Hachette CEO’s Response to Amazon Advocate Emails: Why We Price Books the Way We Do

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According to a company spokesperson, Hachette CEO Michael Pietsch has received “a few emails” in response to a call earlier this weekend by Amazon to contact the executive, demanding he and his company give in to the retailer’s demands for lower ebook prices.

In response to those emails, Pietsch is sending the below note. In it, he responds to questions about ebook pricing and about how his company makes money in general. At the end, he says that Hachette is “negotiating in good faith,” something Amazon accused Hachette of not doing, and calls for Amazon to “withdraw the sanctions against Hachette authors,” which include fewer discounts, longer shipping times for titles, and no pre-orders for upcoming books.

While the Hachette spokesperson was unable to provide an exact number of emails Pietsch received, she told Digital Book World, “he heard from a lot of people.”

Related: Amazon’s Latest Note on Hachette: “We Will Never Give up”

Here is Pietsch’s entire email response below, provided to Digital Book World by a Hachette spokesperson:

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

 

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45 thoughts on “Hachette CEO’s Response to Amazon Advocate Emails: Why We Price Books the Way We Do

  1. To Hachette: As a writer who has been working on a novel and has only been published as a poet, I wholeheartedly support your side of this dispute with Amazon; moreover, as a reader, I support your attempts to get Amazon to see reason, regardless of my writing efforts. I wish you all the best with this and have refused to make any purchases from Amazon until it has been resolved. All book purchases I will make until then will be made from brick and mortar establishments.

  2. From the Amazon letter: Hachette has already been caught illegally colluding with its competitors to raise e-book prices. So far those parties have paid $166 million in penalties and restitution. – My comment: Is this true? Are you paying penalties because you’ve been found guilty of this? I was wholly on your side, but I am yet another consumer tired of being screwed over by big companies. I know Amazon would do the same in an instant, and probably already has, because in this society, nothing is as important as the almighty dollar – but… Why did you not address this in your email? Are you guilty?

    • Are you guilty? The Department of Justice and a federal judge certainly think so.

      Hachette sets prices for our books entirely on our own, not in collusion with anyone. Now. (There, I fixed that for him)

    • While true that Hachette and a handful of others were found guilty of collusion, there are very mixed opinions about wisdom of this conclusion. The effect has been to give Amazon an even more dominant position in books sales. That market dominance, where a retailer can dictate prices to the producer as we see in Amazon’s strong-arming of Hachette, is exactly what the publishers involved were trying to avoid. Amazon keeps throwing this “collusion” in their faces, but knows full well that it was the primary beneficiary.

      • No one made them collude. That was their business decision (regardless of Amazon’s actions) so they can deal with their business consequences.

      • A lot of misinformation out there, Amazon wants the ability to price ebooks the way it sees fit, they are not trying to squeeze the publishers, they pay a set price to the publisher no matter what they sell it for. The publishers are trying to force THEIR pricing on Amazon.

        • Your notion that the publishers are price-fixing ignores one fact: in a typical distribution model, the manufacturer determines the price it will charge the channel, and the channel is free under law to charge whatever it wants (though the manufacturer can restrict its ability to advertise prices below a certain point). Amazon will not allow the manufacturers to set the prices they charge Amazon — they price-fix by setting the margins they will accept, which, in turn, forces the retail price. It is Amazon that is price-fixing.

          • This is inaccurate. Publishers were receiving the full wholesale price of any books sold to Amazon. The dispute is that they wanted to control the price that Amazon was reselling — this is exactly what the agency model was all about. Under the agency model, the reseller wasn’t treated as an independent retailer who owned the good after purchasing it from the publisher and could sell it or keep it or do whatever they pleased with it, but as a selling agent of the publisher.

            The best recap I’ve seen of that case is here:

            http://arstechnica.com/tech-policy/2013/07/how-apple-led-an-e-book-price-conspiracy-in-the-judges-words/

            “Publishers told Apple they were unhappy with Amazon’s standard price of $9.99. Although they received the full wholesale value of each book sold by Amazon, publishers didn’t want $9.99 to catch on as the new default price for e-books, especially since this was so much lower than hardcovers.”

