Bloomberg News

Amazon Calls for E-Book Price Cuts Amid Hachette Dispute

July 30, 2014

Amazon Jeff Bezos

Jeff Bezos, CEO of Amazon.com Inc., during an event at Fremont Studios in Seattle on June 18, 2014. Photographer: Mike Kane/Bloomberg

Amazon.com Inc. (AMZN:US) said its dispute with Hachette Book Group is part of an initiative to lower digital-book prices and boost income for authors.

Sales of titles go up when prices are lower, according to data from its Web store, Amazon said in a statement yesterday. The Seattle-based company proposed that revenue from an e-book should be split 35 percent to the author, 35 percent to the publisher and 30 percent to Amazon.

The world’s largest online retailer blocked pre-orders for some of Hachette’s books earlier this year as the two companies sparred over e-book pricing. Amazon has also appealed directly to authors, offering them all of the proceeds from the sale of any digital book in a letter earlier this month.

“This post here is another step in terms of them trying to publicly negotiate and try and challenge Hachette’s position,” James Crompton, an analyst at IBISWorld, said. “It’s certainly posturing, essentially painting themselves in a positive way.”

Sophie Cottrell, a spokeswoman at New York-based Hachette, didn’t respond to requests for comment. Brittany Turner, a spokeswoman at Amazon, declined to comment.

Amazon shares rose less than 1 percent to $322.51 at the close in New York, leaving them down 19 percent this year.

Book Proceeds

“Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more,” Amazon said in the statement, which was posted on the forum for its Kindle e-book reader. “If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.”

Amazon made the case in yesterday’s post for most e-books to be sold for $9.99 instead of $14.99 or more. Measurements show that the number of digital books sold jumps 74 percent at the lower price, resulting in a 16 percent boost in total revenue, Amazon said.

“Even though the customer is paying less, the total pie is bigger,” Amazon wrote.

Amazon dominates digital book sales with 60 percent of the market, according to Forrester Research. The company also helped pioneer the e-book market with the introduction of the Kindle device in 2007.

Amazon’s proposed share of book proceeds is the same as what Hachette “forced” Amazon to take as part of an agreement in 2010, the Web retailer said yesterday. The publisher was seeking higher e-book prices, though, Amazon said.

“We had no problem with the 30 percent -- we did have a big problem with the price increases,” Amazon said. “We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call.”

Blocked Orders

Amazon blocked pre-orders for some of Hachette’s books earlier this year, including “The Silkworm,” a new novel by J.K. Rowling, writing under the pseudonym Robert Galbraith. While physical book sales in the U.S. are projected to decline to $19.5 billion this year from $26 billion in 2010, e-book revenue is anticipated to jump more than eightfold to $8.7 billion, according to Forrester.

Dana Weinberg, a sociology professor at Queens College, City University of New York, said that lower e-book prices don’t necessarily increase the number of consumers buying digital books. The reading rate for Americans has held relatively steady, according to Kathryn Zickuhr, a researcher at the Pew Research Center in Washington who conducted a study on reading that was published in January.

Because Amazon hasn’t released more details about how it came up with the numbers in the post, such as methodology and sample size, it’s impossible to know whether lower prices have an effect on total purchases, IBISWorld’s Crompton said.

“At the end of the day this is two large corporations trying to negotiate a contract together,” Crompton said. “It’ll be important to see Hachette’s rebuttal. I’m sure they’ve been working on one, probably saying: We need to see your numbers, where are you getting your numbers from?”

To contact the reporter on this story: Reed Stevenson in San Francisco at rstevenson15@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Reed Stevenson, Jillian Ward


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Companies Mentioned

  • AMZN
    (Amazon.com Inc)
    • $322.44 USD
    • 0.62
    • 0.19%
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