Hachette’s Price Hike

Sep 17, 2012 | The Publishing Industry

I can, of course, understand the need for businesses to protect their revenue streams. What I cannot understand, and likely never will, is when a business chooses a short term high revenue stream instead of a longer term low revenue stream that will be more beneficial to them.

Such is the case with Hachette’s price hike in licensing ebooks to libraries (and Random House’s hike before them).

Here’s the story in a nutshell: libraries were looking forward to being able to license more of Hachette’s catalog for their patrons. Hachette decided that they wanted a 220% increase in fees first. Here’s Maureen Sullivan of the American Library Association:

“When Hachette announced it was stepping back into the library ebook market this past May with pilots that would bring a selection of its recent bestsellers to millions of library patrons, the ALA welcomed this news,” she said in a prepared statement. “Leaving our meeting with them, we were pleased that they recognized libraries as strong partners—as direct customers and marketers of their titles, as well as integral community institutions that must be supported as a fundamental cornerstone of literacy. After these tentative steps forward, we were stunned to learn that Hachette plans to more than triple its prices for ebook sales to libraries starting October 1.”

Hachette’s response after the predictable outcry:

“We believe these terms fairly reflect the value to the library customer, that the ebooks will not need periodic replacement as do print copies, and there is no limit on amount of borrowing activity per ebook copy.”

Here’s The-Digital-Reader’s rundown of the state of the major publishers with respect to libraries:

  • 2 major publishers which charge high prices (Hachette, Random House)
  • 2 major publishers which won’t sell at all (Macmillan, Simon & Schuster)
  • Penguin, which is only selling ebooks to libraries grudgingly and with support for the Kindle explicitly blocked
  • HarperCollins, which imposed a 26 checkout limit for library ebooks

Now, tell me what’s wrong with this picture.

The Elephant in the Room

If you said ‘the stink of fear’, then congratulations! You officially have more business sense than the major publishers. And they are very clearly afraid. More specifically, they’re still afraid of ebooks cannibalizing sales of print books, so much so that they’re willing to make the terms of ebook lending for libraries untenable in comparison. They’re effectively pricing libraries out of the market, because the library budgets for ebooks are not going to rise by 220% in comparison. Conclusion: they don’t want libraries to lend ebooks at all, because lending an ebook might mean someone doesn’t buy an ebook instead.

Notice how Penguin is blocking the most popular e-reader around, and there’s a 26 checkout limit on HarperCollins books. These are artificial restrictions, there only because Penguin fears Amazon’s dominance and HC doesn’t want libraries to be able to lend the same ebook out indefinitely without paying for it over and over.

All of these publishers want to make sure that ebooks don’t get too popular. They make money on hardcovers. They could be making twice that with cheap ebooks, but that would mean thinking about a long term strategy – and top of that list, for me at least, would be making arrangements with the libraries for a flat fee for a certain number of ebooks, for example.

Just think about their response above, for god’s sake. ‘Ebooks will not need periodic replacement’? That means they need to charge less, not more, because it costs them nothing to send a new copy out to a library. They already have as many as they’ll ever need.

The Good News

Oh, there is good news. Just not for the major publishers.

Librarians are not idiots. They’re also not for-profit organizations. Again, here’s what Sullivan says:

“Libraries must have the ability to purchase a wide range of digital content at a fair price so that all readers have full access to our world’s creative and cultural resources, especially the many millions who depend on libraries as their only source of reading material.”

Independent publishers and authors can grab a huge amount of goodwill by approaching libraries and offering them their books. I’d certainly offer my local library a digital and print copy of my book for free. Self-publishers already know that getting attention for their work is half the battle – if they can do so in a venue that has zero competition from the majors, so much the better.

The biggest danger to the traditional publishing industry is irrelevance. This kind of move only accelerates that, because it makes it harder for people to read their books.