          • I’m sorry, I have been following this dispute since the beginning of the year. The wholesale price is indeed set by the publisher. The publishers do not want to allow Amazon to set the retail price as it sees fit, so yes indeed they are trying to restrict Amazon from doing what it does – namely provide the best price to the consumer. Publishers do not sell to the public, their business is selling to distributers. The wholesale price structure is not in question here.

            • You’re right about some things, but you don’t have the whole picture. Publishers do set the wholesale price, but they set it based on the costs associated with making a book. There are editors, designers, agents, people who work in marketing, sales, finance, and other departments within a publishing house. When you buy a cup of coffee from Starbucks, you’re paying for the coffee that was prepared by a barista, roasted by a roaster, in a cup made by a manufacturer, both items shipped in from somewhere. You pay for a lot of invisible costs. Publishers are in it to make money, yes, because they have people to pay for working for them.

            • “Publishers do set the wholesale price, but they set it based on the costs associated with making a book.”

              Agree 100%. Why are they trying to dictate to the retailer how much they can charge? If that retailer decides to run with a loss leader, why should they not be allowed to do it? It happens all the time in retail.

            • “[...]editors, designers, agents, people who work in marketing, sales, finance, and other departments within a publishing house”

              DM, your post included nothing about the most critical point in the process–the authors themselves, and quite frankly, they are the ones getting screwed no matter who decides to set the ebook price (authors are paid royalties of a percentage of net, in the vast majority of cases). Hachette and its colluders would like to keep ebook prices higher because they were…some would say, “shamed” into paying authors 25% net royalties on ebooks, as opposed to between 4% and 8% for print copies. Publishers keep a much larger chunk of print books than they do ebooks–it’s in their best interest to keep ebooks prohibitively expensive. Amazon may be no prize, but Hachette loves its authors the way Nike loves its sweatshop workers.

      • ” . . . there are very mixed opinions about wisdom of this conclusion.”

        Only among the guilty, their employees and the vendors they use.

  3. I don’t know the details of the differences between Amazon and Hachette. But I have been frustrated at times how a book is in hardcover before other formats. I don’t think this type of self imposed scarcity reflects the changing habits of the consumer. I consume a lot of media and on occasion it is with a good ol’ book. But more times than not, this is not my preferred choice of consumption.
    I would also call into to question their investment statement. Times are changing, I would look at your current investments and verify they are wise in the current environment or just something done just because of the way it has always been done.

    • Then don’t buy the hardcover. Problem solved.

      I am bemused by people who seem to think that publishers don’t have access to their own price point, format consumption, and market research data, so therefore publishers must make their business decisions sitting in a completely black room with zero input. It demonstrates an utter lack of comprehension of how businesses are run.

      And unlike films – where if one eschews the theatrical release, one must then wait for the DVD release, then the Netflix/Hulu/Redbox release, then the pay television release, and finally the broadcast/basic television release – for books there is a lovely tax payer provided service called “a library.” And many books can be read for FREE thanks to this service. Including books currently in their hardback release. Imagine that!

      Just because one believes one is entitled to a pony, it doesn’t mean pony breeders must back the horse trailer up to one’s house.

      • Guess that depends on why pony breeders are breeding them ponies, huh? I mean, if they want to sell them, they might be wise to see how I want to buy them.

        ‘Course, so long as you’re the only pony breeder, you can play “take it or leave it” games. But this guy down the road — he’s got some friendly, pretty ponies! And he ships to my door. :| So I guess the rest of you pony brokers can take your leave it and shove it sideways with a spin.

        Customers drive business, folks.

    • If you want a book to be simultaneously available in hardcover and ebook format, you want the publishers to win. If Hatchette can set its own price through the agency model, it can release a higher priced ebook along with the hardcover without undercutting its hardcover sales. Then it can respond to the market, and offer a lower priced book after the people who want the book right away have paid the premium for that privilege. This kind of dynamic pricing is very common, and very valuable to producers. You see it across the board, on iPhones and plane tickets. You want it first and/or you want it on your terms, you pay a little extra.

  4. So the ebook gets cheaper when the paperback is published? How does that make any sense? The ebook is it’s own product with pros and cons separate from paperbacks or hardcovers. It’s clear Hachette is trying to make the old rules last as long as possible.

