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Why Hachette Had to Settle: Revenues Fell 18% in Third Quarter

Much ink has been spilt over the past day on the subject of Amazon, Hachette, and their new book contract, and while we don’t know who got the better end of the deal there is strong evidence to suggest that Hachette blinked first.

Buried under the news coverage of the new contract was another story which offers insight into Hachette’s motivations. PW reported yesterday that Hachette’s US revenues were down considerably from last year:

Third quarter sales at Hachette Book Group USA fell 18.5% in the period ended September 30, 2014 compared to the third quarter of 2013, parent company Lagardere reported. The decline was attributed to difficult comparisons with last year when the company had an “unusually high” number of bestsellers led by The Longest Ride, Lagardere said. The “difficult situation” with Amazon also impacted sales and HBG also postponed some titles, Lagardere said.

For all of Lagardere Publishing, revenue in the quarter fell 2.9%, to 564 million euros. In addition to softness in the U.S., sales were down in France and the U.K., but rose in Spain/Latin America.

While revenues were down in most of Lagardère’s publishing divisions, the sharpest decline by far happened in the US and was likely due to the ongoing contract dispute with Amazon.

Given the steep decline in revenues and the timing of news, I think it’s clear that Hachette struck a deal before they released the quarterly report, before they had to admit just how big of hit they took from letting the contract lapse earlier this year.

If they had waited until after the quarterly report, I bet Amazon would have turned the screws another notch – or even worse, let the negotiations drag on until after the lucrative holiday season had already begun.

And with S&S already having signed a deal with Amazon, there wasn’t going to be any chance of another major publisher negotiating with Amazon for another 9 months. That’s much longer that Hachette could have afforded to wait.

image by Ida Myrvold

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fjtorres November 14, 2014 um 7:12 pm

Money quote:

"Pietsch noted that the agreement with Amazon “will be a wonderful boost to the end of the year.”

Bury the Hachette: Amazon and book publisher settle their differences | Anthony's Notes November 14, 2014 um 8:55 pm

[…] seem mixed on the outcome of this. A few (such as The Digital Reader blog) thinks Hachette was forced to blink due to lowered quarterly revenue concerns, while others […]

puzzled November 15, 2014 um 2:48 pm

And now Hachette will use the lack of sales and loss of revenue to go after its authors.

Greg Strandberg November 15, 2014 um 11:03 pm

I think your point about the lucrative holiday season is one of the biggest. I do wonder what many of the self-publishing news sites will put up now, however.

I’m afraid many will feel lost for some time. We could even see some fold as they grasp for ideas in this new post 'wasting-of-time' world.

And what will writers complain about next? There is indeed a huge new black hole on the landscape.

Jonah November 16, 2014 um 10:23 pm

The damage is done. I think this dispute has had the unintended consequence of educating readers how little authors are paid in comparison to the cut the publisher takes.

Episode 33 – Happiness, Author Ethics and Hachette Makes a Deal | Sell More Books Show November 19, 2014 um 9:41 am

[…] Hachette’s Olive Branch #3 […]

Amazon y las siete imposturas de Jorge Carrión – El blog de Bernat Ruiz April 10, 2017 um 3:30 pm

[…] negociando con Hachette, uno de los diez grupos editoriales más grandes del mundo que, por cierto, lo notó en su cuenta de resultados. De hecho Amazon ni siquiera pierde el tiempo extorsionando a los pequeños, se limita a publicar […]

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