In a public post on its website, Amazon laid out its wishes to book publisher Hachette for a $9.99 ceiling on the prices of e-books, in exchange for the e-commerce company not demanding for a larger share of profits.
In the post, Amazon detailed its argument for lower prices of e-books, along with its acceptance to move forward with just 30 percent of book sales, its current share, if the publisher would stop releasing e-books that have prices of $12.99 and $14.99.
However, Amazon is not suggesting that all Hachette e-books should have prices lower than $9.99, making room for exceptions such as specialized titles that would command higher price tags.
"At $9.99, the total pie is bigger," Amazon wrote. "How does Amazon propose to share that revenue pie? We believe 35 percent should go to the author, 35 percent to the publisher and 30 percent to Amazon...we had no problem with the 30 percent -- we did have a big problem with the price increases."
Amazon shared its objective of lowering the prices of e-books, as it believes that prices such as $14.99 and $19.99 are too high. Amazon believes that e-books can be and should be cheaper than physical books because e-books do not involve many of the traditional limitations on the earnings of physical books, such as printing costs, lost sales due to lack of stock, transportation and warehousing costs, and more.
Amazon also shares its belief that e-books are very price-elastic, meaning that increasing e-book prices will cause decreasing sales. Amazon's studies reveal that e-books with a price of $14.99 would sell 1.74 copies for every copy sold if it had a price of $9.99.
Amazon illustrates an example of an e-book priced at $14.99 that sells 100,000 copies. If the e-book had a price of $9.99, it would sell 174,000 copies. The total revenue for the $14.99 version is $1,499,000, while the total revenue for the $9.99 version is $1,738,000, representing a 16 percent increase in revenue.
The increased revenue generated from lower e-book prices is good for everyone, Amazon argues. Customers will be paying 33 percent less for their e-books. Authors will be receiving royalty checks that are larger by 16 percent, with their books being picked up by a reader base that is 74 percent larger. The publisher and retailer, in this case Hatchett and Amazon, will also be getting higher shares of the sales, despite the e-book being sold for less.
Amazon also calls to remember that as a form of entertainment, e-books are competing with other products such as video games, movies, social networks, and so many more. Bringing down prices of e-books will promote a healthier culture of reading to the customers.
Amazon proposes that the company will forward 70 percent of the sales to Hachette, of which 35 percent should go to the publisher and the other 35 percent should go to the author. However, Amazon believes that Hachette is currently forwarding too small a percentage to its authors, though the company concedes that it has no say on the matter.
Amazon's statement is the latest development in its longstanding dispute with Hachette over e-book pricing.