    Amazon is also stupid for penalizing any books that are within their desired price range – ie $12 or less. If they were just refusing to stock the more expensive ones that would be sensible.

    Involving me in this mess does not help at all. Now they have you reading my uninformed opinion as if that would make some kind of difference. But it won’t. Nothing I write here or you read here is going to matter. We are both just procrastinating and might as well admit it.

  5. It may or may not be true that the big publishers conspired *with each other* on pricing. What this refers to is their agreement with Apple to price their products themselves (Apple agreed to take a straight commission) instead of having Amazon price everything the same. As the letter says, some books are worth more, some less. It’s also true that the publishers have an interest in keeping some price separation between their products. If e-books get \too cheap\, far fewer people will ever buy a hardback, where much of the recoup of initial costs (advances, marketing, design, editing, etc.) is done.
    Amazon doesn’t care about that, but publishers do. Imagine if some Mercedes dealer somewhere said \We’re going to sell these just like Toyotas!\ Good for customers (lower prices), good for that dealer as long as he can afford it, not so great for Mercedes brand, long term.
    Since Apple has refused to settle (as the publishers largely have) we may yet see the details of how this \conspiracy\ came about.

    • In your example, Mercedes would stop sending cars to that Dealership, and demand they stop using the Mercedes Brand. The Dealership is free to do pretty much what it wants to, But Mercedes does not have to provide their cars to that Dealership. If the publishers do not like the way Amazon is doing business, they have the right to pull all their titles from Amazon. Oh, right, they can’t, because they make more money off ebooks than print, and they were not forward thinking enough to change their business model to accomodate technology. Does noone remember that is exactly what the record companies tried to do? As technology evolves, you have to adapt or die. Kodak perhaps?

      • ” Oh, right, they can’t, because they make more money off ebooks than print, and they were not forward thinking enough to change their business model to accomodate technology.”

        If they are making more money off ebooks than print, then logic dictates they DID change their business model to accommodate technology.

        Also, print is still 70% of the market for the Big 5. In addition, their contribution profit is greater for ebooks, but contribution margin takes into consideration only variable costs and not fixed, so contribution profit is not the same as corporate profit. Look it up on Wikipedia.

        Last, the dealer doesn’t have to sell the cars, either. Hachette has been urging customers who can’t find their books to go elsewhere. Amazon said to go elsewhere, too. But deep down, Amazon doesn’t want customers to get accustomed to going to BN.com, iBooks, Powell’s, GooglePlay, etc. (If I were GooglePlay, I’d be ALL OVER this situation, advertising Hachette books at a special discount).

        At the end of day, people come to Amazon for ease of shopping convenience. Once they discover Amazon doesn’t everything they want, they’ll go elsewhere. Don’t forget, Hachette has the newest J.K. Rowling book as well as the recent Pulitzer Prize winner. People are looking for those titles. And few, if any, pay attention to the publisher name on the spine. All they know is that they want to buy “The Goldfinch” and they want to buy it now.

        Amazon needs the publishers just as much, or give up being “The Everything Store.”

      • They DID change their business model. From the “wholesale model” (which is identical to physical book sales) to the “agency model” (a pricing scheme that really only works for e-books.) Amazon is fighting to change it back to the wholesale model.

        • I am a Kobo user. I take for Amazon on this although I do not often buy them stuff. The problem with the DRMed eBook business is that the book does not belong to you as a paperback or hard cover copy does. You have just the right to read it on one or several computing machines that belong to you or at least where you set up your software account.

          Therefore you cannot pass an ebook to your loved ones for a couple of week or get it back. If your children want to read it you must give them your ereader for a while or accept that thay may fuck up your DRM account if you install it or their tablet, phone or computer. Furthermore, there is no second-hand market. It is impossible to resell the book you’ve read. So your freedom as a consumer is much more restricted than it is with the analog market, and the objective worth of the ebook object is much lower.

          This is why, IMHO, Amazon is right to call for lower prices on this market and I do support them.

  6. The best thing for readers would be if these are made available for Free through ad-support or on pay per page read the way we do our platform Qpeka. This can help works go Viral. As it is we have discovered that ads can earn revenue equal to the sales proceeds and remove the efforts required to sell, which can instead be used to produce more quality content for readers.

  7. 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.

