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Amazon to Hachette: Lower e-book prices to $9.99 to end dispute

The e-commerce company has made the book publisher a public offer: accept $9.99 e-book prices, and Amazon won't ask for more of each sale.

Nick Statt Former Staff Reporter / News
Nick Statt was a staff reporter for CNET News covering Microsoft, gaming, and technology you sometimes wear. He previously wrote for ReadWrite, was a news associate at the social-news app Flipboard, and his work has appeared in Popular Science and Newsweek. When not complaining about Bay Area bagel quality, he can be found spending a questionable amount of time contemplating his relationship with video games.
Nick Statt
3 min read

Amazon's Kindle Paperwhite e-reader Sarah Tew/CNET

Amazon has made French book publisher Hachette an offer and laid it out for all to see: put a $9.99 ceiling on e-book prices and the e-commerce retailer won't demand a larger percentage of the pie.

In a post on its website, Amazon made the argument for lower e-book prices and outlined that it would be willing to continue accepting 30 percent of e-book sales, its current take, if Hachette stopped pricing titles at $12.99 and $14.99. The company did not suggest that Hachette lower all e-books to $9.99, leaving room for exceptions for specialized titles that warrant higher prices.

Amazon and Hachette, the fourth-largest publisher in the US, have been in a fierce dispute for months over e-book pricing. Though the terms of the negotiations have never been made public, it's been widely believed to stem both from Amazon's desire for a larger percentage of each sale -- 50 precent, not 30 percent -- and Hachette's desire to price e-books above $9.99.

"At $9.99, the total pie is bigger," Amazon wrote. "How does Amazon propose to share that revenue pie? We believe 35 percent should go to the author, 35 percent to the publisher and 30 percent to Amazon...we had no problem with the 30 percent -- we did have a big problem with the price increases."

Amazon did point out however that it would still legally have to give 70 percent to Hachette, which then gives authors their respective cut. "They [Hachette] would decide how much to share with the author. We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call," the company added.

The dispute between Amazon and Hachette heated up in May when the e-commerce company began removing pre-order buttons from upcoming Hachette titles and refusing to restock its books. Amazon said that its licensing deal with Hachette would expire if the two companies could not come to an agreement, so it stopped stocking its titles, resulting in longer shipping times for US customers. In what's become a shot-trading display over every facet of the dispute, Hachette accused the company of purposely delaying shipment and using authors as bargaining chips.

The dispute has thus far affected only US customers, but many in the publishing industry see the fight as emblematic of a larger struggle. Amazon controls, by some estimates, a third of the entire book market and more than half of the e-book market. Prior to today, Amazon has refrained from compromising directly on negotiations.

Hachette, too, has refused to budge on its position -- claiming that it's fighting both for its business and the livelihood of authors, some of whom, including Stephen King and other prominent novelists, have come out in opposition against Amazon over the feud. When Amazon publicly demanded that both companies forgo revenue on e-book sales and give 100 percent of the proceeds directly to authors, Hachette called it suicide.

In its post, Amazon laid out why it sees a $9.99 e-book price as justifiable and, in most cases, more profitable too.

"A key objective is lower e-book prices," the company wrote. "Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market -- e-books cannot be resold as used books. E-books can be, and should be, less expensive."

At $9.99, Amazon says an e-book sells twice as well, and it has stats to prove that the sales result in a 16 percent increase in revenue. "If customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,00."

CNET has reached out to Hachette for comment and will update this story when we hear back.