Amazon resolves dispute with Hachette over price of e-books

Amazon.com Inc. and Hachette Book Group resolved their dispute over the sale of print and digital books with a multiyear agreement in the U.S., ending a standoff that cut off supplies of some of the publisher's titles.

Hachette will set consumer prices of its e-books, and benefit from “better terms” when it delivers lower prices for readers, the companies said in a statement yesterday. Seattle- based Amazon will also prominently feature Hachette books in promotions. The deal will take effect early next year.

The agreement removes a distraction for the retailer and publisher before the year-end holiday shopping season. Amazon blocked pre-orders for some of Hachette's books earlier this year as they haggled over book prices. The world's largest online retailer sought discounts, arguing that the move would boost sales and result in higher total revenue. New York-based Hachette resisted the move and gained the backing of many of its authors, who said the dispute was causing the loss of income.

“It definitely shows the large publishers that they can have some impact, even if the smaller ones can't publicly battle Amazon,” said Sarah Kahn, an analyst at IBISWorld. “It showed a little bit of Amazon's weakness.”

Amazon dominates e-book sales with 60 percent of the market, according to Forrester Research Inc. The company also pioneered the e-book market with the introduction of the Kindle device in 2007.

“The new agreement will benefit Hachette authors for years to come,” Michael Pietsch, Hachette Book Group's chief executive officer, said in the statement.

Authors, Publishers

The deal with Hachette includes “specific financial incentives for Hachette to deliver lower prices,” David Naggar, Amazon's vice president for Kindle, said in the statement.

The dispute, which became public in May, disrupted supplies of popular books, including “The Silkworm,” a new novel by J.K. Rowling writing under the pseudonym Robert Galbraith. Amazon also appealed directly to authors, offering them all of the proceeds from the sale of any digital book in a letter in July.

Roxana Robinson, president of the Authors Guild, a professional organization for writers, said yesterday that the resolution was good news for Hachette authors ahead of the busy holiday shopping season.

“I'm relieved that Amazon and Hachette reached an agreement,” said Douglas Preston, a Hachette author and leader of Author's United, which has been a vocal critic of Amazon's tactics. “I can only hope that, if disagreements arise in the future between Amazon and publishers, Amazon will never again seek to gain leverage by sanctioning books and hurting authors.”

Book Deals

Amazon's agreement with Hachette follows a multiyear deal between the Web retailer and publisher Simon & Schuster that was announced last month. Carolyn Reidy, Simon & Schuster's chief executive officer, said the deal “maintains the author's share of income generated from e-book sales.” Simon & Schuster gained control of digital-book pricing and also provides “flexibility to deliver great prices for readers.”

James McQuivey, an analyst at Forrester Research, said the Simon & Schuster deal put pressure on Hachette to negotiate since the company could no longer could unite all book publishers against Amazon.

“Why in the world did they let it get to this point?” McQuivey said. “If these terms are doable now, they should have been doable four months ago.”

--With assistance from Jing Cao in New York.

To contact the reporters on this story: Spencer Soper in San Francisco at ssoperbloomberg.net; Doni Bloomfield in New York at mbloomfiel12bloomberg.net To contact the editors responsible for this story: Pui-Wing Tam at ptam13bloomberg.net Reed Stevenson