  8. This is misleading on Pietsch’s part: what matters is the list price of actual ebooks 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 or 90%) of their ebooks that actually sell each day are listed for over $9.99. This could easily be so if their bestselling ebooks, which undoubtedly make up most of their sales, are all listed for over $9.99.

  9. Letter sent to CEO of Hachette

    I would in no way wish to denounce the printed book! There is nothing nicer than handling the tactile, that is the book. I am of a generation that has grown with printed books from school to college to Uni, to work & leisure but I am a realist that, like all of us, we are witnesses a new era where technology, like of loath), is introducing a new format that is the eBook.

    In a number of ways I find this exciting in that it has opened up a new world to people who would not otherwise read books, neigh even access books in third worlds and where literacy is an important part of reading to learn, and by this learning to write!

    It should not pose a threat. We have witnessed where huge companies such a HMV who maintain a stance of tradition in records and CD’s and initially would not embrace the technology that was mp3’s and when for bust because of it or of structuring the pricing right. The publishing industry should have already learnt its lesson when it maintained a stance of hard production print when the embryo of technology broad in Desk Top Publishing and because of that we sadly saw the major part of the print industry diminished.

    ePub, ida, or whatever the format will eventually be, (again almost like the ‘70s argument of Betamax verses VHS), this increases the range and depth of books being published and opens up the exciting prospects of so much for future generations.

    Both formats are here to stay but I can envisage a 22nd Century where print books in the home will became less, mostly as an aesthetic piece of décor to create a conversational piece at diner parties, (reduce space and dust cleaning), and confined to the tablet. Libraries will follow to reduce costs and able to offer a great range via a major database.

    It is not what I am advocating, nor necessarily what I want – but it is the future and if both formats are to continue, they need to embrace each other and co-exist. The alternative is neither good for the publishing industry and certainly not for the ardent readers!

    Bookstores generally need to co-exist with changing markets and the embryo of eBooks, which is exponentially increasing in sales since 2009-10. The traditional way of customers having to enter a bookstore to find what they want and have to stand there to peruse potential selection does not make for a relaxing environment.

    Combining a bookstores’ with a warm welcoming and relaxing environment where readers can feel comfortable looking at books where seating is available to go through a series of books and then perhaps stay for a while to contemplate which book(s) they will chose to buy makes the whole customer experience more conducive to encouraging increased sales.

    Comments on social media alone reinforces the latter with comments around eBooks and how readers feel more relaxed and comfortable whilst browsing eBooks selection which is a small but important part of a customers journey in buying the eBooks and likely means that over a time they will buy more. This principal needs to be better understood and applied in bookstores to balance sales of handbook printed editions along side eBook formats.

    Books are no more threatened by eBooks then stairs by elevators!
    : https://www.facebook.com/photo.php?fbid=481200521998428&set=pb.372393752879106.-2207520000.1392226500.&type=3&theater

    Time has come to put this subject to bed and get on with cohesively working together for the good of readers and publishing and get the pricing balance right – An investment rather than a loss in reduction of disproportionate profits!!!! Lose on the swings and gain in author and readers loyalty that will generate longer term income!

    You may think you have heard all before and this is yet another e-mail from another disgruntled author but I am onside and simply ask that you take a step back, reflect; the only winners are the lawyers and the losers are those we exist to serve without whom we would have to back up our bags and go home – no business!

    Apologies for the length but so much is at stake – let us get a balance of pricing.

    A positive response would truly be valued.

    Good wishes.

  10. \ . . . there are very mixed opinions about wisdom of this conclusion.\

    Only among the guilty, their employees, the vendors they use and the authors who are bound to them by contracts.

    • Just as with the Hachette/Amazon dispute, I think it’s overly simplistic to paint the Amazon/Apple dispute as “one side pure evil, other side pure good.”

      Yes, this is certainly a dispute over who gets to set the retail price, and yes, traditionally brick-and-mortar stores have worked on a wholesale model rather than the “agency” model that Apple (and many publishers) prefer — essentially commission-based. But there’s just not much evidence to support the notion that the agency model makes all ebook prices higher, harms consumers, lessens choice, etc., no more than the agency model has made music prices and software prices higher. (If anything, the circumstantial evidence is that the agency model has been terrific for software and music consumers and not so good for software and music publishers: we’re paying a lot less for both now than we were fifteen years ago.)

