Hachette responds to Amazon advocates’ email on pricing its e-books

Digital Book World is carrying the response Hachette CEO Michael Pietsch is sending to those people who write him at Amazon’s behest. Since I posted the Amazon letter in full, it seems only fair to do the same for this.

Pietsch (or whoever wrote the response for him) maintains that “Hachette sets prices for our books entirely on our own, not in collusion with anyone” (technically true, I suppose, since he said books, not e-books). He also maintains that the vast majority of Hachette’s titles are priced at or below $9.99, that the ones that cost more are nonetheless less than half the price of the paper version, and that they too will cost less when they come out in paperback.

I think my favorite line from this letter is “We set our ebook prices far below corresponding print book prices, reflecting savings in manufacturing and shipping.” That’s pretty funny given that I remember publishers complaining vociferously that manufacturing and shipping costs are the lowest part of the cost of publishing a book, and their absence shouldn’t necessarily lead to a substantial price markdown in an e-book. Trying to co-opt the other side’s rhetoric now, are we?

I also remember reading that, in the price-fixing affair, the publishers wanted to price their e-books higher than Apple would allow, but Jobs didn’t want the prices so high that consumers found them altogether ridiculous. (And I remember how, even as late as just before the imposition of agency pricing, it was not uncommon to find e-books of hardcover books—or even paperbacks—retailing at more than $20.) The publishers gave in in the end and cut their suggested retail prices for hardcovers’ e-books down to $12 to $15, and now they get to reap the benefit as if it was somehow their own idea.

He also makes some dubious claims about the history of paperback books—in particular that they were intended not to replace hardcovers but to supplement them with subsequent cheap editions of books. As Dan Agin points out in Digital Reader comments, a number of direct-to-paperback publishers started right away, and in France (Hachette’s own native country!) cheap paperback editions of new books have appeared before the hardcovers for more than a century.

Anyway, here’s the letter in full.

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 a 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

About Chris Meadows (4149 Articles)
TeleRead Editor Chris Meadows has been writing for us--except for a brief interruption--since 2006. Son of two librarians, he has worked on a third-party help line for Best Buy and holds degrees in computer science and communications. He clearly personifies TeleRead's motto: "For geeks who love books--and book-lovers who love gadgets." Chris lives in Indianapolis and is active in the gamer community.

3 Comments on Hachette responds to Amazon advocates’ email on pricing its e-books

  1. Keep in mind a fundamental difference between Amazon and Hachette. As an aggressive retailer, Amazon’s only loyalty is to Amazon. As a well-established publisher, Hachette has loyalties to its entire retail chain. It not only needs them, it recognizes that it needs them and acts accordingly.

    One of those loyalties is to retail bookstores with higher-than-warehouse operating costs. Those stores already suffer because the public can visit their premise to find a book they like and then go home to order it from Amazon. The only advantage those stores can offer is convenience. Store visitors can buy that hardback on the spot from them for $25 rather than go home and get it in a few days later from Amazon for $20. That’s why Amazon is working to get next-day delivery in major cities.

    Ebooks make life even more difficult for those bookstores. Now, instead of going home and ordering a print copy for $5 less, those potential customers can literally stand in front of a store’s book display and have that ebook download from Amazon to their Kindle tablet before they leave the store.

    And in that context, the price of that ebook matters immensely. If it is $15, as Hachette might want, that store visitor may waver. He can’t loan an ebook to friends, but he can loan the store’s print version. Lower that ebook price to an Amazon-approved $10 though, and that store visitor is more inclined to walk out of that bookstore with an Amazon-supplied edition rather than the store’s.

    That’s one reason among several why the major retailers resist making ebooks cheaper. Even it could be demonstrated that Hatchette itself could make more money selling a particular ebook as cheaply as Amazon claims, Hachette is concerned that the end effect will not only be the demise of that bookstore, but less total sales and less profit for itself. After all, one of the major advantages of large publishers over small is their greater ability to push books into bookstores. Drive most print book sales online and much of that advantage disappears. That’s why Amazon’s attempts to lecture Hachette about book selling must sound incredibly stupid to Hachette’s executives.

    All this leaves me wondering. On somedays, Amazon’s management is just behaving like jerks. On other days I wonder is Amazon suffers from a corporate Asperger syndrome, and by that I don’t just mean an inability to understand the feeling of others. That is obvious. I mean an inability to understand the complex interactions of society in general and the marketplace in particular. Not understanding the loyalty that Hachette feels to bookstores illustrates that. For Amazon, everything comes down to cash flow in the present. No other reality exists.

    You can see that in the Wikipedia’s remark that Asperger is “characterized by significant difficulties in social interaction and nonverbal communication, alongside restricted and repetitive patterns of behavior and interests. It differs from other autism spectrum disorders by its relative preservation of linguistic and cognitive development.”

    Think of yanking those “Buy” buttons from books and then becoming confused when the authors of those books become upset. How did Amazon think they would react?

    Think of Amazon’s computer-data-is-the-only-reality lectures to publishers who’ve been around since long before Jeff Bezos was born. I’ve met people with Aspergers. That’s exactly how they view the world.

    Although Oscar Wilde was talking about cynics, the playwright could have meant Amazon when he referred to “a man who knows the price of everything and the value of nothing.” And in the end, if you listen closely, this Amazon/Hachette dispute comes down to a clash between price and value. For Amazon, price is everything. For Hachette, the value of the entire societal chain that writes, edits, publishes and distributes books matters more.

    And that’s why I cast my lot with Hachette.

  2. From:
    Date: Sat, Aug 9, 2014 at 12:11 PM
    Subject: Michael Pietsch: Is Hachette Heading For a Premature Extinction?

    Dear Mr. Pietsch

    As a result of your position on ebook pricing, more and more authors are, like me, being forced to publish their books directly – only to find that the editing, marketing, and other so-called services you frequently cite in defense of your high prices and miserly author royalties aren’t worth very much at all.

    I have self-edited and self-published my current work – a memoir – and am now in the process of self marketing it. It’s all been a lot of fun and I won’t be at all surprised when I end up counting a whole lot more royalty dollars than I’d have ever earned going through the tired old-boy system you so epitomize.

    I’d encourage you to come to your senses on the issue of ebook pricing but I understand that one of the defining characteristics of a dinosaur is its pea-sized brain.

    Yours sincerely,
    Tom Benghauser

    Although I’m confident you won’t be amused, here’s how The Thinking Man’s Animal House (Part 1.26 of III) opens:

    “Try as I might, I can’t seem to recall my mother breast feeding me.

    “It’s pretty obvious she didn’t, though, since what other explanation could there possibly be for why I’m a 69 year old Princeton and Penn Law grad with a body mass index of 45.2, not a single friend within 900 miles, $28.72 until my next social security check arrives, and penile attention deficit disorder?”

  3. William Ockham // August 14, 2014 at 1:55 pm //

    Michael W. Perry makes Amazon’s case better than Amazon does. Strip out his insulting rhetoric and what you have is a cogent explanation of why Amazon will win this confrontation. Perry’s scenario sounds better for everyone except the person paying the bills, the reader. He starts with a reader going in a bookstore while tacitly admitting that there is no good reason to ever do that.

    Instead of driving 30 miles to the nearest bookstore with a decent selection and hoping they will have something I like, I can hop online and choose from the largest array of books ever offered for sale. I can even buy lots of other stuff there too. Spoiler alert, I showroom at Amazon too. They even encourage it. They want their customers to be happy.

    Perry’s vision seems to be one where people are tricked into overpaying for the privilege of shopping from a selection of books that are controlled by a bunch of people who have no clue what readers want.

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