In an apparent pre-emptive strike, Amazon is appealing to readers and authors to take its side in an increasingly acrimonious pricing dispute with book publisher Hachette.

The giant bookseller posted an appeal on its Readers United site in which it laid out its case for dropping the price for electronic books and urged customers to contact Hachette Book Group Chief Executive Michael Pietsch (whose email Amazon provides) and lobby him to end “your illegal collusion” and stop “working so hard to overcharge for ebooks.” It even sought to use “1984” author George Orwell — in an apparent contortion of the novelist’s own words — to make its case about publishers resisting change.

It made a similar pitch to authors, including Facebook executive Sriram Krishnan, who tweeted out the text of his email from Amazon last night.

The retail giant apparently is seeking to defuse the impact of a full-page ad that will appear in the New York Times on Sunday signed by 900-plus authors. In the open letter, a group known as Authors United calls on Amazon to settle its dispute with Hachette and asks readers to send email messages to Amazon CEO Jeff Bezos at his Amazon email address, which is printed in the letter.

The world’s largest bookstore and the giant publisher have been locked in the dispute since May.

Over the course of negotiations, Amazon stopped accepting pre-orders of Hachette books and slowed mail delivery, as the retailer sought to reduce the digital copy price to $9.99 from $14.99. Rival Apple made hay from this feud, prominently promoting upcoming books from Hachette authors James Patterson and J.K. Rowling.

In its pitch to consumers and authors, Amazon sought to draw parallels in its current dispute with Hachette to the publishing world’s resistance to an earlier “radical innovation” — the paperback. Publishers aligned against the new format, which would be sold for 25 cents, or a tenth of the price of a hardcover book, deeming it a threat to literature as well as their own profits.

Amazon cited, as an illustration of the industry’s resistance to change, a quote from Orwell.

“The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.’ Yes, George Orwell was suggesting collusion,” Amazon wrote. “Fast forward to today, and it’s the e-book’s turn to be opposed by the literary establishment.”

The New York Times notes that the novelist was misinterpreted.

The complete text of the novelist’s remarks, published in 1935, reveal a tongue-in-cheek celebration of the paperback novel, at least from the reader’s standpoint. “Penguin books are splendid value for sixpence, so splendid that if the other publishers had any sense, they would combine against them and suppress them,” Orwell said.

But speaking to the broader implications for the industry, he said, “It is of course a great mistake to imagine that cheap books are good for the book trade. Actually it is just the other way about. … The cheaper books become, the less money is spent on books.

Lowering book prices “is an advantage from the reader’s point of view and doesn’t hurt trade as a whole,” he went on, “but for the publisher, the compositor, the author and the bookseller, it is a disaster.”

Here’s the text of Amazon’s appeal:

A Message from the Amazon Books Team

Dear Readers,

Just ahead of World War II, there was a radical invention that shook the foundations of book publishing. It was the paperback book. This was a time when movie tickets cost 10 or 20 cents, and books cost $2.50. The new paperback cost 25 cents — it was ten times cheaper. Readers loved the paperback and millions of copies were sold in just the first year.

With it being so inexpensive and with so many more people able to afford to buy and read books, you would think the literary establishment of the day would have celebrated the invention of the paperback, yes? Nope. Instead, they dug in and circled the wagons. They believed low cost paperbacks would destroy literary culture and harm the industry (not to mention their own bank accounts). Many bookstores refused to stock them, and the early paperback publishers had to use unconventional methods of distribution — places like newsstands and drugstores. The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.” Yes, George Orwell was suggesting collusion.

Well … history doesn’t repeat itself, but it does rhyme.

Fast forward to today, and it’s the e-book’s turn to be opposed by the literary establishment. Amazon and Hachette — a big US publisher and part of a $10 billion media conglomerate — are in the middle of a business dispute about e-books. We want lower e-book prices. Hachette does not. 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 and should be less expensive.

Perhaps channeling Orwell’s decades old suggestion, Hachette has already been caught illegally colluding with its competitors to raise e-book prices. So far those parties have paid $166 million in penalties and restitution. Colluding with its competitors to raise prices wasn’t only illegal, it was also highly disrespectful to Hachette’s readers.

The fact is many established incumbents in the industry have taken the position that lower e-book prices will “devalue books” and hurt “Arts and Letters.” They’re wrong. Just as paperbacks did not destroy book culture despite being ten times cheaper, neither will e-books. On the contrary, paperbacks ended up rejuvenating the book industry and making it stronger. The same will happen with e-books.

Many inside the echo-chamber of the industry often draw the box too small. They think books only compete against books. But in reality, books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.

Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. The important thing to note here is that the lower price is good for all parties involved: the customer is paying 33% less and the author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. The pie is simply bigger.

But when a thing has been done a certain way for a long time, resisting change can be a reflexive instinct, and the powerful interests of the status quo are hard to move. It was never in George Orwell’s interest to suppress paperback books — he was wrong about that.

And despite what some would have you believe, authors are not united on this issue. When the Authors Guild recently wrote on this, they titled their post: “Amazon-Hachette Debate Yields Diverse Opinions Among Authors” (the comments to this post are worth a read). A petition started by another group of authors and aimed at Hachette, titled “Stop Fighting Low Prices and Fair Wages,” garnered over 7,600 signatures. And there are myriad articles and posts, by authors and readers alike, supporting us in our effort to keep prices low and build a healthy reading culture. Author David Gaughran’s recent interview is another piece worth reading.

We recognize that writers reasonably want to be left out of a dispute between large companies. Some have suggested that we “just talk.” We tried that. Hachette spent three months stonewalling and only grudgingly began to even acknowledge our concerns when we took action to reduce sales of their titles in our store. Since then Amazon has made three separate offers to Hachette to take authors out of the middle. We first suggested that we (Amazon and Hachette) jointly make author royalties whole during the term of the dispute. Then we suggested that authors receive 100% of all sales of their titles until this dispute is resolved. Then we suggested that we would return to normal business operations if Amazon and Hachette’s normal share of revenue went to a literacy charity. But Hachette, and their parent company Lagardere, have quickly and repeatedly dismissed these offers even though e-books represent 1% of their revenues and they could easily agree to do so. They believe they get leverage from keeping their authors in the middle.

We will never give up our fight for reasonable e-book prices. We know making books more affordable is good for book culture. We’d like your help. Please email Hachette and copy us.

Hachette CEO, Michael Pietsch: Michael.Pietsch@hbgusa.com

Copy us at: readers-united@amazon.com

Please consider including these points:

  • We have noted your illegal collusion. Please stop working so hard to overcharge for ebooks. They can and should be less expensive.
  • Lowering e-book prices will help — not hurt — the reading culture, just like paperbacks did.
  • Stop using your authors as leverage and accept one of Amazon’s offers to take them out of the middle.
  • Especially if you’re an author yourself: Remind them that authors are not united on this issue.

Thanks for your support.

The Amazon Books Team




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