      The reason that some of us have misgivings about this all is that Amazon already commands a significant majority of ebook sales — and indeed physical book sales, at this point — and that our worry is that Amazon is going to start using their effective monopsony power to dictate terms to their suppliers. And their battle with Hachette suggests we may be right to be worried about that. If you’re an indie author and Amazon accounts for eighty or even ninety percent of your sales (and from talking to author friends, this is not an uncommon scenario), what happens if Amazon decides that they’re going to just start giving you less money? What happens if they decide your book should be $4.99 instead of $9.99 and they’re going to adjust your revenue accordingly? If you say, “Oh, come on, Amazon would never do that,” I say you’re far too sanguine.

      Maybe you don’t like Apple, maybe you think all “big publishers” are terrible people who kick puppies and taunt children at playgrounds. But personally, I want Amazon to have serious competition — and if you’re really interested in protecting both consumer prices and author revenue, you should, too.

  11. @ BL: No, it’s not about the wholesale model. You needed to start following the publisher/Amazon dispute in 2007 to get the whole picture.

    Hachette apparently wants to continue selling books on the agency model – they set the price, Amazon takes a set percentage for selling the book. Agency pricing is NOT illegal; Amazon uses it itself for Kindle Direct Publishing (self published author sets the price, Amazon takes a predetermined cut).

    Currently that percentage is 30%.

    I firmly believe Amazon would LOVE to go back to the wholesale model, but Hachette (the first publisher up for renegotiation after the DOJ settlement) is digging its heels in.

    That fits with the rumors (as neither side is really talking about terms). Supposedly, Amazon will accept 30% only on books priced at $9.99 or below, and wants 50% – 70% on books priced above $9.99.

    In addition, if held to agency pricing, Amazon is supposedly asking for more co-op advertising money (think those recommendations are generated solely by your purchasing history? Nope. Publishers pay good money to have their titles pushed to you) and Amazon is also asking for money for services they used to provide as part of being a business partner (they want Hachette to pay for a dedicated customer service representative, for example).

    The goal of the negotiation on Amazon’s side seems to be to break Hachette’s insistence on agency pricing and make them go back to wholesale – which means Amazon could continue discounting to its heart’s content, ensuring that ebooks stay an unattractive market for potential big pocket entrants into the space. Hachette, on the other hand, would love to have more than one major retailer of its products. Agency pricing allowed Apple to enter the market and kept BN.com afloat; Hachette has no incentive to make either of the two exit the market because they can no longer compete with Amazon’s loss leader pricing.

    Also, Konrath is not exactly known as an unbiased observer. I find Joe’s blog highly amusing but his spews about publishing are often better works of fiction than his novels. If that’s who you are relying on for information, no wonder you might be a bit confused about what is really happening.

  12. “That fits with the rumors (as neither side is really talking about terms). Supposedly, Amazon will accept 30% only on books priced at $9.99 or below, and wants 50% – 70% on books priced above $9.99. ”

    As mentioned, neither side is talking about terms, but if this is true, that may be a game changer. It is also possible it is simply a negotiating tactic, as was evidenced by Amazon’s open letter, they seem to not believe that any ebook should be priced above $9.99.

    I also get a chuckle from Joe, but in an attempt to make informed decisions, I do a lot of research outside of his blog, as I do not arbitrarily agree with everything he says.

  13. The statement that 80% of the ebooks they publish are priced at $9.99 or lower is misleading on Pietsch’s part: what matters is the list price of actual ebooks 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 or 90%) of their ebooks that actually sell each day are listed for over $9.99. This could easily be so if their bestselling ebooks, which undoubtedly make up most of their sales, are all listed for over $9.99.

    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

  14. If Hatchette is charging more for their best-selling, most in-demand ebooks, isn’t that just… smart? A well-functioning market? Good for the authors, if nothing else.

    I don’t even think that Hachette is being misleading in offering that statistic. They said in plain words that $9.99 is not an appropriate price point for all books, and that they are looking to recoup their investments. That kind of leads naturally to the idea that the best sellers will cost more, like most in-demand products.

  15. @Nirmala:

    That’s a lovely theory. Too bad it is completely speculative, comes straight from your imagination, and isn’t backed up by data.

