Amazon removes Hachette buy links from its stores.

No, the math doesn't bear out—or, rather, it's only the part of the story that fits Amazon's narrative. That narrative, as I've argued before, is to lower the perceived value of books.

Amazon argues that selling books for $9.99 sells more copies than books priced at $14.99.

Let's make that some kind of given where everything in the world is equal. Let’s pretend that printed books are somehow divorced from all of this. Let’s pretend that Amazon reports book sales to anyone’s Best Seller’s List other than its own (a point in the blog propaganda). Let’s ignore the renewed effort to pit authors against publishers in this fight that is the last paragraph. Let’s pretend there aren’t tons of other factors that play into this whole fight.

Let’s just look at the math.

According to Amazon, $9.99 sells 74% more books than $14.99 for a 16% net increase in total revenues. I believe that figure, FWIW, all things being equal.

Which they aren't.

Great, so what does the $12.99 price point do? Does it sell 50% more books than $14.99? I don’t know, but if it did, that would be $1.95 million for those 100,000 books that Amazon so blithely tosses out to make the people reading it think that all authors are millionaires.

For those keeping score at home, that’s 30% more revenue. 30% > 16%.

If it’s only 40% more books, that $1.82 million, or 21% more revenue. 21% > 16%.

At 34% more books sold at $12.99, we have revenue parity between the two price points.

How about at $13.99? That will move more books, though fewer than a lower price point. You have to sell 24% more books at that price point to earn the same revenue as what Amazon claims it would sell at $9.99.

I don’t know what Amazon’s data says about those other price points, but 40-50% more books at $12.99 feels about right to me.

You know who does know those numbers? Amazon.

But Amazon didn’t mention these other price points and their potential effect on books sales because—as I have argued in this thread and elsewhere—the company’s goal is not to make publishers and authors more money, which is what this sham of a blog post is trying to perpetrate. Amazon’s goal is to lower the perceived value of books in order to limit competition.

Digging further, it should be obvious that Amazon's comparisons are based on a market where there are both ebooks at $9.99 and ebooks at $14.99. In that market, books priced just below $9.99 sell far better than books at $14.99.

What happens in a market where all of the best sellers are $9.99? Are all of those books selling 74% more units than they would have at $14.99?

No. Not on your life. The overall book market will not grow by 74%. The overall book market won't grow 20% (my guess). The ebook market could conceivably grow 40-50%, but much of that growth will come at the expense of the print market. Making less net revenue for the publishing industry, but a LOT more share for Amazon.

And the print side of the industry will see lower prices, too, so there's even less money for publishing.

So, no. The math doesn’t bear out. In any way. Whatsoever.

[Edit: Hey Shaun, rereading my post, it sounds a lot more aggressive than intended. That aggression is aimed at Amazon's bullshit, not you. ]

ShaunHorton said:

Isn't that a bit disingenuous?

True, we all could've done without the little snap at the percentage Hachette passes on to it's authors, but are not the basic points sound?

I don't know about the exact numbers, but I have little doubt a fair number of people are probably driven away from purchasing ebooks costing $14.99 or more. I know it certainly doesn't make sense to me and I'm not about to pay that much. If I want a book that badly, I'll borrow a paperback from a friend. Or buy the *gasp* cheaper paperback. Oh, right, that's the point of pricing ebooks so high isn't it? So that the paper market continues to live, somewhat?

Doesn't the math also bear out that, profit wise all around, selling two books at $9.99 is more for all than one book at $14.99? Yes, at a certain point, the pie does start shrinking again, but I seriously doubt the point of sales vs. price balances at $15 a book.

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The thing I find amazing is that Amazon has the data, they've analyzed it, and they're sharing it (something they're not known for) and saying here is how we'll all make more money. Given that ebook buyers will save on each individual ebook, so it's good for everyone in the equation, why is it this horrific idea?

The logical conclusion is that Hachette's problem with Amazon's terms have nothing do with ebook profits.

I do think Amazon's PR machine just grabbed Hachette's by the ankles and whipped it overhead to slam on the ground a few times. I think they know exactly what they're doing, and considering that they're still selling Hachette ebooks without a contract, which they're under no obligation to do, if I were at Hachette, I'd be worried about the day Amazon decides to delist them all until a contract is signed.

I'm a little surprised they haven't done that yet, but I think them putting on a show of tolerance above and beyond does more for their image than removing all the buy buttons would.

I don't trust this press release. One reason being, Amazon can say whatever the heck it wants, and since their data is proprietary, who can gainsay them?

