The end of the months-long impasse between Amazon and Hachette over e-book pricing was a bit anticlimactic for those who had been watching the drama unfold. For months, the companies and their supporters had been accusing each other of bad behavior, warped motives, and plain dimwittedness. At one point, Amazon, apparently hoping to put pressure on the publisher, began delaying shipments of hard copies of Hachette-published books ordered through its site, to the ire of those books’ authors. In response, many writers signed an open letter from a group called Authors United, begging Amazon to back off; later, Authors United announced that it would ask the U.S. Department of Justice to investigate whether Amazon’s delays, or other tactics, amounted to antitrust violations.
Journalists covered each of the escalations attentively, and the negative publicity hurt Amazon’s reputation and maybe even its bottom line. The company posted disappointing earnings results in late October, including the slowest growth it had seen for North American media sales (which includes books, movies, and music) in more than five years. But then, on Thursday morning, the companies issued a joint press release announcing that they have agreed to make Hachette responsible for setting e-book prices, as Hachette is thought to have sought. It is believed that Amazon, which has typically favored keeping e-book prices low, had hoped to set those prices itself. Instead, with this agreement, Amazon will, according to David Naggar, Amazon’s vice-president for Kindle, offer “specific financial incentives for Hachette to deliver lower prices.” The agreement will take effect in early 2015.
Beyond that, Amazon and Hachette didn’t offer much detail. Perhaps most important, they haven’t made public the nature of the financial incentives being offered to Hachette, which might have given outsiders a sense of whether the company’s e-books will become cheaper after all. The closest they got to referencing Amazon’s negotiating tactics, involving Hachette authors’ books, was to note that the companies will “resume normal trading,” with books published by Hachette “prominently featured in promotions.”
The C.E.O. of Hachette, Michael Pietsch, wrote a letter to the company’s authors after the agreement was announced, lauding the new terms and reassuring writers that the percentage of revenue on which Hachette bases e-book royalties won’t decrease under the new agreement. “I feel strongly that this new contract reestablishes our positive relationship with Amazon, an important retailer and industry leader, and that this strong relationship will benefit the writers we publish for many years to come,” he wrote.
It remains to be seen how Amazon will promote Hachette authors in the aftermath of the fight; the companies didn’t disclose many details about that aspect of their agreement. I talked on Friday morning with Sarah Burnes, a literary agent at the Gernert Co., who once worked at Hachette, and she told me that she hadn’t yet seen any proposals from Little, Brown—a publishing house owned by Hachette—for new Amazon promotions of authors she represents, but expected that she would soon. While we were on the phone, she visited Amazon to check on a client’s short-story collection, published by Little, Brown and found that Amazon was still reporting delayed shipping. “If by Monday these books are not available, I will definitely call and find out what’s going on,” she said. She added that, as far as she could tell, “They can’t just push a button, and all of Hachette’s books are available again.”
The agreement comes after the publisher Simon and Schuster last month struck a deal with Amazon that lets it control e-book pricing, which led some people to speculate that a Hachette deal could soon follow. Beyond the immediate impact of having its books readily available and promoted prominently on Amazon, Hachette’s retaining control over e-book pricing is, by all accounts, good for the publisher. It is also most likely good for other big publishers, who can now push to retain control over e-book pricing when it comes time to strike their own deals with Amazon.
As both a retailer and a producer of e-reading devices, Amazon has a particular incentive to keep prices low. For Hachette and other publishers, the situation is more complicated. On the face of it, they benefit from higher e-book sales, too, since they get a cut of the revenue. But Mike Shatzkin, a publishing-industry analyst, explains that when e-books cannibalize sales of printed books, especially hardcovers, it can hurt publishers’ revenues. This is both because hardcovers can bring in more revenue—they often sell at more than double the price of e-books—and because the model for selling hardcovers relies on publishers to print and distribute the books. In other words, selling hardcovers justifies the share of revenue that publishers recoup from book sales.
Some coverage of the Amazon–Hachette fight has focussed on the fact that writers generally receive higher royalties from sales of hardcovers than they do from sales of e-books, which would suggest that writers, too, want higher e-book prices as a way to incentivize readers to buy hard copies. But, Shatzkin notes, this may not be the real reason for the majority of writers to be in favor of the deal. Royalty rates often don’t come into play for authors, because publishing houses typically pay advances against royalties, and most authors never make back their advances—perhaps eighty per cent do not, Shatzkin estimates, based on his conversations with agents. In other words, authors tend to make their money from advances against royalties, not from sales themselves. So the Amazon–Hachette deal may be good for most writers simply because it is good for publishers, who can (at least theoretically) invest in author advances when they make money.
If Amazon executives hope their rapprochement with Hachette will conciliate authors, though, they might be disappointed. The writer Douglas Preston (who has written for this magazine) publishes with Hachette and helps run Authors United. He told me on Thursday that Authors United expects to go forward with its plans to ask the Justice Department to probe Amazon; the group is crafting a letter, along those lines, that it plans to send to the department. Of the Amazon–Hachette agreement, he said, “I think this is a reasonable resolution.” But he added that one big problem remains: the fact that the company that owns nearly half the book market “has demonstrated the most ruthless bullying behavior around.”
Correction: This post previously misidentified a book by a client of Sarah Burnes as a novel, rather than a short-story collection.
