Hachette CEO: “More than 80% of the ebooks we publish are priced at $9.99 or lower”

13 Comments

Credit: Biz Carson/Gigaom

It’s been a weekend of manifestoes as Amazon (s AMZN), book publisher Hachette and authors try to draw others onto their respective sides — and encourage readers to email Amazon CEO Jeff Bezos and Hachette Book Group CEO Michael Pietsch. Now Pietsch is responding to those writing to him, and Hachette made that response public on Sunday night.

letter in support of Hachette ran as a two-full-page advertisement in the Sunday edition of the New York Times, signed by more than 900 authors. Amazon, meanwhile, sent a letter of its own to KDP authors and posted it online in the wee hours of Saturday morning.

In his letter (posted in full below), Pietsch writes that “we don’t usually comment publicly while negotiating, but I’ve received a lot of requests for Hachette’s response to the issues raised by Amazon, and wanted to reply with a few facts.” He goes on to say that Hachette sets its own ebook prices “far below corresponding print books,” that “more than 80% of the ebooks we publish are priced at $9.99 or lower” and that “those few priced higher” will decrease in price once the paperback edition of a book is published.

“This dispute started because Amazon is seeking a lot more profit and even more market share, at the expense of authors, bricks and mortar bookstores, and ourselves,” Pietsch argues.

A Hachette spokeswoman said Sunday that everyone who writes to Pietsch will receive a copy of this email “over the next couple days.” I’ve asked the company how many emails it’s received so far, and will update this post if I hear back.

All of the statements that Amazon has released thus far have been unattributed, so it’ll be interesting to see if we get a statement from Jeff Bezos himself any time soon.

Pietsch’s full letter:

Thank you for writing to me in response to Amazon’s email. I appreciate that you care enough about books to take the time to write. We usually don’t comment publicly while negotiating,but I’ve received a lot of requests for Hachette’s response to the issues raised by Amazon, and want to reply with a few facts.

  • Hachette sets prices for our books entirely on our own, not in collusion with anyone.
  • We set our ebook prices far below corresponding print book prices, reflecting savings in manufacturing and shipping.
  • More than 80% of the ebooks we publish are priced at $9.99 or lower.
  • Those few priced higher—most at $11.99 and $12.99—are less than half the price of their print versions.
  • Those higher priced ebooks will have lower prices soon, when the paperback version is published.
  • The invention of mass-market paperbacks was great for all because it was not intended to replace hardbacks but to create a new format available later, at a lower price.

As a publisher, we work to bring a variety of great books to readers, in a variety of formats and prices. We know by experience that there is not one appropriate price for all ebooks, and that all ebooks do not belong in the same $9.99 box. Unlike retailers, publishers invest heavily in individual books, often for years, before we see any revenue. We invest in advances against royalties, editing, design, production, marketing, warehousing, shipping, piracy protection, and more. We recoup these costs from sales of all the versions of the book that we publish — hardcover, paperback, large print, audio, and ebook. While ebooks do not have the $2-$3 costs of manufacturing, warehousing, and shipping that print books have, their selling price carries share of all our investments in the book.

This dispute started because Amazon is seeking a lot more profit and even more market share, at the expense of authors, bricks and mortar bookstores, and ourselves. Both Hachette and Amazon are big businesses and neither should claim a monopoly on enlightenment, but we do believe in a book industry where talent is respected and choice continues to be offered to the reading public.

Once again, we call on Amazon to withdraw the sanctions against Hachette’s authors that they have unilaterally imposed, and restore their books to normal levels of availability. We are negotiating in good faith. These punitive actions are not necessary, nor what we would expect from a trusted business partner.

Thank you again and best wishes,

Michael Pietsch

 

13 Comments

Watchman

I received an email from Amazon suggesting that I email the chairman of Hachette to get him to change his policies. As an author I have no intention of doing any such thing. Maybe some of you should be asking exactly what it is that Amazon does for its share of the pie? They host the file…that’s it. But you attack the people who actually do the work. You know? The people who actually write, edit, proof read, fact check, layout, translate, market, research, sell, account, and design the books you read. Meanwhile you are defending a company that does absolutely ZERO work. You do realise that the publishers/authors even program the ebooks you read? They also do the code checking and the uploading to Amazon’s servers. Then an ALGORITHM inside a computer downloads it to you, takes your money and carves off a fraction for the author while keeping the rest. As an author you can’t even talk to Amazon on the phone when they screw things up (which despite it being automated they manage to do regularly.) What is the matter with you people? Do you really think it is OK to regularly benefit from other people’s work while complaining about how much you are paying for it, while simultaneously congratulating the parasites in the middle and advocating that they should get MORE of the money? Sheesh.