If they want to make an argument on price points, they need to release the data they have on it. The $9.99 price point trades on something retail companies have known forever, that people are fooled by the dollar amount alone. So, by using that point, they get to pretend to be in the single digits, a threshold that is very powerful in terms of hooking consumers. Even though really, it's $10.


Not to mention the crap about publisher's splitting money with authors.


Also, their explanation of why they think ebooks should cost less is nothing new, and has been dissected a hundred times, here on AW, and elsewhere on the internet. It's a gross over-simplification of how book production works.

Seems to me that people are missing the obvious.

Amazon can subsidize anything they want with sales from other areas.

Hachette cannot. They have only one source of income and those are books. They can't drop their prices to $2.99 and make up the rest by selling widgets and bathroom accessories.

But these continuing public offers to "think of the authors" and, btw, break the legal contracts said authors signed with Hachette, make me wonder if Amazon's not getting a little nervous about the bad press they're getting over this.

Neither party is a perfect for any author. But I'd take a company who dedicates themselves to publishing books to one who sees books as another sideline product besides lunch boxes and coffee.

Sheryl Nantus said:

Seems to me that people are missing the obvious.

Amazon can subsidize anything they want with sales from other areas.

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This really cannot be hammered home enough. Amazon is not a bookseller. They are a retailer who happens to sell books along with a ton of other things. A book to Amazon is like toilet paper to a grocery store - sell cheap to get people into the store where they'll buy other things.

*muse* So if Amazon thinks that all ebooks should cost 9.99 or less, what happens if I, self-publisher, wish to sell (to use an actual example that applies to me) my massive omnibus collection for $19.99?

(This omnibus can, in print form, be used to club a burglar to death--I threw my back out signing them.)

Is Amazon gonna go "No, little self-publisher! You may not price your book above what we feel books should be sold at! IT'S FOR THE GOOD OF THE WORLD!"?

...or are they gonna go "You're one author, what do we care?" which might indicate that perhaaaaaps there's something else going on re: Hachette?

Well, Amazon is already telling you not to price it above $9,99, unless you're fine with only receiving 35% instead of 70%.

Do they really? I must have overlooked that.

Goodness, how very...controlling...of them...

ETA: Upon further reflection, I wonder if we're going to eventually get a boutique model? I am a creator of big art-heavy volumes that retail at quite high prices. I have many peers that write art books that are also big and heavy and retail at high prices. I buy many books--garden photography being one of my loves--that are massive and expensive and full of full cover photos. These are not cheap books to make, and printing costs are not the only factor.

It's always been a niche, but when people are creating $60 art books, telling them that e-books can't be above 9.99 because...um...reasons...is not going to make people want to retail through you. It lacks nuance. Nuance is important.

Either people in my particular field are not going to do e-books, or they're going through somebody other than Amazon to do it. So I wonder if we'll start to get an ebook equivalent of Paper Tiger or someone, for books that it'd be frankly stupid to sell at 9.99.

RedWombat said:

Either people in my particular field are not going to do e-books, or they're going through somebody other than Amazon to do it. So I wonder if we'll start to get an ebook equivalent of Paper Tiger or someone, for books that it'd be frankly stupid to sell at 9.99.

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I'm not sure what their royalties are like, but there are a few places you can sell more artsy books. Blurb comes to mind. So there should be some options other than just Amazon. Might be harder to sell to the general audience, though.

RedWombat said:

*muse* So if Amazon thinks that all ebooks should cost 9.99 or less, what happens if I, self-publisher, wish to sell (to use an actual example that applies to me) my massive omnibus collection for $19.99?

Is Amazon gonna go "No, little self-publisher! You may not price your book above what we feel books should be sold at! IT'S FOR THE GOOD OF THE WORLD!"?

...or are they gonna go "You're one author, what do we care?" which might indicate that perhaaaaaps there's something else going on re: Hachette?

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Then you sell it for $19.99. You'll get a 35% royalty on each sale. You could sell it for $400 and Amazon wouldn't say mumbling word.

I could be wrong, but I feel reasonably certain Amazon's not telling Hachette that they can't price an ebook above $9.99.

I think what they're arguing over is the price Amazon can sell it for through discounting, and how much of a cut Hachette will get from that sale. I suspect they're demanding a bigger cut than Hachette is used to them taking for anything listed over $9.99 that they discount to that price.

Hachette can list price their ebooks at $40. That's most likely not the sticking point.

