retail news in context, analysis with attitude

Business Insider reports that in a blog posting, Amazon has gotten specific about its rationale in picking a fight with publisher Hachette over costs, saying that it wants a system in which 35 percent of all e-book revenues go to authors, 35 percent to publishers, and 30 percent to Amazon.

The statement contradicts a rumor that Amazon was looking for a 50 percent cut when it decided to slow down the shipment and availability of Hachette-published books until the pricing dispute was settled.

According to the story, "In its post, Amazon makes a mathematical plea for why most e-books should be priced at $9.99, instead of $14.99 or $19.99, given that they don't require printing, storage, or transportation. The company says it's found that e-books priced at $9.99 sell 1.74 more copies than when they're priced at $14.99. If you carry that factor to an instance of selling either 100,000 books at $14.99 or 174,000 copies at $9.99, total revenue increases 16%, and authors get an audience that's 74% larger."

In other words, authors who have sided with Hachette in this dispute need to think again.

"Keep in mind," Amazon writes, "that books don't just compete against books. Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive."
KC's View:
Of course, the real argument that Amazon is making is that traditional big publishing houses may have outlived at least part of their usefulness in a publishing world where technology has allowed a kind of democratization of content availability. Publishers no longer serve as the gatekeepers when it comes to what gets published and what does not, and therefore they ought to take a haircut when it comes to revenue.

Which is a pretty persuasive argument, I think.