The digital publishing wars: Amazon v Hachette

Amazon’s dominance of the book retail market is already hurting publishers – does it also threaten authors and book lovers? Simon Wilson investigates.

What’s happened?

All summer, a row has been simmering between Amazon, the online retailer that sells around 90% of the digital books published in Britain, and Hachette, one of the world’s largest publishers.

The argument is primarily about the price of digital books, or ebooks. Amazon wants the right to sell the vast majority of ebooks for $9.99, whereas Hachette wants to carry on charging variable prices.

Amazon, which says it’s happy to keep its slice of the price at 30%, says ebooks are unjustifiably expensive, given that there are no printing, warehousing or transport costs. It also argues that lower prices would lead to a boom in demand, leaving overall revenues intact.

Is Amazon right?

Amazon’s view that demand will surge looks optimistic, given that growth in ebook sales has been tailing off. And while the company is obviously right that ebooks are cheaper to deliver, publishers argue that low prices are only possible because ebooks are produced as part of a wider publishing process that includes the costs of paying advances, editing, proofing, marketing, distribution and so on.

Nevertheless, Amazon’s supporters have argued that the retailer’s shake-up of the book industry is a classic case of creative destruction that will ultimately prove a good thing for both authors and consumers (albeit not for publishers).

Why’s that?

Because it will hand more power and revenues to those authors who are savvy enough to seize the opportunity, cut out the middlemen, and buy in whatever editing and marketing services they need, for example.

“Some existing publishers will thrive on the basis of their strength in author support services,” reckons John Kay in the FT. “But most will not.”

Authors, however, don’t appear to share this vision of a brave new world. Earlier this month, more than 900 authors, including many famous names such as Stephen King, Donna Tartt and JK Rowling, took out a full-page advertisement in The New York Times (under the name Authors United) urging Amazon to end its hardball tactics aimed at pressuring Hachette into an agreement.

These tactics include blocking orders and slowing down delivery times. Amazon, said the authors, should “stop harming the livelihood of the authors on whom it has built its business”.

What was Amazon’s response?

Amazon set up its own “Readers United” website to solicit backing from satisfied Amazon customers and the thousands of (less famous) authors who already publish direct through Amazon.

However, it promptly made something of a PR blunder by solemnly quoting – but misunderstanding – comments made in 1936 by “the famous author” George Orwell (see below).

Orwell, claimed Amazon, believed paperbacks were such a threat to the publishing industry that they should be suppressed – but Orwell was actually joking about introducing such a ban. (Although he did believe that paperbacks were bad news for publishers, authors and booksellers.)

Distorting Orwell’s views to suit its own agenda made Amazon seem a bit, well, Orwellian. On the other hand, Orwell’s comments do illustrate the fact that publishing is an industry where similar arguments – over pricing, and who gets what slice of the pie – keep resurfacing.

What’s different about this dispute?

So, yes, disputes between suppliers and their retail customers are nothing new: Amazon is simply a big shop that has the right to stock and sell whatever it chooses. But what makes the stand-off between Hachette and Amazon interesting is that it is not about alleged monopolistic behaviour – ie, where a single seller gets so much pricing power it can hurt the interests of consumers. Not yet, anyway. The worry about Amazon is that it has become a ‘monopsony’ – a uniquely powerful buyer who squeezes suppliers in the short term, but who will also hit consumers in the long term when it eventually raises prices.

How does it hurt readers?

By diminishing choice and reducing competition. If you think publishers still have a role – in shaping books, building authors, marketing their work – then what hurts publishers will (it is argued) ultimately hurt authors and their readers.

Moreover, Amazon is no longer mainly a bookseller – and yet it still uses cheap books as a way of drawing in punters to build long-term share and market dominance in online retailing.

That, say publishers and (some) authors is a recipe for disaster in the publishing industry, and will inevitably lead to a collapse in range and quality, and mean fewer authors can earn a living – and that’s far from a happy ending for anyone who loves books.

How Amazon mangled Orwell

In a review of ten books published by Allen Lane in his revolutionary new paperback format, George Orwell quipped that “the Penguin Books are splendid value for sixpence, so splendid that if the other publishers had any sense they would combine against them and suppress them”.

Orwell, said the Amazon PR team, had been guilty of “suggesting collusion” of the kind it alleges against today’s publishers. In the long run, however, paperbacks triumphed: “It was never in George Orwell’s interest to suppress paperback books,” noted Amazon: “he was wrong about that.” Just as today’s authors, by analogy, are wrong to oppose Amazon’s own innovations.