Tuesday, May 27, 2014

Economy/Books: Amazon Versus Hachette - Who`s The Evil One?

(Drivebycuriosity) - There is a fight going on on the book market. Amazon.com is struggling with the french book printer Hachette, who is No 4 on the US market. Amazon wants to sell e-books really cheap, much cheaper than printed copies; publishers like Hachette want to keep the virtual versions expensive and sell them almost at the same price as printed books.

Amazon is now putting the French under pressure and is playing a rough game: According to the media they lifted prices for Hachette books, are shipping them at a slower pace and are recommending titles from other publishers. They also refuse to take pre-orders for coming Hachette books.

There is now an anti-Amazon front in the media. Newspapers and magazines like "New York Times", "Fortune" "TechCrunch" and others are taking side with Hachette and are bashing the online retailer (nytimes  fortune). The Amazon bashers claim that they represent the interests of the readers & authors and lament that Hachette books are less available via Amazon now. But anyone can still get a Hachette book from an Amazon competitor. So what?

Amazon is acting in the interests of the readers (driveby). E-books have much lower costs than printed books because there are zero expenses for paper, printing, storing and distributing. It costs almost nothing to produce a virtual book. So, why are e-books often priced like printed books?

Publishers like Hachette are monopolists; no one else is allowed to publish their books (except you buy an expensive license which is usually done by publishers in foreign languages). Publishers have been abusing their monopoly power for decades by pricing books - and especially e-books - too high. According to the Wall Street Journal e-books have a profit margin of 75%! That means that 3 quarter of the selling price go to the publisher, not to the author.

Contrary to Hachette and other publishers, Amazon is not a monopolist. The online retailer has a profit margin close to zero and has to compete against Apple, Google and a lot of other online retailers. Soon the Chinese e-commerce giant Alibaba, who already dominates his home market, will arrive on the global markets (they already invested in ShopRunner, who competes against Amazon Prime). Why then do New York Times & Co. take the French monopolist`s part?

Amazon`s is turning the heat on Hachette because they want to tame the monopolistic power of the publishers. They want to force them to price e-books much cheaper, thus ceding a part of their 75% profit margin. If Amazon wins the fight not only the readers will benefit. Authors also would be winners because cheaper e-books mean more buyers, especially lesser known authors (those who aren´t in the bestseller lists) would find more readers.

Btw: The world is changing faster and faster - and the Internet is disrupting everything. If Amazon didn´t tame the publishers, then maybe Google, Alibaba or some newcomers would do that soon. I believe times have changed for monopolists like Hachette.

Disclosure: I am an investor in Amazon.com, user of a Kindle and subscriber of Amazon Prime.

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