John Walker Harmon

“They host the file… that’s it.” Such a statement indicates that you have little to no understanding of what Amazon actually does. Yes, Amazon has a system in place that automates as much as possible but it took time, money, and resources to set up that system and it takes time, money, and resources to maintain that system, a system that is arguably the sole reason the eBook market is thriving and profitable. Calling Amazon a parasite “that does absolutely ZERO work” is disingenuous. It is a symbiotic relationship – both Amazon and the publisher/author are dependent upon each other.

Nirmala

This is a bit deceptive on Pietsch’s part: what matters is the list price of actual units sold. It is possible that only 20% of the ebooks they have published have a list price above $9.99, but that nonetheless some other percentage (maybe even a large percentage like 80%) of their ebooks actually sell for over $9.99. This could easily be so if their bestselling ebooks are all listing for over $9.99.

Nirmala

To exaggerate a bit to make the point clearer: if Hachette only published 100 ebooks and had 99 ebooks priced $9.99 or less and 1 ebook priced at $14.99, then Mr Pietsch could accurately claim that 99% of the ebooks Hachette publishes are available for $9.99 or less. But let’s say that all of those lower priced ebooks sell on average a total of 1 book a day for a total of 99 books a day, and that the one book at $14.99 sells 10000 copies a day. Well guess what, in that scenario over 99% of the ebooks that Hachette sells are priced $14.99 (even though it is still true to say that 99% of the books they publish are priced at 9.99 or less)

The difference is probably not even close to being that extreme, but since Hachette did not tell us, we have no idea what percentage of actual sales (not the percentage of books published) are at a price of $9.99 or less. It is reasonable to assume that they price their best selling ebooks higher, so it is reasonable to assume that a much higher percentage than just 20% of sales are at a price point above $9.99. As always, there are lies, damn lies and then there are statistics.

Jack Decker

All this is the rearranging of deck chairs on the Titanic. Publishers are not needed in the world of ebooks. They are nothing more than unneeded middlemen. The future of ebooks is the them being free and supported by advertising. A single full-page ad between chapters. This business model would be no different than ads in magazines, except the magazines would be free as well. Being computer files, the ads can be added as the person is requesting the ebook and thus customized to their demographics, psychographics, and buying habits. Authors paid per download.

Ty Holland

Actually, this highlights the ONE area where publishers can be useful to authors. They have more clout to fight and maintain the ability to set their own prices. It’s a lot harder for individual authors to do that unless they are some sort of superstar.

I think a smarter fight for amazon would simply be to fight to keep ebooks available at the same time as hard cover book launches. If the publishers/authors want to charge more for ebooks during the launch window, so be it. I have no problem with that, they do that in the pc games industry all the time. Get the game at launch, pay full price, get it several months down the line, you often get deep discounts.

One thing that should be maintained though is the ability for the actual creators and publishers to set their own prices.

JamieT

Typically, wholesalers set the wholesale price to retailers and retailers set the retail price to consumers. It was the price-fix six that colluded with Apple to up-end this type of relationship, force agency pricing into place and artificially raising e-book prices while taking away the ability of the e-book retailer to set prices. It would appear Hachette is pushing for agency pricing once again which would allow them, not the retailer, to set retail prices. That’s clearly not ideal from a consumer’s perspective as it results in a less competitive market place and higher prices.

As for the comment regarding publishers “letting” Amazon sell e-books…Amazon has invested billions of dollars to develop the most consumer friendly e-commerce platform on the web. Their e-book platform has allowed publishers to make much higher margins on e-books than on print books – this was detailed and blogged about repeatedly last year – thanks to a Harper Collins investor presentation being leaked. It should be no surprise that Amazon wishes to partake in a bit more of the profit created by their own investment.

Watchman

THEIR INVESTMENT? Are you kidding me? “The Amazon shareholders aren’t getting paid enough return on their code.” Don’t you see the hypocrisy of that attitude? What about the poor schmuck who wrote the book? Doesn’t he get a return on his investment?

