Amazon fights with publisher Hachette over the price of ebooks

Amazon continues to solidify its grip over books sales. As first reported yesterday by Business Insider, the online retail giant has signed a multi-year pact to sell new paper books and ebooks from CBS-owned Simon & Schuster, one of the largest publishing companies in the world. The full terms of the deal haven't been disclosed, but it puts an end to months of difficult negotiations and ensures that Simon & Schuster book titles will be prominently promoted on Amazon's website, according to The Wall Street Journal. Simon & Schuster touted the deal as a victory for its authors in a letter it sent them, noting that it preserves the authors' share of ebook sales going forward. But the deal is perhaps most strategically advantageous for Amazon, which reportedly can discount Simon & Schuster titles at will under certain conditions.

Amazon is still locked in a bitter dispute with another separate big book publishing company, Hachette, over a proposed new contract that would require the vast majority of Hachette ebooks to be listed for $9.99 or less on Amazon. Hachette balked and Amazon retaliated by removing option to pre-order new Hachette books online and delaying shipments by weeks. The two sides are still fighting it out, each trying to rally public support for their side, while customers and authors are caught in the middle. Amazon's new deal with Simon & Schuster could advantage Simon & Schuster books in the short-term and make it harder for Hachette to hold out.

Amazon has fired its latest shot in what has become a protracted battle with book publisher Hachette. The retailer has published an open letter to readers admonishing Hachette for refusing to agree to a new contract. The letter, titled "Readers United," paints the publisher as a big business that's set in its old-fashioned ways, likening Hachette to the publishers of old that fought to suppress cheap paperback books in the ‘30s.

The online retailer is seeking new contract terms with Hachette that would see most ebooks sell for $9.99 or less. It also wants a 30 percent cut, an amount that the company says Hachette itself originally proposed in 2010. Amazon echoes an earlier letter, saying that $14.99 to $19.99, the current price of many ebooks being released by the publisher, "is unjustifiably high for an ebook." It notes that ebooks are less expensive to produce and don't have the same stocking or resale concerns as physical copies. "Ebooks can and should be less expensive," Amazon's books team writes.

Nearly 900 writers, including Stephen King, John Grisham, Jennifer Egan, and Donna Tartt, have signed a letter objecting to the aggressive tactics that Amazon has been using to gain leverage over the book publisher Hachette, according to the Guardian. As part of what appears to be an attempt to renegotiate the split of revenue on ebook sales in its favor, Amazon has effectively begun discouraging its shoppers from buying Hachette books by not offering preorder options and by pushing their shipping times back by weeks in some cases. While this is clearly damaging to Hachette, it's also damaging to the authors, who might otherwise be seeing more substantial royalties through book sales. The dispute has been going on for over two months now.

"We're not against Amazon as a company — we would like to see it sell books, be profitable and successful," Douglas Preston, a thriller author and the organizer of the letter, tells the Guardian. "What we object to is harming authors who have nothing to do with this dispute to gain leverage." The letter, which opposes what Preston calls Amazon's "thuggish behavior," is not yet public. Preston reportedly intends to publish it as a full-page ad in The New York Times, though there's no date given for when this might be.

For months, authors have complained about being caught in the middle of a very public spat between Amazon, the world's largest bookseller, and publisher Hachette. Amazon has aggressively worked to secure better contract terms with the publisher, and in the process has turned to controversial "negotiation tactics" like halting pre-orders for upcoming Hachette books, cutting down on physical inventory, and hitting customers with abnormally long shipping delays. But now the company is offering to reverse those decisions, which authors have roundly criticized as unfair and a glaring example of Amazon abusing its dominant market position.

Now, Amazon says it's willing to give authors something more: a bigger cut of ebook sales. The online retailer has offered to provide Hachette authors with 100 percent of ebook revenues as negotiations between the two sides continue. Both The Wall Street Journal and The New York Times are reporting that Amazon has circulated the offer via a letter sent to authors and their agents.

Amazon's spat with publishing conglomerate Hachette has been unofficial but well-documented, as the retail giant uses its considerable muscle to gain more favorable terms in a deal with one of its largest book partners. On Tuesday it swung its biggest hammer yet, saying formally that it's buying less inventory from Hachette and is no longer taking pre-orders on its books. That means that while you can still buy a Hachette book on Amazon, you can't do so ahead of its publication date, and the company will only buy the book from Hachette when you buy it from Amazon. That means slow shipping and no cheaper prices — none of the perks of being an Amazon supplier or customer.

In some ways the move is just a formalizing of what Amazon has been doing for weeks as it has negotiated with Hachette, primarily over the price of ebooks. In a note in its forums, the company compares itself to a bookstore, saying that while it wouldn't cease sales of Hachette books, it has every right to essentially deter them. "A retailer can feature a supplier's items in its advertising and promotional circulars, "stack it high" in the front of the store, keep small quantities on hand in the back aisle, or not carry the item at all, and bookstores and other retailers do these every day." The note goes so far as to recommend that buyers look for Hachette books among its third-party sellers, or even buy from one of Amazon's competitors.