U.S. Markets closed

Amazon, Hachette ramp up mudslinging in book dispute

Aaron Pressman
Amazon, Hachette ramp up mudslinging in book dispute

It’s becoming increasingly obvious that the contentious negotiation between Amazon.com (AMZN) and  publisher Hachette is little more than a typical business dispute, with all the petty bickering and blame tossing that entails.

Also increasingly obvious: The dispute is not a battle over the future of the publishing industry, the quality of literature or civilization as we know it.

This week’s turn of the screw saw Amazon offering to pay Hachette authors the entire proceeds of ebook sales, both its share and Hachette’s, along with restoring pre-orders and immediate shipping for print books, for the duration of the talks.

“We agree that authors are caught in the middle while these negotiations drag on, and we’re particularly sensitive to the effect on debut and midlist authors,” Amazon vice president David Naggar wrote in a letter to authors explaining the concept. “But Hachette’s unresponsiveness and unwillingness to talk until we took action put us in this position.”

Hachette, owned by French media conglomerate Lagardère, quickly rejected the offer. “We invite Amazon to withdraw the sanctions they have unilaterally imposed, and we will continue to negotiate in good faith and with the hope of a swift conclusion,” the company said in a statement.

The proposed ebook deal for authors would be financially extra-painful for Hachette because, in most cases, it has already paid authors their share of royalties as part of an advance, publishing industry consultant Mike Shatzkin noted on his blog.

On a typical $10 ebook sale, Amazon keeps $3 and pays $7 to the publisher, which in turn owes the author $1.75 from its share, Shatzkin explained. Traditionally, authors would get their share as part of an advance, so they'd be double-dipping under the Amazon proposal, ratcheting up the financial pain for Hachette, he said. And most books don’t even sell enough copies to cover the advanced royalties.

“Many of the authors, frankly, aren’t entitled to even their own share on those sales (they already got it), let alone Hachette’s (or Amazon’s),” Shatzkin wrote.

As the dispute over the latest offer wended its way through the press, the two sides made more charges and countercharges.

Amazon said it made an initial offer to Hachette in January, as its sales contract was expiring in March. Hachette failed to respond for three months and didn’t make a counteroffer until Amazon imposed its controversial sales-delaying tactics.

But the Hachette side says the publisher made a counteroffer in April that was “the largest we’d ever made any retailer,” and in May upped the offer further, one executive there says, disputing Amazon’s version of events.

Amazon said it’s still waiting to hear back on its most recent counteroffer from June 5.

Still, there’s little to no detail about the terms of the various offers. Big publishers and best-selling authors complain that Amazon wants “more,” then leap to the conclusion that the mega-retailer wants to push book prices to almost nothing and destroy the industry.

But publishers didn’t make a peep last year when Barnes & Noble (BKS) used similar tactics at its stores to squeeze a better deal from CBS's (CBS) Simon & Schuster unit. Apparently, getting squeezed out of your cut by a retailer that favors higher, not lower, book prices is okay with publishers.

And it was big publishers that were presiding over a moribund industry amid rising book prices before Amazon and its Kindle ebook program came along with lower prices and an ease of purchasing that boosted customers’ total book spending. Growth in ebook sales slowed after the major publishers colluded with Apple (AAPL) to force a huge price hike.

Without the lift from ebook sales over the past six years, there would be considerably less revenue coming in at major publishers like Hachette, News Corp.'s (NWSA) HarperCollins and newly formed book titan Penguin Random House, owned by European publishers Bertelsmann and Pearson.

The rise of ebooks, and the increasing proportion of sales of print books online, may finally be prompting publishers to get creative. HarperCollins this week unveiled a new web site selling direct to consumers print and ebooks, viewable via the company’s own ereader apps. It even has a section of 99-cent genre ebooks to combat Amazon’s growing self-published ebook marketplace.

Competition in a free market, what a concept.