Now Amazon is moving into groceries I’d like to see how many people will defend them if they tell the farmers “We don’t care that it cost you $1 to make a potato, we’re going to give you 40 cents for it because we think a potato is only worth 50 cents and if you complain we’re going to stop selling your potatoes. Oh yeah and BTW we’ve managed to drive all the other big potato stores out of business because we managed to persuade some idiot in Washington that charging $1 is illegal.” Sooner or later you’ll get hungry enough to go to the farm; either that or go on a diet.

Will White

Amazon, while within their rights, are being a holes on this one. JamieT is right, that typically, the wholesaler set the price to the retailer, and the retailer then sets the price to the consumer. It is not clear to me who Hachette is hurting the consumer here. If the consumer doesn’t want to pay 12.99 for the book, then they won’t buy it. This is how the market works. By forcing the wholesaler into a lower and lower margin, they will turn books into more of a commodity which will make publishers less willing to take risks on cutting edge books that will likely fail and instead publishing more mindless drivel … but whatever. Amazon is acting as a bully much like Walmart does because they control that much of the market … doesn’t make them morally right though, and it makes me like amazon less and less.

While it can be said that Apple was colluding with publishers to keep prices high which might not be in a consumers interest, it could also be argued that Apple was working with publishers to protect their business by allowing agency pricing and that allowing this was in fact better for consumers since it protects the quality of the product from the effects of commoditization …

I don’t like Amazon in this fight …

Samir Shah

80% is a misleading number. Tell us how many books in units were sold at above $9.99 levels as compared to the ones at $9.99. Every publisher gouges customers when the customer wants to buy a bestseller. And about the authors, how many new authors did you bring in last year? When you are blaming Amazon, what did publishers do when there were no eBooks? Do not throw stones at others when you live in glass houses..

Just limiting the books to hardcovers when you are talking about the paperback analogy is also misleading. If you are an international customer, you end up paying huge shipping charges sometimes costing more than the hardcover books. So waiting for eBooks till paperbacks come is also punishing for international customers, I remember pining for books and waiting for month or even months before I got the bestseller I wanted.

I think this is the publishers’ last stand before the cookie crumbles. Publishing is not going to be the ‘old boys club’. I also feel for authors who are betting on the wrong horse. In the new age of internet, publishers and favored authors will long be gone.

tkreagan

You’re crazy. It’s not gouging. As the CEO noted, only a small fraction of publishing costs are reduced by ebooks. Editing and promotion costs are unchanged.

Note that the publishers are publicly traded. You can see how much money they (aren’t) making. I’d be curious to see Amazon’s margins on ebooks. It might open your eyes about who is gouging whom.

In a hits-based business, markups on the blockbusters fund hundreds of duds. The profit on the blockbuster is split between the author and the publisher to recoup other losses.

Unlike music, artists continue to choose publishers due to the value they get from editing and distribution. It’s even easier to go direct with books than music and yet most people stick with a publisher. That’s kind of de facto evidence that the publishers aren’t greedy.

Sam

How is it gouging customers if those customers are willing to pay more than $9.99? If many customers are willing to buy a book for $12.99, where is the price gouging?

I thought that this is how free market capitalism works, sellers are allowed to dictate their prices.

The $9.99 eBook pricing is Amazon’s creation, to balance their profitable sales with their loss leaders ie selling $11.99 and $12.99 eBooks for $9.99, while making profits on $6.99 and $7.99 eBooks.

“…what did publishers do when there were no eBooks?” I’d guess they were much happier back then.

You know, eBooks only exist because the publishers decided to allow them, and let Amazon, B&N, etc to sell digital files of the publishers’ copyrighted works.

You seem to be cheering the demise of the publishers, based on pricing and availability.

I fear the demise of publishers, based on quality of literature.

I have no connection to books or publishing, I just know that first year Econ students can demolish Amazon’s arguments.

Will Buckley

Astounding that thousands of authors would sign a petition that fights for lower compensation. These authors really need to.study the demise of the record business, so they get a cleare understanding of the pitfalls ahead. E-books are a slippery slope, especially for mid-level authors who can’t afford to take less and make a living.

This entire fiasco reminds me of the musicians who derided others who wanted to get paid. Their attacks were merciless and silenced many professional musicians and songwriters for years. In the book business best selling authors sold their books at a premium, while others ended up in the discount bin. All artists are not equal and it has been that way forever.

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