Amazon finally revealed what is says is the exact cause behind its long battle with “Big Five” book publisher Hachette in a public post on its Kindle forum: It’s fighting for lower e-book prices and a 30 percent cut of sales.
For the last several months, Amazon and Hachette have been having a very public pricing disagreement that left affected authors enraged and sparked a debate in the literary world about whether or not Amazon has too much power. We knew the battle was over e-books, but rumor had it that Amazon wanted a 50 percent cut of every sale, instead of 30 percent.
In its post, Amazon makes a mathematical plea for why most e-books should be priced at $9.99, instead of $14.99 or $19.99, given that they don’t require printing, storage, or transportation.
The company says it’s found that e-books priced at $9.99 sell 1.74 more copies than when they’re priced at $14.99. If you carry that factor to an instance of selling either 100,000 books at $14.99 or 174,000 copies at $9.99, total revenue increases 16 percent, and authors get an audience that’s 74 percent larger.
Amazon also believes that 35 percent of revenues should go to authors, 35 percent to publishers, and 30 percent to Amazon. While making its point, the company completely shreds Hachette.
“Is 30 percent reasonable? Yes. In fact, the 30 percent share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices,” Amazon writes, referencing a recently settled anti-trust case against Apple for e-book price-fixing. “We had no problem with the 30 percent— we did have a big problem with the price increases.”
Amazon also takes a jab at how much revenue Hachette actually gives its authors. Royalties for e-books are generally 25 percent at traditional publishing houses.
“While we believe 35 percent should go to the author and 35 percent to Hachette, the way this would actually work is that we would send 70 percent of the total revenue to Hachette, and they would decide how much to share with the author,” Amazon writes. “We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call.”
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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