Hachette CEO’s Response to Amazon Advocate Emails: Why We Price Books the Way We Do

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According to a company spokesperson, Hachette CEO Michael Pietsch has received “a few emails” in response to a call earlier this weekend by Amazon to contact the executive, demanding he and his company give in to the retailer’s demands for lower ebook prices.

In response to those emails, Pietsch is sending the below note. In it, he responds to questions about ebook pricing and about how his company makes money in general. At the end, he says that Hachette is “negotiating in good faith,” something Amazon accused Hachette of not doing, and calls for Amazon to “withdraw the sanctions against Hachette authors,” which include fewer discounts, longer shipping times for titles, and no pre-orders for upcoming books.

While the Hachette spokesperson was unable to provide an exact number of emails Pietsch received, she told Digital Book World, “he heard from a lot of people.”

Here is Pietsch’s entire email response below, provided to Digital Book World by a Hachette spokesperson:

Thank you for writing to me in response to Amazon’s email. I appreciate that you care enough about books to take the time to write. We usually don’t comment publicly while negotiating, but I’ve received a lot of requests for Hachette’s response to the issues raised by Amazon, and want to reply with a few facts.

• Hachette sets prices for our books entirely on our own, not in collusion with anyone.

• We set our ebook prices far below corresponding print book prices, reflecting savings in manufacturing and shipping.

• More than 80% of the ebooks we publish are priced at $9.99 or lower.

• Those few priced higher—most at $11.99 and $12.99—are less than half the price of their print versions.

• Those higher priced ebooks will have lower prices soon, when the paperback version is published.

• The invention of mass-market paperbacks was great for all because it was not intended to replace hardbacks but to create a new format available later, at a lower price.

As a publisher, we work to bring a variety of great books to readers, in a variety of formats and prices. We know by experience that there is not one appropriate price for all ebooks, and that all ebooks do not belong in the same $9.99 box. Unlike retailers, publishers invest heavily in individual books, often for years, before we see any revenue. We invest in advances against royalties, editing, design, production, marketing, warehousing, shipping, piracy protection, and more. We recoup these costs from sales of all the versions of the book that we publish—hardcover, paperback, large print, audio, and ebook. While ebooks do not have the $2-$3 costs of manufacturing, warehousing, and shipping that print books have, their selling price carries a share of all our investments in the book.

This dispute started because Amazon is seeking a lot more profit and even more market share, at the expense of authors, bricks and mortar bookstores, and ourselves. Both Hachette and Amazon are big businesses and neither should claim a monopoly on enlightenment, but we do believe in a book industry where talent is respected and choice continues to be offered to the reading public.

Once again, we call on Amazon to withdraw the sanctions against Hachette’s authors that they have unilaterally imposed, and restore their books to normal levels of availability. We are negotiating in good faith. These punitive actions are not necessary, nor what we would expect from a trusted business partner.

Thank you again and best wishes,

Michael Pietsch

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45 thoughts on “ Hachette CEO’s Response to Amazon Advocate Emails: Why

We Price Books the Way We Do ”

From the Amazon letter: 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. – My comment: Is this true? Are you paying penalties because you’ve been found guilty of this? I was wholly on your side, but I am yet another consumer tired of being screwed over by big companies. I know Amazon would do the same in an instant, and probably already has, because in this society, nothing is as important as the almighty dollar – but… Why did you not address this in your email? Are you guilty?

Are you guilty? The Department of Justice and a federal judge certainly think so.

Your notion that the publishers are price-fixing ignores one fact: in a typical distribution model, the manufacturer determines the price it will charge the channel, and the channel is free under law to charge whatever it wants (though the manufacturer can restrict its ability to advertise prices below a certain point). Amazon will not allow the manufacturers to set the prices they charge Amazon — they price-fix by setting the margins they will accept, which, in turn, forces the retail price. It is Amazon that is price-fixing.

This is inaccurate. Publishers were receiving the full wholesale price of any books sold to Amazon. The dispute is that they wanted to control the price that Amazon was reselling — this is exactly what the agency model was all about. Under the agency model, the reseller wasn’t treated as an independent retailer who owned the good after purchasing it from the publisher and could sell it or keep it or do whatever they pleased with it, but as a selling agent of the publisher.

You’re right about some things, but you don’t have the whole picture. Publishers do set the wholesale price, but they set it based on the costs associated with making a book. There are editors, designers, agents, people who work in marketing, sales, finance, and other departments within a publishing house. When you buy a cup of coffee from Starbucks, you’re paying for the coffee that was prepared by a barista, roasted by a roaster, in a cup made by a manufacturer, both items shipped in from somewhere. You pay for a lot of invisible costs. Publishers are in it to make money, yes, because they have people to pay for working for them.

“Publishers do set the wholesale price, but they set it based on the costs associated with making a book.”

Agree 100%. Why are they trying to dictate to the retailer how much they can charge? If that retailer decides to run with a loss leader, why should they not be allowed to do it? It happens all the time in retail.

“[. ]editors, designers, agents, people who work in marketing, sales, finance, and other departments within a publishing house”

DM, your post included nothing about the most critical point in the process–the authors themselves, and quite frankly, they are the ones getting screwed no matter who decides to set the ebook price (authors are paid royalties of a percentage of net, in the vast majority of cases). Hachette and its colluders would like to keep ebook prices higher because they were…some would say, “shamed” into paying authors 25% net royalties on ebooks, as opposed to between 4% and 8% for print copies. Publishers keep a much larger chunk of print books than they do ebooks–it’s in their best interest to keep ebooks prohibitively expensive. Amazon may be no prize, but Hachette loves its authors the way Nike loves its sweatshop workers.

Source: www.digitalbookworld.com

Category: Advocate

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