How Do You Read It?

Published: Sep 04 , 2014
Author: Alan Smith

I am a big fan of the Kindle.

It is convenient, easy to read at night, can carry lots of product, etc., etc. But whilst I still also love books, the Kindle’s massive advantage is the price you pay and the ease by which you can get hold of pretty much any book in print at any time, provided you have internet access. Brilliant.

I am not alone. Amazon who produces the Kindle, sell about 10 million of the e-reader devices a year and owners buy roughly 10 books per year to feed their devices and reading habit. That’s a lot of books.

Seems that not everyone feels the same way about Kindle however, as demonstrated in the unfolding spat between French publishing giant Hachette and Amazon about prices and control.

Unless you've been living in a book-free cave, you may have heard that retail giant Amazon and book publisher Hachette are having a little tiff. It's all about digital versions of books -- e-books -- and it boils down to this: Amazon wants to sell most of them for $9.99, and Hachette wants to set its own prices depending on the title and author.

Once Amazon got big enough to dictate terms, it declared $9.99 to be the de facto price for e-books. Simon & Schuster, Penguin, Hachette and other publishers wanted to set their own prices, but felt they had no leverage against Amazon's dominance. Negotiations began.

Once those negotiations started, Hachette and Amazon quickly found themselves at loggerheads. Hachette wants to set wholesale prices at about 70 percent of retail and, out of that, pay authors whatever amount they can negotiate -- around about 10 percent. That leaves 30 percent to Amazon, depending on deals. Amazon, on the other hand, is willing to keep its e-book margins at 30 percent but is adamant that the price for most books be at the rate of $9.99 or less, with limited titles higher. That's 30 to 50 percent lower than current prices, depending on the title. It also proposed that publishers split the 70 percent balance with authors, rather than taking so much of it.

Amazon pressurises suppliers to keep its competitive edge, and publishers are in the firing line. It claims that reduced e-book prices actually result in higher sales and more money for all the players, not less. They argue that high e-book prices are unjustified since publishers have no printing, returns, re-sales and warehousing to deal with. It also believes high prices are hurting the book industry, which must compete against all other rival forms of entertainment.

Meanwhile, Hachette thinks a one-size-fits-all pricing model won’t work; it wants the ability to set pricing for its own books. It has said that it would only settle on an agreement that valued the publisher's role in "editing, marketing and distributing" books. As a final dig, it accused Amazon of harming authors with its actions, and believes it -- not them -- should compensate them for losses once the dispute is settled.

So lines are drawn and battle is underway.

Hachette do hold another particularly interesting card. They do have the support of many authors and if they withdraw their product from Amazon I suspect that consumers looking for JK Rowling, Stephen King, AA Milne, Iain Banks, to name just a few, will look elsewhere for their purchases, which will dent Amazon not only financially but also its guiding principle of being the one stop shop.

It will be interesting if they play it.

The danger, of course, in playing the sanction route is that for most of us, and Amazon is no exception, when threatened, we come out fighting.

I suspect we will be able to read all about how it is resolved. Maybe on the Kindle.

Alan Smith

 


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Alan Smith

About the author:

Alan Smith
My background is marketing and advertising. After graduating in Economics I entered the agency world to become, at 28, MD of London's largest independent below-the-line marketing provider.

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