, that Hachette conspired, etc. I personally don’t think they did anything illegal, but let’s assume they did.

      My point is that in the aftermath of the lawsuit, Hachette finds itself constrained, whether by actual law or by the fear of prosecution. You say Hachette has no vision of a market that competes more effectively with Amazon. I say they probably do…but there’s nothing they can do to implement it. Because anything that competes more effectively with Amazon (or at least anything I can think of — maybe I’m not that bright) is going to look and smell pretty close to what got them in trouble last time. If you’re Hachette’s lawyer and the CEO of Hachette says to you, “In order to build a market that competes more effectively with Amazon, we’re going to build a storefront with other publishers,” you’re going to say, “Slow your roll, man! That sounds like collusion! Are you nuts?”

      Hachette could sell direct to consumers, I guess, but that won’t do much to improve market competition. Because most people don’t know who publishes their favorite authors. So, a fan of Barry Lyga isn’t going to know to go to the Hachette Online Bookstore. You need to have ALL of the books — like Amazon, like B&N, like your local indie bookstore — in order to compete.

      But if book publishers decided to get together and build a store to do just that…we’re back in DOJland.

      Now, really, maybe I just have a limited imagination and there IS something Hachette can do (other than resisting Amazon as they are) and I just don’t see it. But when I read your comment about Hachette not putting forth a vision, I tried to imagine what they COULD offer…and everything I thought of either A) would summon the hellhounds of the DOJ or B) would cause a reasonably paranoid and astute corporate attorney to say, “See Point A.”

      It’s less about “Was Hachette right or wrong in the DOJ case?” and more about, “Going forward, (how) does the DOJ constrain Hachette’s actions?”

      But one thing I did NOT say in my piece — and I am remiss in neglecting to do so — is that it would be great to see a constructive discussion on just your point: What could or should Hachette suggest or move forward on that would meet your criteria of “a market that effectively competes with Amazon?” Maybe the wisdom of the crowd can come up with something that will make things better for everyone!

      Thanks for stopping by. I’m actually sort of surprised anyone read this piece, much less you! 🙂

  2. EbooksAreTooExpensive says:

    Shadows of Self

    Hardcover £9.99
    Paperback £7.99
    Ebook £9.99

    Ebooks should 100% without any doubt be less expensive than a paperback. The fact that even one single Ebook is more expensive simply demonstrates what happens when greedy simpletons get an idea into their head that “theres gold in them there hills”.

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