• An employee of the online retailer Amazon puts packages onto a conveyor band at the logistics centre in Bad Hersfeld, Germany. (EPA)
Amazon wants publishers to make their e-books cheaper. Publishers, particularly Hachette, want to preserve their position as cultural gatekeepers. Who will blink first?
By
Anne Treasure

31 Jul 2014 - 9:59 AM  UPDATED 31 Jul 2014 - 10:04 AM

Amazon has recently become the latest digital retailer to attempt a “Spotify for books” model of all-you-can-read content for a monthly fee with their Kindle Unlimited service.

For $9.99 a month, users can access over 600,000 titles available through Amazon. But it isn’t quite as unlimited as Amazon would like. None of the big five book publishers will be making their titles available for the service at this stage.

This means Amazon is up against the content problem all-you-can-read pioneers Oyster, Scribd and 24Symbols struggled with. The difference is that Amazon is far more likely to succeed in the long run, given their weight and willingness to go head to head with publishers over terms.

Amazon says that “Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there’s no printing, no over-printing, 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 — e-books cannot be resold as used books. E-books can be and should be less expensive.”

Kindle Unlimited is only the latest in a series of digital developments driven by Amazon that are putting pressure on the book publishing industry. While some call Amazon “the best thing to happen to storytellers since the invention of movable type”, the big book publishers see the online retailer as more of an immovable object.

Amazon have reportedly been playing dirty in their negotiations with publishers about contract terms. The latest episode involves one of the world’s largest publishers Hachette, who has been in talks with Amazon since January about the terms of their ebook sales contract.

There are reports of Amazon removing retailer discounts and pre-order buttons on Hachette titles, slowing delivery times on Hachette print books, and appealing directly to Hachette authors have been the talk of the publishing world. One of the major sticking points appears to be Amazon’s insistence on having the authorisation to print copies of Hachette books via print-on-demand facilities at Amazon warehouses if they are out of stock.

But the main disagreement is about ebook pricing. Publishers are attempting to keep ebook retail prices at a level comparable to print books pricing, whereas Amazon wants lower priced ebooks in order to sell higher quantities.

Amazon says that “Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there’s no printing, no over-printing, 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 — e-books cannot be resold as used books. E-books can be and should be less expensive.”

The big publishers are attempting to maintain their territory, their business models and their status as gatekeepers.

Publishers often make the argument that the cost of producing ebooks is exactly the same as producing a print book, up to the point of distribution. Yet the costs and risks of producing stock is a minor factor in the face of the intrinsic cultural value of books, no matter the format.

What publishers are really trying to preserve is their relevance and capacity as cultural gatekeepers. This is a valuable societal contribution, no matter how you regard the most recent torrent of technology-enabled self-publishing.

Authors have now become involved, with Philip Pullman, Donna Tartt and Stephen King among many big names who have signed an open letter criticising Amazon’s bullying tactics, saying “we encourage Amazon in the strongest possible terms to stop harming the livelihood of the authors on whom it has built its business”.

Thousands of authors published through Amazon’s publishing services arm responded by putting their names to an open letter titled “Stop fighting low prices and fair wages” written by self-publishing phenomenon Hugh Howey. Howey argues that Amazon has liberated authors and readers from establishment publishers who “have a long history of treating authors and readers poorly”.

The methods in which these two letters have been distributed are analogous to how each side operates and regards book publishing. The letter from traditionally-published authors was originally circulated among a small group via email, available to only the elite, and then reported on by industry media. It will be published as a full page ad in the New York Times.

Howey’s letter was posted as a petition on activist platform change.org, and available to anyone to read and sign.

Hachette is only the latest of the big 5 book publishers to come to blows with Amazon. Digital disputes go back to early 2010, when Amazon took down buy buttons on Macmillan titles after Macmillan CEO John Sargent refused to agree to terms allowing Amazon to discount Macmillan ebooks. The altercation eventually led to the US Department of Justice anti-trust suit in 2012, when five of the biggest book publishers and Apple were accused of colluding to raise the price of ebooks.

In essence, the arguments Amazon is having with big publishers are over the fact that Amazon is trying to introduce new, quick and low-cost ways of delivering books to consumers, to increase their market share and ultimately their profit margins.

The big publishers are attempting to maintain their territory, their business models and their status as gatekeepers.

The disruptive effect of new technology has distressed the world of book publishing, which until the Kindle was introduced in 2007 had been relatively stable in terms of technological innovation.

The last great disturbance in the book publishing force was the introduction of paperbacks in the 19th century – a lower-cost, lower-margin format that made books more accessible to greater numbers of people than the traditional hardback. Sound familiar? The first English-language paperbacks were released by publisher Allen Lane in 1935 under an imprint set up specifically for the purpose: Penguin, which is now the largest book publisher in the world following a merger with Random House.

The huge popularity of cheap, disposable paperbacks had the traditional publishing gatekeepers up in arms. They were concerned that lower cost, lower quality books available in places like supermarkets and train stations would devalue the book model. Yet eighty years later people revere paperbacks as precious objects.

Paperbacks have not made hardbacks redundant, nor have ebooks made print books obsolete. A recent poll conducted by Nielsen showed that 46% of Americans only read paper books. The self-publishing revolution popularised by Amazon through their Kindle Direct Publishing initiative hasn’t lessened the need for traditional publishing labour like editing and book cover design. In fact, the opposite is true, with the need for professional publishing services more apparent than ever in the wake of a self-publishing avalanche.

As this piece by David Streitfeld in the New York Times points out, “Amazon looks so good because it has the rest of publishing to compete against. But if those publishers wither, maybe that would not be true”.  Amazon has dragged traditional publishers into the future and they are struggling to adapt.

The language being used in this dispute is highly charged, and deeply absurd considering what is going on in other parts of the world right now. Amazon and Hachette are waging a corporate war where one side has insisted that damaging sanctions be withdrawn unilaterally, and the other has demanded that their adversary stop using their authors as human shields.

Both sides are sustaining damage to their image and bottom lines.  At stake is the future of book publishing as we know it. This war is being fought for the hearts and minds, and above all the wallets of readers and writers.

Anne Treasure works in communications, is a recent survivor of the book industry, and exists mainly on the internet.