Amazon war with Hachette over ebook profit margins intensifies (2024)

It is another mystery for inspector Rebus to solve. Why is Amazon UK selling Saints of the Shadow Bible, the latest instalment of Ian Rankin's best-selling series about the Edinburgh sleuth, for half the price being advertised on its United States website?

The answer is that Detective Inspector John Rebus has joined the list of casualties in Amazon's battle with Rankin's publisher, Hachette, over how to split the generous profit margins publishers make on ebooks – which in some cases can be 75% of the cover price.

The dispute has also dragged in JKRowling and the best-selling American writer James Patterson, and broke into the open on Friday, when the world's largest bookseller started turning the thumbscrew on the French-owned publisher.

Reviving the tactic it used four years ago against another publishing heavyweight, Macmillan, it began removing the all-important pre-order button from its forthcoming top sellers on the US site.

Those looking to pre-order the hardcover version of Rowling's The Silkworm in the US (due out on 19 June) see a message telling them: "Sign up to be notified when this item becomes available." In the UK, the book can be purchased in advance for £9.99.

Pre-orders are not just sales – they are a major factor in getting new books to the top of the bestseller charts, so Amazon is denting Rowling's chances of creating another hit title stateside.

For other authors such as Rankin, Amazon has removed the discounting that helps shift titles: the hardcover version of the latest Rebus is for sale at £7 on Amazon.co.uk, but on Amazon.com will set you back $26 (£15.50). Other retailers are discounting it, including Barnes & Noble, which offers the title in the US for $16.85 (£10). Other writers caught in the crossfire appear to include Jeffrey Deaver, Anna Holmes and Joshua Ferris. A Hachette spokeswoman confirmed that Amazon had removed discounts from a number of its titles in America.

"There is a huge monopoly in Amazon. This dimension of power is something we haven't seen before and what they are doing must be an abuse of power," said literary agent Clare Alexander, who represents Mark Haddon, author of The Curious Incident of the Dog in the Night Time.

While the battle is being waged over the price and availability of physical books, Amazon's real dispute is about digital publishing. It takes a 30% cut of most books sold, but any discounts are paid for from that commission. The retailer would like to share the cost of discounting books, but publishers are fighting hard to avoid this outcome.

The battle lines are not as unevenly drawn as they might seem. After the attack on Macmillan, the world's big five publishing houses – Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster – went on the offensive in an alliance with Apple, withholding their bestsellers from Amazon. But the alliance was pulled apart after regulators and judges rapped its members for collusion. These days, publishing bosses are advised by their lawyers against so much as having lunch with chief executives from rival firms.

But Hachette is no minnow – it is owned by the French media group Lagardère, whose interests also include radio, television, Elle magazine, airport retail and whose revenues total €7bn a year. There are those who believe capitulation to Amazon this time is not a foregone conclusion.

Amazon is under pressure from its own investors to increase profits and begin paying a dividend. The company has always reinvested profits in building distribution centres, developing gadgets such as the Kindle reader and pulling in more business through discounts.

But shareholders have become less tolerant of this approach, because after years of relentless growth, Amazon's share price began to stumble at Christmas and it is down more than 20% in the year to date. The retailer is under pressure to increase its own margins, and the digital profits made by publishers could provide part of the solution.

Dennis Johnson, founder of the Melville House publishing group, has little sympathy. He told the New York Times: "How is this not extortion? You know, the thing that is illegal when the mafia does it."

If Amazon's attack on some of Britain's best loved authors is unpopular with the public, then consumers can choose to buy their books through Tesco, for example on its popular Hudl tablet, or through Apple's iTunes. But these still make up a small share of sales, despite high profile calls, most recently from the Labour MP Margaret Hodge, for consumers to boycott Amazon.

"The contract negotiation they are having is about who gets the profit split on ebooks," said economist and Adam Smith Institute fellow Tim Worstall. "The correct answer emerges from our behaviour as consumers. We don't know what the consumers are valuing most – the distribution system Amazon supplies them with or the new JK Rowling that Hachette publishes. If we value JK Rowling more, then Hachette should win."

Not everyone is ranged against Amazon. Rankin has declined to comment on the dispute, but Stephen Fry waded into the debate on Tuesday, tweeting a link to a commentary by the self-published author David Gaughran, who characterises the current furore as an anti-Amazon PR campaign. Fry described the piece as a "sane counter" to the prevailing views on the dispute.

Agents say that Amazon has lobbied them to publish under its own imprint, offering authors a share as high as 70% of ebook sales. Some years ago, when publishing houses were using sales of new titles to pay for the digitisation of their back catalogues, agents accepted that their clients would get just a quarter of the profits from ebooks. But the justification for such a small share no longer exists, according to Alexander.

"Amazon presents to agents and authors the fact that publishers are making money," she said. "There was a period where publishers were digitising their backlist and that's why they settled on a royalty of 25%. I don't think that's any longer a fair recompense to an author for digital rights."

