Amazon: 'Hachette paying authors too little on e-books'

Amazon: 'Hachette paying authors too little on e-books'

Hachette Book Group is “sharing too small a portion” of the revenue from e-books with authors, Amazon has said in its latest salvo in the ongoing dispute between the two companies.

Writing on its Kindle forum, Amazon said the aim of its latest note was to provide “specific information” about its objectives, but only discussed one – lower e-book prices.

The online retailer proposed that 35% of the total revenue from e-book sales should go to the author, 35% to the publisher and 30% to Amazon.

“While we believe 35% should go to the author and 35% to Hachette, the way this would actually work is that we would send 70% of the total revenue to Hachette, and they would decide how much to share with the author,” Amazon said. “We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call.”

Of its 30% share, Amazon asked: “Is 30% reasonable? Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% - we did have a big problem with the price increases.”

Amazon said $14.99 and $19.99 were “unjustifiably high” prices for e-books.

“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,” Amazon said. “E-books can be and should be less expensive.”

Amazon and Hachette have been locked in a public battle since May as they negotiate terms. It is thought the negotiation includes disputes over services which Amazon believes Hachette should pay for, such as pre-order buttons, personalised recommendations and a dedicated employee at the retailer for Hachette books, among other things.

The online retailer said that when the price of e-books go up “customers buy much less”, and argued that at a lower price of $9.99 per e-book, total revenue increases 16%, although it acknowledged that “there will be legitimate reasons for a small number of specialised titles to be above $9.99”.

“We've quantified the price elasticity of e-books from repeated measurements across many titles,” Amazon said. “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.”

It said lower prices were good for all parties involved, including the customer, who would be paying 33% less; the author, who would be “getting a royalty cheque 16% larger and being read by an audience that’s 74% larger”; and for the publisher and retailer, because “the total pie is bigger and there is more to share amongst the parties”.

Authors trying to “get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower”, Amazon said.

Books need to be less expensive so they are competitive against other media types, such as mobile games and television, Amazon’s statement also said.

Last week, Amazon reportedly offered Authors United, a group of writers protesting against the online retailer because of its dispute with Hachette Book Group, a new deal which would include restocking all HBG titles and donating the proceeds from sales to a literacy charity.
Hachette US has been contacted to request comment.