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posted: 8/2/2014 7:42 AM

Why Amazon wants cheaper books from Hachette

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  • Jeff Bezos, chairman and CEO of

    Jeff Bezos, chairman and CEO of
    Associated Press

By Hayley Tsukayama=
The Washington Post has finally laid out the reasons behind its months-long e-book dispute with Hachette Book Group, arguing that it is advocating for a new pricing and revenue sharing plan that will ultimately boost sales, lower prices and benefit the entire publishing industry.

The spat has prompted Amazon to delay shipping to customers some books published by Hachette, and has also prevented readers from pre-ordering some books. But, until now, neither Amazon nor Hachette had spelled out exactly what the two companies were fighting over. (Amazon chief executive Jeffrey Bezos owns The Washington Post.)

In a post on its company forums Tuesday, Amazon said that it would like to see most e-books priced at $9.99, rather than the common $14.99 or $19.99 that publishers set for digital copies of their books. Amazon argued that while it doesn't want every e-book to be set at $9.99, using that price for the majority of digital books would benefit customers, publishers and Amazon itself.

Lowering prices by roughly one-third, Amazon said, would encourage customers to buy more books, therefore increasing the size of the e-book market overall. According to its own number-crunching, the company said that the lower price could improve book sales on Amazon by 74 percent. For instance, Amazon said, an e-book that would sell 100,000 copies at $14.99 would be poised to sell 174,000 copies with a $9.99 price tag.

Overall, the company said, revenue would actually go up, roughly 16 percent. "At $9.99, even though the customer is paying less, the total pie is bigger and there is more to share amongst the parties," the company said in the post.

The online retailer has advocated setting e-book prices at $9.99 before. In fact, a similar plan from Amazon is what prompted Apple to reach out to book publishers in 2008 about what it called "the $9.99 problem" -- discussions that eventually drew the attention of the Justice Department. Apple and five major book publishers were charged with collusion to raise e-book prices in 2012. All the publishers, including Hachette, settled out of court without admitting wrongdoing. Apple has appealed that decision, and the case is pending.

Amazon alluded to that history in its Tuesday post, saying, "the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% -- we did have a big problem with the price increases."

Hachette Book Group did not immediately respond to a request for comment.

Amazon also laid out how it says revenues from e-book sales should be divided: It would like to keep 30 percent of e-book revenues, and the remaining 70 percent would go to Hachette -- a take that Amazon said it would like to see the group share evenly with authors.

Authors affected by the fight between Amazon and Hachette have been outspoken on both sides of the issue, though the majority have said that dragging out the dispute hurts the industry overall.

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