I'm surprised writers are so quick to scold Amazon for their comment about how they think publishers should pay authors more. Is it just dislike for the messenger, or do you really not think publishers could and should pay better royalties?

Amazon's ebook model has long struck me as particularly ill suited for art books or illustration-intensive books, those sort of gigantic coffee table books that are vital professional tools in the arts.

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Do coffee-table books convert to ebooks well? The books along those lines I've had, I wouldn't even want in ebook form.

shelleyo said:

Do coffee-table books convert to ebooks well? The books along those lines I've had, I wouldn't even want in ebook form.

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It's hard to do, and sometimes clunky--you have to give up on the double-page spread--but I've seen it done. But you're paying somebody a LOT to do it well, or you're spending a lot of time and labor doing it.

I actually much prefer ebook for things like garden photography and design books, because those things weigh a blessed ton and I actually need to consult the things on the run at the nursery. Tablets work rather well for things like garden magazines these days, so obviously the technology is able to pull it off--a lot of the problem lies in formatting.

Anyway, didn't mean to de-rail, just thinking about my particular niche and how "no, no, e-books should 9.99" is pretty lousy for it, and sort of de-incentivizes creating self-pub work in that niche for the ebook market, at least via Amazon. But this is admittedly a specialized field and not applicable to the broader market.

RedWombat said:

It's hard to do, and sometimes clunky--you have to give up on the double-page spread--but I've seen it done. But you're paying somebody a LOT to do it well, or you're spending a lot of time and labor doing it.

I actually much prefer ebook for things like garden photography and design books, because those things weigh a blessed ton and I actually need to consult the things on the run at the nursery. Tablets work rather well for things like garden magazines these days, so obviously the technology is able to pull it off--a lot of the problem lies in formatting.

Anyway, didn't mean to de-rail, just thinking about my particular niche and how "no, no, e-books should 9.99" is pretty lousy for it, and sort of de-incentivizes creating self-pub work in that niche for the ebook market, at least via Amazon. But this is admittedly a specialized field and not applicable to the broader market.

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Amazon did say that they didn't mean all, and coffee-table books have always commanded higher prices than most regular hardbacks. I would think they'd be an exception. Especially when you consider the image-heaviness. Some books can't even be sold for .99 because of the file size--Amazon won't let them sell for less than $2.99 in some cases. So a coffee-table type book in ebook would probably be part of the exceptions they were talking about. At a guess, anyway.

I'm not really on one side or the other, because I'll flat admit I'm not smart and/or well-informed enough to judge what one side winning might mean in a year or three or five. I see good points on both sides, and both bad and good results coming out of either scenario. But man, I wish I could be a fly on the wall to know exactly what's going on, because press releases from both sides, while I'm sure they're factual, are almost certainly not entirely truthful.

shelleyo said:

Amazon did say that they didn't mean all, and coffee-table books have always commanded higher prices than most regular hardbacks. I would think they'd be an exception. Especially when you consider the image-heaviness. Some books can't even be sold for .99 because of the file size--Amazon won't let them sell for less than $2.99 in some cases. So a coffee-table type book in ebook would probably be part of the exceptions they were talking about. At a guess, anyway.

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Mmm. Wonder how they'd do the opt-out on that one..."Click here if this is a coffee-table book!" *grin*

Amazon is going to win this because books are on aggregate (50,000' view) interchangeable entertainment. To put it in steam terms, at a certain price point (for me it's <5 bucks), I'll buy a game for the hell of it, just to check it out. It's at that impulse buy level. With books it's the same thing. It's why I enjoy slumming through self-published books. There's a lot of crap in there, but it's great when you can buy a dozen for $30, and still be happy when you get maybe 5 or 6 good books in the bunch.

Let me put it in perspective. I used to pirate shit like crazy when I was a broke ass pup. My computer flew the jolly roger and I was a regular in the pirate bay. But a few things changed.

1. Steam. Steam is the most magnificent money vacuum ever created. It made acquiring games so affordable and so convenient that pirating was more of a hassle than just buying the game. I now have 300+ games in my library, many that I bought for like $2.99 or $5.00 when they went on sale, just to check them out.
2. Pandora. Pandora provides a first class music experience at a good price. $4.00 a month for all you can eat no-adds. All of the sudden pirating MP3s seems kinda silly, and is more trouble than it's worth.
3. Netflix. Like steam, it made pirating a waste of time. The convenience and value are so high that pirating is pointless, and I've ditched cable TV, because netlfix/amazon prime are THAT good.


