Amazon bypasses Hachette by offering authors all e-book proceeds

In a move aimed at taking authors out of the current dispute, Amazon bypasses Hachette by offering authors all e-book proceeds. Amazon wrote directly to authors, including Douglas Preston, offering to give all e-book revenues to them.

In other words, is telling authors they can keep 100% of digital-book sales while it and the Hachette Book Group continue their bitter negotiations over a new e-book contract. The letter was sent by David Naggar, an Amazon executive who works with independent authors and publishers.

Preston, co-author of the Pendergast book series, is leading an appeal to readers and authors to get Amazon to resolve the dispute.

Authors caught in the middle

Authors say they are caught in the middle of a nasty dispute between the world’s largest online bookseller and the publishing giant. In its letter to authors, Amazon claims its proposal would help speed up the negotiations with Hachette.

Earlier this year, Amazon blocked pre-orders for some books published by the Hachette Book Group, including J.K Rowlings’ novel “Silkworm”, written under the pseudonym Robert Galbraith. Both publishers want a greater share of e-book revenue.

Hachette depends on Amazon for 60% of its e-book income. Amazon wants to pay Hachette less for each digital-book it sells.

Physical versus digital book markets

US physical-book sales are tumbling, giving way to an accelerating e-book trade. In 2014, physical book sales are expected to decline to $19.5 billion compared to $26 billion four years ago, while e-book sales are forecast to have increased eightfold over the same period to $8.7 billion, according to data published by Forrester Research.

E-book revenue is exploding as more Americans choose to enjoy their literature through tablets, smartphones and e-readers.

Preston believes Hachette would never accept Amazon’s proposal, because the direct payment of e-book sales to authors would violate their contracts with publishers. He believes Amazon’s letter is a negotiating maneuver “rather than a serious attempt to bring the two sides together.

Hachette and Amazon light-years from a deal

Apart from taking out a pre-order button on future Hachette titles, Amazon has also delayed deliveries of its books and reduced the discounts offered on some of its titles.

According to the Wall Street Journal, Hachette said today “Amazon has just sent us a brief proposal. We invite Amazon to withdraw the sanctions they have unilaterally imposed, and we will continue to negotiate in good faith and with the hope of a swift conclusion.”

Amazon responded to the publisher’s statement, referring it to a comment earlier in the day in which it said such a proposal would mean suicide. Amazon wrote “Hachette is part of a $10 billion global conglomerate. It wouldn’t be ‘suicide.’ They can afford it.”

Amazon accuses Hachette of deliberately keeping their authors caught in the middle of the spat because they think it gives them more leverage. “All the while, they are stalling and refusing to negotiate, despite the pain caused to their authors. Our offer is sincere. They should take us up on it,” Amazon said.

Much ado about nothing?

Peter Cohan, writing in Forbes today, believes the extra income for Amazon if it got its way would be about $11.2 million, i.e. 0.014% of the online retailing giant’s $78 billion in revenue. From an investment point of view, he describes this acrimonious dispute as much ado about nothing, “unless winning this dispute forces all the other publishers to cave,” he adds.

Amazon wants Hachette to get less for each digital book it sells, probably so that it can receive a larger slice of the cake.

It is not common to see billion-dollar businesses loud-mouthing each other in public to such an extent. Amazon historically has been extremely media shy. However, as the dispute continues unresolved, perhaps it is trying a new approach.

Amazon’s senior vice-president for Kindle content, Russ Grandinetti, said:

“(The proposal) has several real benefits – to motivate us and Hachette to reach an agreement sooner rather than later and to insulate the authors. It would make things better for readers, too.”

In a New York Times blog, David Streitfeld quotes Roxana Robinson, president of the Authors Guild, who said regarding Amazon’s proposal “If Amazon wants to have a constructive conversation about this, we’re ready to have one at any time. But this seems like a short-term solution that encourages authors to take sides against their publishers. It doesn’t get authors out of the middle of this – we’re still in the middle.”

Amazon vs Hachette dispute

The authors are caught right in the middle of the war of the giants.

Some authors have taken sides

Prominent best-selling authors, such as John Grisham, have signed a petition vowing not to take sides during the dispute.

However, when one looks at their petition’s wording, it is clearly criticizes Amazon. “We encourage Amazon in the strongest possible terms to stop harming the livelihood of the authors on whom it has built its business. None of us, neither readers nor authors, benefit when books are taken hostage.”

More than six thousand authors who use Amazon’s system to publish their works have set up a petition web page at, in which they write:

“New York Publishing once controlled the book industry. They decided which stories you were allowed to read. They decided which authors were allowed to publish. They charged high prices while withholding less expensive formats. They paid authors as little as possible, usually between 2% and 12.5% of the list price of a book.”

“Amazon, in contrast, trusts you to decide what to read, and they strive to keep the price you pay low. They allow all writers to publish on their platform, and they pay authors between 35% and 70% of the list price of the book.”

“Major publishers like Hachette have a long history of treating authors and readers poorly. Amazon, on the other hand, has built its reputation on valuing authors and readers dearly. The two companies didn’t simultaneously change directions overnight.”