Amazon and Hachette kiss and make up

After nearly a year of Amazon (the largest bookseller on earth) refusing to sell books from one of the largest publishers on earth, they've finally made peace.

Details of the new deal are pretty thin. Basically, Amazon wanted Hachette to charge less for ebooks (so they could sell more Kindles, which lock customers into an Amazon digital ecosystem through which the company believes it will profit in the long-term). Hachette wanted to charge more for frontlist titles so they wouldn't displace hardcover sales during the initial sales window.

Under the deal, Hachette will get to set its own prices on Amazon, but Amazon will be allowed to discount those prices, on the condition that it give Hachette a larger proportion of the sales-price, so Hachette's total take on those discounted titles will stay more-or-less constant.

However, nothing in this deal weakens Amazon's power over Hachette -- the multi-year deal will increase Hachette's dependence on Amazon and the number of Hachette readers who are locked into Amazon's walled garden forever. Meaning that the next time this happens, Hachette will have even less negotiating leverage over Amazon.

Hachette can escape this trap by insisting (as Tor Books does) that all its titles be sold without DRM, so that readers can move freely between different vendors. And pigs might also fly.

James L. McQuivey, a Forrester analyst, said that if Hachette won in the short term, it would be a different story in the long run.

“Hachette got Amazon to allow them to control pricing while also cutting the amount of money Amazon takes if the publisher does engage in discounts, which appears like a victory,” the analyst said. “But in the end this all cements Amazon’s ultimate long-term role in this business, which will only put Hachette right back in this situation every time they are up for renegotiation.”

Neither side gave many details of the deal, but both pronounced themselves satisfied.

An Amazon executive, David Naggar, said Amazon was “pleased with this new agreement as it includes specific financial incentives for Hachette to deliver lower prices.”

Amazon and Hachette Resolve Dispute [David Streitfeld/NYT]

(Image: Bright Smile, Randy Robertson, CC-BY)