November 16, 2017

Amazon, Hachette End Ebook Pricing Dispute

amazon-hachetteAmazon and Hachette Book Group have ended the pricing dispute that the two have been waging since spring of 2014. On November 13 they jointly announced a multiyear agreement for ebook and print sales. The new terms will go into effect in early 2015, but Hachette has said that even before that time Amazon will restore its previous supply of Hachette titles and make them available for pre-order, as well as including them in promotions on the site.

Hachette, which publishes under the imprints Grand Central Publishing; Little, Brown and Company; and Orbit Books; among others, and distributes a number of third-party publishers, was among the first publishers to settle in response to the Department of Justice’s 2012 antitrust suit over ebook pricing. Along with fellow Big Five publishers HarperCollins and Simon & Schuster, Hachette agreed to grant retailers such as Amazon the freedom to reduce prices on ebook titles.

However, when Hachette’s existing contract with Amazon expired in March 2014, negotiations quickly hit an impasse. Amazon called on Hachette to lower its ebook prices to a uniform $9.99, while Hachette insisted on maintaining its $14.99–$19.99 price range. In an open letter to readers Amazon termed such prices “unjustifiably high,” citing the lack of printing, warehousing, and shipping costs involved in ebook production. In May 2014 Amazon removed pre-orders for Hachette titles, delaying delivery on some of them as much as six weeks. It also refused to offer discounts on Hachette titles. In a July post to the Kindle forum, the Amazon Books team added that it deserved a 30% cut of ebook sales, and that Hachette’s higher prices made this impossible.

In August, Hachette author Douglas Preston mobilized 900 writers to sign an open letter of protest against Amazon’s tactics, which was published as a full-page advertisement in the New York Times. Under the umbrella of the advocacy group Authors United, the letter said, in part, “Traditional publishing houses perform a vital role in our society.… Publishers expect—and receive—a financial return. What will Amazon replace this process with? How, in the Amazon model, will a young author get funding to pursue a promising idea? And what about the role of editors, copy editors, designers, and other publishing staff who ensure that what ultimately ends up on the shelf is both worthy and accurate?”

BACK TO THE AGENCY MODEL

The specific terms of the new agreement have not been disclosed, but it appears that both parties are satisfied. The agreement will most likely resemble the contract Amazon recently negotiated with Simon & Schuster in October, essentially a return to the agency model of 2010 wherein publishers control retail pricing and retailers—in this case Amazon—serve as agents through which customers make their purchases. (Ironically, it was the publisher’s wholesale adoption of the agency model that constituted the charge of collusion in the Department of Justice lawsuit, which alleged that the “defendants’ ongoing conspiracy and agreement have caused e-book consumers to pay tens of millions of dollars more for e-books than they otherwise would have paid.”)

According to a joint statement, Hachette will be able to set its own ebook prices as it sees fit. However, the statement adds, the publisher “will also benefit from better terms when it delivers lower prices for readers.” This is similar to the language used in Amazon’s statement about its agreement with Simon & Schuster, in which it declared that ““The agreement specifically creates a financial incentive for Simon & Schuster to deliver lower prices for readers.”

Neither side wished to comment, but the new terms seem amenable to both. In a joint press release David Naggar, vice president of Kindle, said, “We are pleased with this new agreement as it includes specific financial incentives for Hachette to deliver lower prices, which we believe will be a great win for readers and authors alike.”

Michael Pietsch, Hachette Book Group CEO, proclaimed it “great news for writers,” and stated in an email to Hachette authors and agents, “The new agreement delivers considerable benefits. It gives us full responsibility for the consumer prices of our ebooks. This approach…protects the value of our authors’ content, while allowing the publisher to change ebook prices dynamically to maximize sales. Importantly, the percent of revenue on which Hachette authors’ ebook royalties are based will not decrease under this agreement.”

Lisa Peet About Lisa Peet

Lisa Peet is Associate Editor, News for Library Journal.

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