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| Amazon war with Hachette over ebook profit margins intensifies | Amazon war with Hachette over ebook profit margins intensifies |
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| 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? | 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 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 JK Rowling 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. | The dispute has also dragged in JK Rowling 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. | 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. | 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. | 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. | 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. | "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. | 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. | 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. | 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. | 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. | 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." | 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. | 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." | "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. | 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. | 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 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 did not respond to requests for comment. |
| • This article was amended on Tuesday 27 May 2014 to correct the description of David Gaughran's commentary |