    Nor is that even close to being a logical reading of Mr. Pietsch’s statement.

    A very quick perusal of, say, books published by James Patterson and sold in the Nook store shows that of the 30 titles on the first page, six are priced at $10.99 and above while the remaining twenty-four titles are priced at $9.99 or below.

    Hmmm….six is 20% of thirty. This is a very small and insignificant sample size, but it suggests that 80% are, indeed, priced as Mr. Pietsch says.

    And no, it is not \reasonable\ to assume they price their best selling ebooks higher. Yes, new releasees are usually priced at a premium to capture consumers for whom \have it now\ is a higher priority than \pay a bargain price.\ But over time, those consumers will start to drop off, and so the publisher drops the price to capture the more price sensitive consumer. And so on, until the publisher reaches the basement price.

    However, as Amazon itself pointed out, lower priced books tend to sell at higher quantities.

    This is why the New York Times and other lists that measure best selling books do it based on format: hardcover vs. paper, because a bestselling hardcover rarely approaches the sheer volume sold by a lower priced paperback so it is fallacious to combine the two into one list. And why not every author gets a hardcover release.

    But the revenues captured by hardcover do indeed warrant their production, because there are enough readers who are willing to pay a premium for the first window to make them lucrative.

    There are lies, damn lies, and statistics – but statistics are even more useless when facts and logic aren’t present.

    (heh heh: my captcha was case closed)

    • Do publishers actually capture price sensitive consumers when they lower the price over time, or do they miss some customers altogether?

      I posted the following as questions to a publisher who comments on Joe Konrath’s blog:

      How many people who want the hardcover would still buy the hardcover even if a reasonably priced ebook (or paperback) was released at the same time? And on the other side, how many people who do not care about the hardcover get discouraged when they don’t see the book for a reasonable price and so don’t buy the ebook, or just move on to another title or author and never come back to buy the book?

      What if these two groups actually cancel out the people who will just wait and buy the cheaper ebook/paperback , and the publishers would sell just as many hardcovers and more paperbacks and/or fairly priced ebooks if they released them all at the same time? Or what if they could make more overall by releasing them all at once with a smaller print run of hardcovers or no hardcovers at all?

      Reminds me of the old story about the family who always cut the ends off of the ham before baking it on Easter, until the youngest daughter asked why. The mom did not know, so she asked the grandmother. Grandma did not know so they asked the great-grandmother and she said that back in the day, her oven was so small she had to cut off the ends to fit the ham in the oven.

      Are publishers wasting ham for no good reason other than, “That is the way we have always done it?” Amazon has sales data that show the actual effect of different ebook prices. Do publishers have actual sales data that show that delaying the paperback or keeping the price high on ebooks (at least at first) actually maximizes their sales revenue overall? Or are they just following their decades long habits? Has anyone ever tried a different approach to see if that would make them more money?

      What is the basis for the windowing of paperbacks and setting the price high on ebooks other than a perspective clouded by tradition? I do not have the answers to these questions, but my guess is that the publishers do not either as they have never tried a different approach with a new release by one of their bestselling authors.

      Someone on another blog posted a reasonable theory as to the real reason publishers delay the lower priced versions:
      “It’s not as simple as that for the publisher though. You have to remember the underlying reason that the Big 5 has such a stranglehold on the paper market is because of their relationship with paper distributors. If they suddenly start throwing their efforts into maxing out ebook revenue and paying less attention to their paper sales the bookstores and book distributors will not just roll over and let them. No, they will feel the publisher has turned their back on them so they will do the same. They’ll start carrying Amazon published books and maybe even print on demand and start making big 5 published books actually have to compete in the paper market. Sure they are trying to protect their paper sales, but what they are really trying to protect is the loyalty and relationship they have with the paper distributors, even if it means losing out on some ebook sales now.”

      I responded as follows:
      Thanks for that perspective, it is a part of this, I had not considered or at least fully understood. I have often heard that publishers are trying to protect their paper sales, but this is clearer: they are trying to protect their somewhat exclusive access to the paper market, probably even if it hurts their paper sales as well as their ebook sales. Ironically, when they price ebooks very high to protect their exclusive access to the paper market by slowing down the adoption of ebooks, they may also speed up the adoption of ebooks by other readers. If someone gets too frustrated with the whole pricing structure of the traditional publishers, they may just stop shopping for new paper books altogether and simply limit their purchases to used paper books and reasonably priced ebooks (in fact I have read many comments suggesting people are doing just that). The publishers may be like someone in a flood trying desperately to stop water from coming in their front door without noticing that the water is already pouring in the back door.

