Steven Zacharius, a respected CEO for Kensington Publishing, responded to my comment from this post on Hugh Howey’s blog.
Here is what he said:
Readers have not spoken. Amazon has spoken. There job for their shareholders is to build their companies bottom-line. They’re doing this by capturing marketshare by discounting prices and eating the difference when they want to. They can afford to do this because of their size. They can absorb taking a loss to capture readers into their proprietary system because they’re making money from other things like distributing other products and their many service….Amazon Web Services, which hosts websites.
Here was my reply to him on the same blog…
Amazon isn’t saying anything, that influences why I buy from them or not. It’s what they DO that influences why I buy books from them.
They take care of the customer, they provide good shipping options, and they know how to pack a book. Then, there is their selection, I can find any title (just about) that I want from them.
Yes, Steven, the readers “speak” with their dollar.
But let’s address a few of your points, one by one…
1. You said: “There job for their shareholders is to build their companies bottom-line. They’re doing this by capturing marketshare by discounting prices and eating the difference when they want to.”
Okay, and? They are a for-profit business and not a charity, correct?
2. You said: “They can afford to do this because of their size.”
Okay, and? They have built their business to that “size,” which has nothing to do with monopolizing a market (if the market is big enough, and the book market is). Also, I don’t think Hachette is exactly “small,” right Steven?
And, in terms of pricing, which people seem to keep using as a point towards the supposed “Amazon bullying” theme … if pricing is all you can compete on … then Amazon will win the battle, and that’s business plain and simple.
Oh yeah, and low price for a title, all other things being equal in the value equation for a product like a book, is what a customer will pick… IF there is no other value to exchange for their dollar.
3. You said: “They can absorb taking a loss to capture readers into their proprietary system because they’re making money from other things like distributing other products and their many service….Amazon Web Services, which hosts websites.”
Okay, and? So, Amazon built their business by correctly placing business “bets” in various areas, and their results shine. I would have to ask is Hachette competing with Amazon as a whole, or just doing the “book business” better than Amazon (hint: Hachette’s trying to bite the whole elephant)?
Do I want just one company providing me everything in certain categories, like Amazon does? Well, if that’s the best option for my money, the best “value” … then yes.
BUT … the reason Wal-Mart hasn’t killed off every single business in the categories they sell within their stores … and the same theory will apply to Amazon…
… is there are businesses who add unique value where they can differentiate FROM the behemoths like Wal-Mart and Amazon.
I shop them (hint: I don’t go to Wal-Mart, ever, for anything … and it’s because I’ve found the businesses that do it “better” because price isn’t my first consideration).
So let’s get back to this pricing thing…
Hachette wants to sell ebooks at a higher price point, Amazon wants to sell ebooks at a lower price point (remember, this is the digital world).
Do you think that Amazon is trying to keep those prices down “because it can” or perhaps because they’ve recognized that they can sell more units, “turn” more ebooks that way?
Digital provides profit continuously, because of the unlimited shelf space.
Hachette wants to raise prices on ebooks because it wants to maintain the price point (or justify the price point) of their print versions.
There really isn’t another reason to try so hard and keep prices closer to the rest of their product line, when the market (the readers, who speak with their dollars) wants to pay much lower prices for the digital product in the first place.
I’m not saying print will die, or anything like that … but I am saying that print had better find a way to price itself closer to the digital market IF Hachette wants to keep that business running smooth.
Because in the end, you’re right, Amazon is a mighty big company who has a proven track record of successfully placing the right “bets” in business, especially when it comes to online selling.
Does Hachette, even at its size (and profits, they aren’t poor either) want to compete with a giant like Amazon on what has proven to be THEIR battleground (digital business)?
If I were Hachette, I would start by listening to guys like J.A. Konrath, Hugh Howey, and Barry Eisler … and listen to them very closely.
Because time is running out for outdated publishing business practices, and Amazon figured that out a LONG time ago.