e-Books: Averting a Digital Horror Story
Amazon.com’s growing might and the sizzling success of the Kindle has publishers terrified. Hachette, Harlequin, and others are fighting back
By Spencer E. Ante
On Christmas Day, for the first time in its history, Amazon.com (AMZN) sold more digital books than the old fashioned kind. It was a watershed moment for the book industry—but it’s scaring the hell out of traditional publishers. Even though they make the same amount on sales of both kinds of books, they see Amazon’s digital dominance as a looming threat to their business, and with good reason. Their big worry: Amazon will end up with the same kind of pricing power in books that Apple has in music, and that the book industry will suffer the same kind of bruising decline.
One goal for publishers is to dilute Amazon’s power. Hachette is selling e-books through more than a dozen partners, including Sony, Apple, and small retailers such as Fictionwise. By partnering with multiple outlets, publishers hope to regain control over pricing and gather purchasing data that could fuel future sales. They’re unhappy Amazon has dropped the price of some new digital best-sellers to as little as $7.99, compared with $35 for hardcovers. Hachette and Simon & Schuster plan to delay the release of certain digital books for several months to avoid undercutting the sale of best-sellers. “We are giving away the family jewels,” says David Young, chairman and chief executive of Hachette Book Group, which publishes authors Malcolm Gladwell and Walter Mosley.
Publishers are typically paid about half the hardcover’s retail price, whether a digital book or hardcover is sold. But Amazon has been pushing to pay them less, and many publishers think cheap digital books will open the door to lower industry revenues in the future. Amazon, for its part, says publishers’ concerns are overblown. “We are selling a lot of books for publishers. We feel like that relationship continues to be a good one,” says Ian Freed, Amazon’s vice-president for the Kindle business.