Apple Takes Advantage of Fight Between Amazon and Hachette
Amazon (NASDAQ:AMZN), in the midst of its battle with Lagardere‘s (LGDDF.PK) Hachette, has decided that it doesn’t want to stock titles from the publisher. Meanwhile, Apple’s (NASDAQ:AAPL) iTunes is promoting a sale on the e-book versions of popular Hachette books, including pre-orders that Amazon decided not to accept.
Re/code reports that the titles appear in a featured section called “Popular Pre-Orders: $9.99 or Less.” Clicking the “see all” button reveals that all twenty-six titles featured in the section are published by Hachette. Apple is capitalizing not only on the opportunity to sell more books, but is also likely looking to make the best of a situation that sees public attention focused on its settlement of an e-book price-fixing lawsuit. Ironically, Apple’s current offer on the Hachette pre-orders matches Amazon’s $9.99 price tag that Apple and five publishers colluded to get raised, as Wall St. Cheat Sheet reported earlier today.
Amazon is accused of delaying shipments of Hachette titles over a contract dispute as to how much the publisher will discount the books that Amazon purchases. The dispute is also tied to Amazon’s pricing of e-books, a model that publishers have made clear they do not favor. Hachette and other publishers want to keep prices higher, while Amazon would prefer to offer discounts. Amazon isn’t accepting pre-orders of Hachette titles, and is keeping less stock of Hachette books on hand, making the timeline for customer orders more dependent on how quickly Hachette ships the inventory to Amazon. Of its disagreement with Hachette, Amazon notes that it is “not optimistic that this will be resolved soon.”
Apple’s move to promote its Hachette e-book titles shows that it’s committed to maintaining its position as a player in the e-book industry, a position that landed it the antitrust lawsuit that it’s in the process of settling now. It’s unclear if Apple’s offering of Hachette pre-orders at $9.99 was initiated by Hachette dropping wholesale prices or Apple dropping retail prices on its own. Either Apple or Hachette is taking a cut to its margin to offer the books at $9.99, marking the move and its timing as a very intentional jab at Amazon.
According to the Washington Post, Apple’s sales account for somewhere between one-tenth and one-quarter of all e-book sales, comparable to the share of the market claimed by Barnes & Noble (NYSE:BKS). So while Apple’s move to raise prices of eBooks sold both by Amazon and on the iTunes store, its contracts with publishers and the settlement it’s in the processing of making haven’t helped it overthrow Amazon’s dominance over the e-book market.
But more than to dominate the market as it works now, Amazon is looking to change the way that the publishing industry works. According to the New York Times, Amazon envisions an industry “where books are cheap, where anyone can publish anything, where there are no editors or distributors saying this is not what is selling now, go away.” To Amazon, publishers demanding high prices for e-books will get in the way of the evolution of that market.
If Hachette made the move to price pre-orders in the iTunes store, the current promotion may reveal a growing determination among the ranks of big publishers, who don’t want to yield on the terms they agree to with Amazon and other distributors of their e-books. They may recognize that they’re fighting with distributors over the future of publishing — not just on the cut that Amazon or Apple gets of the cover price.