Amazon did not respond to requests for comment.

Amazon war with Hachette over ebook profit margins intensifies (2024)

FAQs

What was the dispute between Amazon and Hachette about? ›

Salinger. While the actual contract terms being disputed have not been disclosed, Amazon and Hachette disagreed on the deep discounting of e-books, according to a May 28 story in The New York Times. The publisher feared that further price declines on its digital tomes would spill over to its print books.

What was Amazon's response when Hachette pushed back? ›

Instead of terminating Hachette's contract, Amazon extended the contract under its current terms but ensured that customers could no longer pre-order many Hachette books. Any book they did order would take several weeks to be delivered because of the print inventory available.

How profitable are ebooks on Amazon? ›

Is selling ebooks on Amazon profitable? It can be. As you can see, you can easily earn at least $2,000 a month (or more) selling your ebooks on Amazon. I'd consider that pretty profitable!

Why were the book authors and publishers upset with Amazon? ›

Amazon's power over books not only dampens revenue and reputation for publishers and authors; the online behemoth also exerts its market-shaping clout to create a profit-fixated monoculture in a publishing industry pushed to maximize short-term returns under successive waves of consolidation.

What is the Hachette changing the story? ›

We believe greater diversity and inclusion enriches creativity and means better books for everyone. Changing the Story has organic, grassroots energy at its heart. We empower our people both to take ownership of the change they want to see, and to hold the leadership team accountable for that change.

Who owns Hachette? ›

Hachette Book Group (HBG) is a publishing company owned by Hachette Livre, the largest publishing company in France, and the third largest trade and educational publisher in the world. Hachette Livre is a wholly owned subsidiary of Lagardère Group.

How did Amazon disrupt the book market? ›

Amazon and authors

The introduction of the Kindle changed the relationship between authors and book publishers. No longer did a publisher's acquisitions department decide whether a book would be published. No longer did authors have to query publisher after publisher trying to get their book into print.

What did Amazon do wrong under the circ*mstances? ›

Workers at an Amazon air hub in Kentucky celebrated a victory Thursday after federal labor regulators found that Amazon violated labor law by trying to prevent workers there from unionizing. The employees have been demanding higher pay, more flexible schedules and safer working conditions since 2022.

Why did Amazon go from books to everything? ›

Bezos' Vision for Amazon's Growth and Innovation

From the early days of Amazon as an online bookstore, Bezos had a grand vision for the company's growth and innovation. He saw the potential for Amazon to become the “everything store” and expand into new product categories.

What 30 year old makes $1.8 million self-publishing on Amazon? ›

Krout, who is now 30 and lives in Kansas, was enjoying these books as a reader, so for fun, he decided to write one, titled "Dungeon Born." He completed it in October 2016 and immediately published it on Amazon, not bothering to hire a copyeditor or cover designer.

What percentage does Amazon take from eBook sales? ›

Kindle publishers are paid either a 35% or 70% royalty for each book sold. Amazon takes 65% on books that sell below $2.99 and above $9.99.

Does Amazon sell more eBooks than printed books? ›

The company said last July that sales of e-books outnumbered hardcover books and it said in January that the same was true for paperbacks. For Amazon, though, the milestone is proof that it has successfully leapt from a print business to a digital one, a transition that has challenged most companies that sell media.

Which author refuses to sell on Amazon? ›

'I'm not worried about fame or glory': Lydia Davis, the author who has refused to sell her book on Amazon. Lydia Davis is a miniaturist with sizable intentions.

Do authors get royalties from books sold on Amazon? ›

KDP offers a fixed 60% royalty rate on paperbacks sold on Amazon marketplaces where KDP supports paperback distribution. Your royalty is 60% of your list price.

Why are publishers worried about eBooks? ›

Publishers worry that one-click access through libraries will discourage readers from purchasing books.

What is the dispute between Amazon and Future Group? ›

Amazon and Future Group are engaged in a multi-forum litigation on the issue of FRL's merger deal to the tune of Rs 24,500 crore with Reliance Retail Limited after the US e-commerce giant dragged FRL into arbitration at the Singapore International Arbitration Centre in October 2020.

What did Amazon get accused of? ›

In July 2020, Amazon, Apple, Google and Meta were accused of using excessive power and anti-competitive strategies to quash potential competitors. Their CEOs appeared in a July 29 teleconference before the U.S. House Antitrust Subcommittee.

What was the ruling in Hachette v Internet Archive? ›

On March 25, 2023, the court ruled against the Internet Archive. In August 2023, the parties reached a negotiated judgment, including a permanent injunction preventing the Internet Archive from distributing some of the plaintiffs' books. In September 2023, the Internet Archive appealed the decision.

What has Amazon been accused of? ›

Amazon has faced criticism for its pay structure in the past. In 2021, current and former Amazon employees filed five discrimination lawsuits against Amazon, alleging the company fosters a culture in which they were sexually harassed, paid less than male peers, referred to with racial slurs and retaliated against.

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