Amazon to Hachette: E-books should be cheaper than print books. Duh

The ongoing war between Amazon and major book publisher Hachette shows no signs of stopping.

After failing to satisfy Hachette authors with better e-book pricing, Amazon has revealed the reasons behind cheaper e-book prices: Expensive e-books won’t sell as well as inexpensive ones.

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The conflict between Amazon and Hachette, caused by a series of failed contract negotiations between the two companies, has affected more than 5,000 Hachette books. Amazon has removed Hachette books from recommendation lists, won’t accept pre-orders for the books, has increased shipping time, and more.

In this statement, Amazon defends itself against backlash for lowering e-book prices.

Amazon believes that, since they require no warehousing, transportation, or printing costs, e-books should not be as expensive as print books. Amazon calls the sale of e-books “highly price-elastic,” demonstrating that titles priced at $14.99 would not sell as well as titles for $9.99. For every 100,000 copies of a book purchased at a higher price, Amazon says, 74,000 more would be purchased if the price were lower. Revenue for e-books priced at $14.99 would be $1,499,000, and revenue for e-books priced at $9.99 would be $1,738,000.

At the lower price, the customer pays 33 percent less, the author’s book is read by a 74 percent larger audience, and the revenue is, indeed, higher.

The company’s statement also discusses its proposed revenue split with Hachette. Hachette would receive 70 percent of the profits, while Amazon would take the leftover 30 percent. Amazon believes that the 70 percent should be split — 35 percent to Hachette, 35 percent to the author — but that Hachette shares too small of a percentage with the author. Amazon is sure to include the fact that, while the company believes that is the fairest way to go about splitting revenue, it is “ultimately … not our call.”

Amazon emphasizes that books compete against not just books, but against free news sites, television, movies, blogs, Facebook, mobile games, and more. The company says:

“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.”