The net of the spat is that Amazon understands the economics for fiction sales, especially e-books, which are highly elastic (for those of you in Boston, that means the lower the price, the more units you sell). Hachette, on the other hand, sets prices artificially high and "discounts" them heavily based on volume orders. In order to preserve the sales of hardbound books, Hachette prices the e-book versions higher than the paperback version that come out after hardbound sales taper off. Amazon thinks that is stupid and has built a pricing model to reflect the same. This is a great boon to the consumer.
Because Hachette doesn't like giving up control, they have dug their heels in. Amazon's response was to take Hachette at its word, and charge the artificially high prices that were Hachette's MSRP. Furthermore, Amazon would not pre-order Hachette books or keep them in stock.
Authors and pundits have taken sides and the ensuing kerfluffle has been most entertaining. Me? I am on the side of the consumer, therefore, I support Amazon. Here is a little piece I wrote in another venue back in the spring when this cranked up:
The fight isn't over and both sides are still heaving salvos at each other. Recently, Rob Spillman, part of the establishment publishing industry, wrote a piece for Salon about why he thinks Amazon needs to be curtailed. Unfortunately for Mr. Spillman, he did not have many facts in his op-ed, and he didn't use much logic. This set him up for one of the best and most thorough fiskings that I have ever read in my life over on JA Konrath's blog.Amazon, whose position as a literature retailer was solidified after the Apple and large publishing houses were sued under federal antitrust laws for an attempt to fix the prices of e-books, is now at it again, going head-to-head with French publishing house, Hachette.For those of you not in tune with the publishing industry, what Amazon is doing is to refuse to continue the extreme discounting of artificially high retail prices assigned by the publishing houses, particularly for e-books. As a mass market retailer, Amazon can only sell books with a profit margin up to a certain price, depending upon the medium, length, and popularity of the author. Because of the way the publishing distribution discount system works, books which have a higher retail price require a higher distribution price. This means Amazon makes about half the margin on a more expensive, but steeply discounted book from the major publishers.Hachette's first complaint was rooted in the fact that Amazon is now selling its books for the price that Hachette itself suggests. Now, Amazon is not pre-ordering potential blockbusters, like J. K. Rowlings' new book, SILKWORM, or building inventory for other popular books from Hachette. Because of Amazon's customer loyalty and purchasing power, this has the effect of slowing down Hachette's sales, and deflating best-seller status of Hachette's offerings.Hachette needs to understand the new economic realities, or the market will leave them behind. The future is e-books. Clearly, e-books do not cost near as much to produce as hardcopy books, since there is no printing, binding, etc. The large publishing houses need to pass that savings on to the consumer, instead of conspiring to prop up artificial prices. One would think that the big publishing houses could have read the writing on the wall after the antitrust suit.The sad part is that Hachette's authors are the ones that are suffering. The authors' royalty per unit would be the same or maybe slightly lower with Amazon's model, but with the lower retail price, they would sell many more copies, putting more money into the authors' pockets.
The traditional publishing model is a dinosaur going head-to-head with 21st century technology. I suspect in 50 years, young economics students will see traditional publishing replace the "buggy whip" symbology that was used on us when referring to technological obsolescence.
While most of the press around the Amazon-Hachette dispute revolves around economics, the more important point is ignored. That is, the political aspect. The gatekeepers can no longer control the narrative. Everyman can publish now, and they may have thoughts and opinions which are not sympathetic to the progressive-collectivist worldview. I suspect this is the real reason so many are taking sides with Hachette when there is no logical reason to do so.