      It does seem the publishers are focused more on their relationship with distributors and bookstores than with their actual customers: readers. This creates all kinds of distortions in their business model, and requires them to resort to convuluted logic and strategies to try and keep all of this going even when their actual customers end up dissatisfied, and they lose sales as a result at the same time they protect their relationships with the middlemen.

    • And I do get it that Mr.Pietsch is telling the truth when he says that 80% of their titles are priced at $9.99 or less (I even scanned all of the Hachette titles on Amazon priced above $9.99 and it cam out to 20%)

      But so what? If a much higher percentage than 20% of the ebooks they actually sell everyday have a list price over $9.99, then that figure is misleading. I exaggerated to the extreme on purpose in my example, but what if it is the exact opposite percentage and 80% of the ebooks that actually sell are priced over $9.99? Then their pricing strategy is on average making consumers pay more than $9.99 for an ebook, and his statement is misleading. I do not know what the actual percentage is, but Mr Pietsch does and he chose not to tell us.

  16. Sorry. Nirmala’s logic is quite correct. Even says right in it that it is exaggerated to illustrate the point. The post doesn’t claim any correct statistics. The point of the post is to show that Pietsch’s statistic is meaningless in the statement and could be very easily misleading.

    Amazon’s point that a lower priced book will sell higher quantities is talking about the same book. Lower prices will sell more for sure, but some books are also more desired and therefore, they will sell more than other less desirable books at a much greater price. Amazon is telling the publishers that based on many years of selling statistics, everyone (Publisher, Author, and Amazon) will make over all more money if the ebook meets a certain threshold ($9.99). The fact is that Hatchett wants to price many high demand books at more than that price. Hence the problem. Hatchett will not let Amazon sell the book for cheaper, even if the difference comes out of Amazon’s cut of the sell.

    Your James Patterson example still falls for the logic fallacy that Nirmala was pointing out. Just because only 20% of James Patterson’s novels sell for more than $9.99, that doesn’t mean that represents 20% of sales. For instance, you can guarantee that the newer books will sell more THIS MONTH. The 6 that are priced higher will in all likelihood sell more copies in in this month than the other 24 combined, since they are newer and in higher demand, since fans already own the older books.

    Nirmala’s logic is sound. Your understanding may not be.

  17. I think Hachette and other publishers should open independent web stores and sell their products at prices they see fit. I don’t like the fact that Amazon wants to control everything and be the ONLY ESTORE ON THE PLANET. This is absurd, and we are all guilty for contributing to this. As an individual author it is difficult to sell my books on my own, but Hatchette, with its established writers and a following, does NOT need Amazon, and should intentionally not even offer their books on Amazon. Instead they should promote Hachette as a brand, and have people come to their e-store, the way we go to Best Buy, or Target, when we are thinking of buying something. Amazon needs to be shrunk.

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    An Old Black Marble (The Great Gatsby of the 21st century)

  18. Certainly, wholesale prices is not the real issue. But it’s absolutely not a situation in which Amazon is acting on behalf of the consumer. Reading some of the limited information on the terms Amazon is seeking is actually quite scary stuff, and goes well beyond merely demanding a publisher lower their prices.

    And even if it were about the outward-facing issue of retail price. The market would determine industry prices, not Amazon. If books are set at a price higher than the market will bear, demand will decrease, and publishers would have to remedy this themselves. Amazon unilaterally demanding that an entire industry lower its prices to a specific price point is somewhat putting the cart before the horse (not to mention bizarre coming from a retailer…perhaps akin to Foot Locker demanding that all shoe companies price their wares below $50 because *it* had quantified the price point as appropriate.)

    But when Amazon is reportedly seeking to increase its agency commission even as it publicly claims to be seeking lower book prices for all, it’s hard to believe it’s anything but a self-serving venture.

    I really want to be on Amazon’s side on this, but it just doesn’t add up, truly.

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