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Amazon, HarperCollins deal opens door for smaller e-book battles

Apple, Publishers Sued Over Alleged E-Book Price ConspiracyApple, Publishers Sued Over Alleged E-Book Price Conspiracy

Earlier this month, a deal between Amazon and HarperCollins—one of the world’s biggest publishing houses—averted an e-book war, but incidentally has now opened both companies up to the possibility of an even bigger dispute in the future.

As Business Insider reported last month, Amazon (AMZN) and HarperCollins were gearing up for battle over e-book sales. The fight was similar to a 2014 spat between Amazon and Hachette that stemmed over the publisher’s reluctance to price e-books cheaper than its physical copies.

During the prolonged dispute between Hatchette and Amazon, the digital retailer turned off the publisher’s pre-order options, refused to offer discounts on certain books and neglected to promote titles by big-name authors, including James Patterson, Stephen Colbert and J.K. Rowling. Those tactics led to protests by approximately 900 authors who wrote an open letter decrying the treatment and accusing Amazon of cutting book sales by up to 90 percent.

By November 2014, both sides had reached an agreement that let Hachettte set its own e-book rates while Amazon would provide financial incentives to set cheap prices.

Amazon and HarperCollins reached a similar, if not identical, deal in April. The specifics of the agreement haven’t been disclosed, but the new arrangement means both sides will get what they want in the end. Amazon won’t lose out on profits from HarperCollins’ popular titles, will avoid a public relations nightmare and continue to dominate book market share (current estimates have Amazon accounting for 65 percent of all book sales). Meanwhile, HarperCollins will set its own e-book prices without losing any future income from Amazon.

However, the agreement doesn’t completely fix the bigger problems facing Amazon and HarperCollins or resolve the tech giant’s issues with e-book prices. Amazon CEO Jeff Bezos believes digital books should cost $9.99, much lower than the price set for hardbacks and trade paperbacks.

The sticking point for publishers over lowering digital book prices ultimately comes down to cost. Publishing an e-book requires layout editing, production work, formatting for various devices, quality control, etc., which doesn’t necessarily mean lower expenses.

Letting HarperCollins set its own e-book prices could result in a standoff later down the road, if the company doesn’t price its digital products to meet Amazon’s desired rates. In the end, the e-retailer could try to persuade the publisher to offer cheaper deals on one title in return for higher pricing on others, or employ similar suppressive tactics it used during the Hachette conflict to force the publisher to lower prices.

In another scenario, HarperCollins could agree to a slightly cheaper price on some (but not all) e-books to appease Amazon so it can continue to profit from its customers who value print. Those smaller-scale deals will come down to compromise and prove that Amazon doesn’t have the muscle to impose its will over major publishers just yet, if ever.

For now, it seems as though this deal is a win for both sides and created a temporary (if uneasy) peace between the two.