Amazon's kindle is just going to turn into the "steam" of books. Game publishers have been making bank on steam, and the greater accessibility of the mainstream market has allowed for fantastic independent and solo game development. It's a fucking golden age of kick ass games, with the game devs/publishers making bank, and with the consumers like me getting fantastic value.

Just because steam exists and sets prices, has not stopped Gamestop from existing. I don't think Amazon will necessarily destroy the book industry either, it's just going to destroy the industry as it is TODAY.

shelleyo said:

Do coffee-table books convert to ebooks well? The books along those lines I've had, I wouldn't even want in ebook form.

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hmmmm... isn't the whole point of a coffee-table book the fact that you lay it on... a coffee-table?

(Don't mind me -- I'm just being silly this early morning. Otherwise it's just popcorn time for me. But I have to say: Amazon suggesting 35% of gross for authors -- is going to be hard for authors to argue against!)

shelleyo said:

I'm surprised writers are so quick to scold Amazon for their comment about how they think publishers should pay authors more. Is it just dislike for the messenger, or do you really not think publishers could and should pay better royalties?

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What I consider when I look at this discussion is profit margins.

While I agree it would be great for authors if they were paid higher royalties on all sales, doing so could well be very dangerous for the publishers concerned.

Most of the publishers I've worked at have run on very small profit margins: really tiny, single-figure percentages.

If publishers are forced pay their authors significantly higher royalties, there is a good chance they won't be able to remain in business. And that won't be good for anyone.

Do coffee-table books convert to ebooks well? The books along those lines I've had, I wouldn't even want in ebook form.

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I agree. Large-format, full-colour books don't work well on e-readers. They can be good as apps, but not as e-books. In general.

shelleyo said:

I'm not really on one side or the other, because I'll flat admit I'm not smart and/or well-informed enough to judge what one side winning might mean in a year or three or five. I see good points on both sides, and both bad and good results coming out of either scenario. But man, I wish I could be a fly on the wall to know exactly what's going on, because press releases from both sides, while I'm sure they're factual, are almost certainly not entirely truthful.

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I think you're putting yourself down here. You know a lot.

And yes, I'd love to sit in on those meetings too. I agree with you about press releases: they never give the full story. But people in publishing talk to one another. The full story will come out.

I've never worked in retail, so can someone with some experience tell us whether a 30% mark-up for a digital product is reasonable? I ask because of this comment from the press release:

We believe 35% should go to the author, 35% to the publisher and 30% to Amazon.

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The author, I would agree, deserves 35% (but I would think that, eh?). And we've had many discussions about how much work it is to get a book (e- or paper) ready for market. I'm just not convinced Amazon's efforts warrant an almost-equal share.

Funnily enough, the statement "no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market" also applies to Amazon and speaks to them deserving a lower percentage, imo.

One other thought - Amazon's argument that e-books should be priced at $9.99 - isn't that already happening? All mine are less than that. Do they really want novels etc to be priced there, or is that a first step to driving the price lower?

Not all Amazon authors get 35% from their imprints for their ebooks though.

Interesting....

MarkEsq said:

I've never worked in retail, so can someone with some experience tell us whether a 30% mark-up for a digital product is reasonable?

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It's lower than for typical physical goods, and matches their major competitors so it seems about right.

Amazon has besically suggested Hachette pay their authors double what they do now. (50% of net instead of 25% of net.) I think a fair counter offer from Hachette is Amazon starts paying every employee, including those that work for companies Amazon hire to do work for them (eg. warehouse workers), double the salary they do now.

If Amazon was serious about wanting authors to get paid more, they would lower their commision. That would immediately lead to authors getting more money, and they would be offering their own money for a change.

Weirdmage said:

I think a fair counter offer from Hachette is Amazon starts paying every employee, including those that work for companies Amazon hire to do work for them (eg. warehouse workers), double the salary they do now.

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Lol yup, GREAT point. They work their staff likes slaves but try to dictate other companies pay structures...


I smell hypocrite.

Every company needs to make a profit

Amazon has many income streams (and still treats its staff like shit). Publishers often make less % per book sold than authors -- they have expenses to pay that authors just don;t so net profit can often be lower.

That is an equal gross profit does not always equal an equal net profit.

Scalzi, as usual, makes some interesting points on the issue.

http://whatever.scalzi.com/2014/07/30/amazons-latest-volley/

Oh! That's for linking that. I meant to read it while out of town and entirely forgot. Good, good article.

Why in particular are you against prices higher than $9.99, though?