This was going to be a comment on Damien Walter’s blog post about Amazon’s recent statement on their row with Hachette, but it seems to have metastasised so now it’s a blog post. It’s a bit rough and ready because I am so behind on other work that I can’t devote as much time as I’d like, but here we go:
It’s worth noting here that ebook prices now behave much more like the dynamics of crowd-funding than traditional book pricing. Your product is essentially unlimited so you price at the point that produces the highest volume.
No supplier should price anything in order to get highest volume, they should price to get the highest revenue. If you price at 99p and sell 10,000 that’s a revenue of £9,900. But if you price at 2.99 and sell 5,000, that’s £14,950. Books aren’t entirely fungible – whilst there’s superficial interchangeability between books, mostly people want a particular book either from a particular author or because they particularly like the look of it.
Amazon want to control prices, and they say of this dispute with Hachette:
A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. 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. E-books can be and should be less expensive.
But because books aren’t fungible, pricing shouldn’t be capped, even for ebooks (because the price of ebooks is only nil if you wilfully ignore all the production costs associated with producing the content in the first place, and if you don’t pay anyone to create the file that is the ebook, and we all know how crap ebooks get when they are simply converted without human oversight). If there’s a keen but limited market of 1,000 that is willing to buy at £14.99 then the revenue of that price point is more than at £2.99 or 99p – it’s £14,990.
Amazon is being very disingenuous when it says:
It’s also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. 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 may well be true in general, but it will not be true in all cases because demand for all books is not equal. It may be that some books have a market that is small, but willing and able to pay more. Forcing a pay cap on publishers means that they are no longer going to be able to service a small but affluent markets. This is going to be especially true for the sorts of books that get bought for business or development reasons, where the customer is much less price sensitive because either the money isn’t coming out of their own pocket and/or they are looking to make a return on their investment in some way, as opposed to books bought only for the pleasure they bring.
You simply cannot take statistics that apply to a population, in this case the population is all the books that Amazon sells, and then apply it to a specific book, because there will always be outliers, there will always be exceptions, and there has to be enough flexibility in any system to accommodate those exceptions. Capping the price of books artificially reduces publisher’s options and makes it less likely that they will consider serving niche markets where the audience is small.
Amazon do say that they believe that there “will be legitimate reasons for a small number of specialized titles to be above $9.99”, but who will get to decide which books are to be deemed specialised? Amazon doesn’t say, but the implications are that it will be Amazon’s call, as it is Amazon who are trying to dictate prices. That would be unacceptible.
Furthermore, even if publishers are overpricing ebooks, that is their right in a free market. We may disagree with how ebooks of novels are priced, we may think that they are often too expensive, that’s our prerogative. But it is the publisher’s prerogative to price high if they want, even if it’s a mistake. They have the right to fuck it up if they want to, and it is not Amazon’s place to stop them; it is our place to stop them by refusing to buy books that are too expensive.
It is a shame that publishers don’t seem to yet understand how to operate in a world of abundant content but scarce attention, but it is their choice. We can only try to help them understand, we cannot force or coerce them to behave in a way that we want.
And neither can or should Amazon.
Amazon goes on to describe how it thinks the revenue from any given book should be split up:
So, at $9.99, the total pie is bigger – how does Amazon propose to share that revenue pie? We believe 35% should go to the author, 35% to the publisher and 30% to Amazon. 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.
It is no business of Amazon’s how publishers split their revenue with authors. There’s certainly a case for giving authors a bigger slice of the pie, of course, and I suspect there are a lot of authors out there who would agree with this. But it’s not Amazon’s argument to have. It’s not Amazon’s place to define the terms of the agreement between an author and their publisher. All Amazon is doing here is trying to appeal to authors, trying to turn them against publishers, which is also why it uses language such as “forced” and “illegally colluded” – it’s a way of framing the debate so that publishers look like evil overlords and Amazon look like knights on white chargers. It’s playing on author’s emotions as a way to distract from the inappropriate nature of its comments on author royalties.
Let me just say it again, though, to be absolutely clear: It is not for Amazon to dictate the terms of the contract between author and publisher.
Damien, perhaps spurred on by the above paragraph from Amazon, says:
This begs the question, if Amazon are fighting for higher author royalties and more profits overall, what are Hachette fighting for and why does anyone support them? It’s clear, Hachette are fighting for their existing and increasingly outmoded business model. They’re fighting for stasis in the face of inevitable change. Worst of all, they are fighting against changes that are vastly to the benefit of writers. I still say this is a fight authors do best not to take sides in. But if you are going to join the battle, you’re a fool not to see Amazon as your ally.
Amazon are not fighting for higher author royalties for any reason other than to turn authors against publishers. There is no altruism at work here, Amazon doesn’t give a flying fuck about authors, as born out by their unwillingness to deal with fake reviews on their site and bullying on Goodreads. They don’t ever care about self-published authors, as shown by their shitty tools, lack of customer service, and frankly sometimes bizarre behaviour that goes unexplained and without apology.
Amazon care about Amazon. That’s fine, but don’t believe that Amazon are anyone’s ally. Amazon will shoot authors in the back if it ever becomes profitable to do so.
Hachette are fighting for survival, but also for their own authors. If they get a smaller chunk of the pie from Amazon, then their income is squeezed and they’re going to have less money to spend on things like marketing, editing, advances, etc. for the authors that they already have on their books. Those authors will be in a worse position, as will any authors that Hachette might take on in future.
Whilst it is true that publishers are not perfect, and sometimes they act like total cockwombles, there are plenty of people who work for publishers who genuinely care about their authors, who genuinely want to put out great books that readers love, who want happy, well paid authors. It is a fallacy to believe that all publishers are evil, or that they are all corrupt, or all stupid, or working against their authors. As William Gibson so famously said, the future is already here, it’s just not evenly distributed yet, and that’s as true of publishing as anything else.
I do not believe that the changes Amazon wants are to the benefit of writers. I do not see Amazon as my ally. I see them for what they are: A self-interested corporation that wants to exert as much control over their suppliers as possible. That’s it. They aren’t saviours, they aren’t allies, they aren’t white knights. They want to control as much as possible in order to make as much money as possible, whilst not paying taxes and treating their workers like shit.
If I were Hachette, I’d be thinking about moving away from any sort of percentage-based deal with Amazon and towards a more sensible retail-wholesale agreement. “We sell you these many books at £x, and you can sell them at whatever price point you want.” Hachette would have income predictability, authors would know how much they’re getting, and Amazon could still discount as much as they like. It’d be no skin off Hachette’s nose if Amazon decided to take a bath on a popular title.
Whatever Hachette is thinking, one thing is very, very clear: Amazon are fighting a propaganda battle, working hard to alienate authors and demonise publishers. Taken with their other practices, this shows just how untrustworthy they are. So this is one occasion where I would strongly counsel those who loathe publishers that the enemy of your enemy is not your friend.
UPDATE 31 July: Interesting post from Mike Shatzkin on this.
UPDATE 2 & 3, 31 July: Steve Mosby examines the implications of Amazon’s claim that “For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99.” Well worth a read, as is John Scalzi’s post covering similar ground.