Tuesday, 27 May 2014

The Book Report: Amazon Wants To Put The Hatchet To Hachette.

The odds are pretty good that you're not all hep to what's going on in the book world and that in the hills of Seattle and the concrete valleys of Manhattan there's a feud a transpiring.

That feud is between online mega-retailer Amazon and international mega-publisher Hachette. Basically Amazon wants Hachette to give them deeper discounts so they can slash prices to levels no independent retailer can possibly compete with.

Hachette balked, so Amazon started making it harder and harder to get titles from Hachette's many imprints, including the latest JK Rowling mega-seller.

Amazon Corporate Executives getting ready for a meeting with Hachette's representatives.

Now normally I'd be giggling like a naughty schoolboy over two big corporate giants fighting, but this is a serious business. Livelihoods, mostly of authors is being threatened here, and it all comes down to margins.

The Wall Street Journal asked an official at the sister-company publisher Harper-Collins and he said that the profit margins on a book are usually around 75% for an ebook, 60% for a paperback, and about 40% for a hardcover.

Now those sound like huge margins, and the one on ebooks is particularly sweet since the only costs are hard-drives for storage and bandwidth for delivery which adds up to fractions of a penny per copy. So you might think that the publishers can afford to be a little more generous in the discount department.

Hmmm… It's probably a bit more complicated than that.

Remember publishers have to pay a chunk of their margin to the AUTHORS who actually write the damn books. Then comes the expenses producing hardcovers and paperbacks, returns of unsold books, the fact that a lot of books don't sell as much as they should to cover those costs, and let's not forget the millions spent each year on book deals to celebrities, politicians, and flash-in-the-pan news or scandal makers. Every deal seems made as if it's going to be the biggest bestseller in the world, and the majority of them fail to crack the bestseller lists or make back their advances and production costs.

That means that Hachette may not have the flexibility that Amazon is looking for.

Now I'm pretty sure that somebody at Amazon must know this, so why are they engaging in a territorial pissing match when some negotiation could have avoided all the hassle?

Well, the only reason I can think of is that Amazon sees itself as the BSD* of the book world. Everyone should just take its shit and call it ice cream.

That's bad, not just for publishers, authors, and readers, but for Amazon.

Arrogance is not a business plan, because what comes up must always come down.

There are alternative routes for ebooks, and thanks to technology both production and distribution of physical books can be done with one machine.

If all the big publishers got together and made sure those machines were in every bookstore, convenience store, Target, or Wal-Mart in the world next to a sign that says "IF IT'S NOT ON OUR SHELVES THEN IT'S IN THIS MACHINE" they could create some serious competition with Amazon.

Amazon has forgotten that one of the keys to its near monopoly of the book market is that it's always presented itself as the convenient choice. When it starts being the inconvenient choice for both suppliers and customers they will find someplace else.

It's the first rule of economics, if everyone doesn't walk away happy from a deal, that deal is bad, and isn't going to work for very long.

Time for Amazon to stop acting like it's a kingdom and start acting like a real business.

1 comment:

  1. Kevin j Waldron2/6/14 4:35 pm

    Wow we I start my own published company. I think I'm not do business with Amazon's lol