Kris Rusch: Amazon is in a Price War With Publishers
Amazon surprised many pundits over the past year as they signed deal after deal that gave publishers control over ebook prices, but now I think we know why.
While Amazon was publicly fighting with Hachette last summer and fall, it also quietly negotiated a new "agency lite" contract with Simon & Schuster. That deal was followed by similar quiet negotiations that resulted in deals with Macmillan and HMH, and not so quiet negotiations that lead to deals with HarperCollins and then Penguin.
No one is talking about the specifics of those contracts, but from what we can see from the outside all of those deals involved publishers having control over their ebook prices (ie, Agency). Given how Amazon bitterly fought against Agency pricing, these deals came as a shock.
I think Kristine Katherine Rusch may have the explanation. She was browsing for books and noticed that while the ebook prices were consistent, Amazon’s prices for paper books were shockingly low:
Agency pricing has returned to ebooks, which means that publishers are setting their own ebook prices and the retailers, like Amazon, are not discounting. The ebook price on Amazon is clearly a price-match with Barnes & Noble, not something that Amazon has done.
I poked around Amazon, looking at e-book prices, and almost fell off my chair for a second time. Lisa Scottoline’s next book, which releases in October, has a $14.99 ebook. So does Michael Connelly’s November release. And Stephen King’s November release. Robert Crais’s next book shows a $12.70 Kindle edition paired with a $13.37 hardcover. Does that sound familiar?
And what’s fascinating to me is that these books, and the dozens of other traditionally published upcoming releases that I looked at are coming out of different publishing companies. Not different imprints of the Big 5, but each of the Big 5.
Once again, pricing seems…agreed upon.
After some more digging, she concluded that "Amazon is leaving the ebook prices—set by the publisher—alone…and messing with the paper prices":
I mean seriously messing with the paper prices. I should not have been able to get a brand-new hardcover for more than half off the list price on the day the book released. Maybe at Christmas. Maybe nine months from now, as the publisher gets ready to release the mass market paperback.
But now? Release day? Seriously?
I looked at all of my other preorders and found the same issue. The hardcovers are the same price—or nearly the same price—as the Kindle edition.
Rusch thinks that Amazon has accepted that it can’t win the ebook fight with the major publishers and has instead turned to fighting a price war by aggressively discounting the print editions.
Basically, if Amazon can’t get the publishers to offer what Amazon sees as reasonable ebook prices, the retailer has decided to make sure that no one is going to buy those expensive ebooks.
I think Rusch is right, because her conclusion also explains why Authors United suddenly launched a media campaign against Amazon a month ago.
Authors United initially formed as an astroturfing group during last year’s bitter negotiation between Amazon and Hachette, so you would think that it would have died when the deal was struck in October 2014, but AU reappeared last month and called for the DoJ to investigate Amazon.
I questioned their motivations at the time, and now I think Rusch has explained it.
Amazon was hitting authors in the pocketbook.
Rusch’s explanation is too long to quote here, but the tl;dr version is that traditionally published authors aren’t making much under the new agency contracts because Amazon was discounting paper book prices to discourage ebook sales, and the authors also weren’t earning anything on print book sales because of those same deep discounts.
The publishers and Amazon are fighting a price war, and traditionally published authors are getting trampled.
Or have I missed something?
images via Flickr
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