I can’t do better for my small contribution to the Amazon/Hachette controversy than to link to Hugh Howey’s latest nasty surprise for traditional Big Five publishers, “Big Publishing is the Problem,” where he reproduces a slide (shared above from his site) from a recent investor briefing that reveals just what Hachette is trying to do.

As he says, “Hachette is strong-arming Amazon and harming its authors because they want to dictate price to a retailer, something not done practically anywhere else in the goods market. It’s something US publishers don’t even do to brick and mortar booksellers. It’s just something they want to be able to do to Amazon.”

TeleRead readers won’t need much reminding that conspiracy to shore up the agency model of publishing was exactly what the ebook price fixing case against Apple was about – and remember that the only reason the Big Five publishers weren’t convicted was that they settled out of court. And, as the slide shows, Hachette is trumpeting to investors its “control over business models” through its “Agency model implemented with e-retailers … in order to retain control over ebook pricing.” And here’s what Denise Cote’s ruling had to say about that:

To ensure that the iBookstore would be competitive at higher prices, Apple concluded that it needed to eliminate all retail price competition. Thus, the final component of its agency model required the Publishers to move all of their e-tailers to agency. Apple expected that this proposal would appeal to the Publishers. After all, it would allow them to “fix” their “problem” with Amazon’s pricing.

Savvy investors might wonder whether Hachette can really make its claim stick. But all the same, it is still out there trumpeting its actions in support of a business model that landed it a big out-of-court fine and its partner Apple in the dock, and put it into the crosshairs of another, European investigation that it and its partners only dodged by cutting a deal.

“Publishers are waging a war here for higher prices and lower royalties,” Howey insists. “Publishers are also colluding with one another to offer lockstep digital e-book royalties of 25%, which is indefensible … Their own authors defend them, partly because they don’t spend any time investigating or understanding the business in which they are engaged.”

I don’t fully agree with Howey that Amazon “forsakes profits in order to pass along the savings to” readers and authors – or at least, not with any altruistic motives for that. But Amazon is at least aligning itself with the interests of its two key constituencies, while the Big Five too often persist in business practices hostile to both of these and to their partner distributors. Be thankful for the supply of useful idiots prepared to cheer them on, eh.



  1. How so? Wholesalers can set their wholesale price, and can suggest a retail price, and can set the wholesale price at a level such that retailers make a certain margin at the suggested retail…but they can’t force a retailer to go by their suggested retail. That’s why it’s called “suggested retail.”

  2. @Mike

    I think what Chris wrote was

    ‘not done practically anywhere else in the goods market’

    So it was not just 2 words he wrote. Nothing like distorting things your way.

    Also, why is it that I get emails from Kobo, B&N and Amazon at different times offering savings on all sorts of books? Is it because the full price of a book is not really the price of a book? It is really a suggested price?

    On B&N’s website right now, Stephen King’s latest book Mr. Mercedes is displayed at $18.35 instead of $30, a saving of 38%. The Nook version is at $11.99 instead of $15.99 a saving of 25%. Amazon has it at the same prices but Kobo which only has the ebook version is selling it for the full $15.99. Simon & Schuster has it at full price. Apple, the one who wanted Agency Pricing has it the discounted $11.99.

    It looks like each seller decides the sale price of the book and they have their own reasons at setting each price point. Free economics in a free market. Go figure!

    @mike, look at the facts please. Most goods, including books, have retail prices set by the retailers.

    Now from the other point of view, discounting books makes them cheaper and also ‘less valuable’. Businesses rely on high prices to pay their staff better wages, give them better conditions and still make profits. So what can the publishers do to ensure their profits keep coming in?

    Publishers can increase the wholesale rate of their books so that Amazon, B&N, Apple, etc have to sell those books at higher prices, but this would be a huge win for those that are self published. Again, free market at play.

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