Amazon Pleads With Hachette to Cut E-Book Prices

In the ongoing spat between Amazon and Hachette over pricing, Amazon has now called for Hachette to simply cut its e-book prices—a move which, it claims, will lower consumer prices on digital titles and provide writers with a larger paycheck at the same time.

In a blog post published yesterday, the Amazon Books Team explained that Hachette's demands are currently "unjustifiably high for an e-book." They went on to explain why:

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.

More than that, they provide some figures to back their point, too—pointing out that e-books are highly price-elastic:

This means that when the price goes up, customers buy much less. We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, 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 $1,738,000.

In other words—if Amazon's figures are accurate—at the lower price, the publisher's total revenues increase by 16 percent, authors receive 16 percent more in their paycheck, and customers pay 33 percent less. "At $9.99, even though the customer is paying less, the total pie is bigger and there is more to share amongst the parties," they write. Wins all round, if Amazon is to be believed.

And it feels pretty strongly about the call, too, suggesting that it would happily accept 30 percent of digital book revenue—that's the same percentage it currently receives from Hachette—if the publisher dropped digital prices to $9.99 across the board. Of course, Amazon isn't really suggesting all this for us, or writers—it's doing it to keep its own pockets lined. But it's a compelling argument for all concerned, so it'll be interesting to see what Hachette makes of the idea. [Amazon via WSJ]

Image by Noelas under Creative Commons license.