The Amazon.com (NASDAQ:AMZN) vs. Hachette battle has ended, with the two companies settling their differences and reaching a multiyear agreement that will fully return the publisher's books to the online retailer.
That's good news for writers who had essentially been caught in the crossfire between the two companies. During the protracted disagreement, Amazon did not allow for pre-orders on Hachette titles, which hurt sales and kept authors off best-seller lists. Pre-orders can account for as much as 25% of the total sales for a title, USA TODAY reported, adding that Amazon accounts for an estimated 40% of all new books sold and 65% of e-books.
Take away the pre-sale, and you're not just harming consumers who like to plan ahead; you're in many cases killing a book before it even has a chance to launch properly.
Authors, however, aren't the only winners with this deal. For the most part, it's a huge positive for consumers, though there was one concession Amazon made that the public may not enjoy.
Hachette retains the right to set e-book prices
One of the key things that kept the companies from making a deal is that Amazon wanted Hachette to commit to lower e-book prices. The online retailer made a compelling case for doing so in a public letter from the Amazon books team. In the letter, the company detailed why it believes e-books should cost less than printed ones:
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 and should be less expensive.
And while Amazon has received the lion's share of the negative publicity during the dispute, it was entirely right that e-books shouldn't cost more than $9.99 in most cases. Hachette, however, would not relent, and Amazon ultimately conceded.
That's not good for consumers, nor is it good for authors. Paperbacks cost less than hardcovers because they're cheaper to produce. The same is true for digital books. Lower prices lead to larger sales, more sampling by readers, and a better chance for a positive consumer experience.
This agreement sets parameters for future deals
While consumers may still pay more for certain Hachette e-books, the fact that this deal exists now makes it easier for Amazon to avoid similar disputes as other publisher agreements come up for renewal. Since Hachette is one of the largest publishers, its actions essentially set a precedent that can be used to make other companies come on board.
When the Hachette dispute first became public, Amazon looked to be at a tipping point. If it lost access to Hachette products and other companies followed suit, it could have lost leverage and had to make less favorable deals. That might have been good for the publishers but it would have been bad for consumers, who almost certainly would be paying more for books if Amazon wasn't dictating terms to the industry.
Hachette has an incentive to lower prices
Hachette can continue to set e-book prices higher than Amazon's desired $9.99 ceiling, but perhaps it won't. A quote in the very brief press release announcing the deal showed that the company had reasons to attempt to lower its prices.
"We are pleased with this new agreement as it includes specific financial incentives for Hachette to deliver lower prices, which we believe will be a great win for readers and authors alike," said Kindle VP David Naggar.
Nothing more was explained, and no terms of the deal have been released, but an incentive for the publisher to charge less to consumers is certainly a good thing.
Generally, it's good for consumers
Amazon has made books cheaper and book publishers less important. In doing so, it has lowered book prices and made it possible for authors to release books and succeed without needing a company like Hachette on board. That's bad for the publishers, but it's hard to see where it's been bad for consumers. Eliminating, or at least lessening the impact of, a middleman lowers prices.
There are countless e-books on Amazon available below $5, and some authors have built a following by offering the first book in a series for free or very little, to hook customers and sell them later books at still-reasonable prices. Hachette, and other publishers, may still have a place in the process, but it's no longer an exclusive one.
Ultimately, if prices fall, and that seems likely, the reading public wins.
Daniel Kline has no position in any stocks mentioned. He reads a lot of books, almost all bought through Amazon. The Motley Fool recommends and owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.