Amazon courts Hachette authors by proposing they keep e-book revenue

SAN FRANCISCO Wed Jul 9, 2014 9:25am IST

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. REUTERS/Rick Wilking/Files

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008.

Credit: Reuters/Rick Wilking/Files

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SAN FRANCISCO (Reuters) - Amazon.com Inc ratcheted up the pressure on Hachette Book Group by proposing the publisher's authors get all the revenue from ebooks sold by the ecommerce company, as both sides try to resolve their bitter months-long contract dispute.

Hachette rejected the offer on Tuesday. The fourth-largest U.S. book publisher, owned by France's Lagardere, instead asked Amazon to immediately withdraw "sanctions" on its books. Amazon's reply to Hachette's response: "We call baloney."

At the center of the highly charged dispute is the price Amazon can charge for e-books. Earlier this year, Amazon delayed delivery of some Hachette titles, including sought-after print versions and, at one point, it removed a pre-order option for "The Silkworm," by Harry Potter author J.K. Rowling writing as Robert Galbraith.

Amazon, in a letter to authors and agents seen by Reuters on Tuesday, portrayed its proposal as a windfall for writers.

Amazon also said it tried to re-negotiate terms with Hachette in January, but heard nothing back until it began cutting back print inventory and reducing discounts on its websites.

"Unless Hachette dramatically changes their negotiating tempo, this is going to take a really long time," Amazon said in the letter. It reiterated key points in a separate statement later on Tuesday.

"Hachette is part of a $10 billion global conglomerate," it said. "It wouldn't be 'suicide.' They can afford it."

What's clear is "they absolutely want their authors caught in the middle of this negotiation because they believe it increases their leverage," Amazon said. "Our offer is sincere. They should take us up on it."

Amazon's actions have alienated authors including top-sellers James Patterson and Malcolm Gladwell, who mocked the situation in a spoof video posted on Slate.com this week.

Both companies have remained quiet on details of the talks. During a July 1 panel discussion at the New York Public Library, one literary agent likened the situation to waiting for surgeons to finish operating on a loved one.

When the Amazon letter was written to authors, the e-commerce giant had not yet broached the revenue proposal with Hachette. Typically, Amazon, Hachette and authors would share digital book sales in agreed-upon proportions.

Lagardere has said Amazon.com accounts for some 60 percent of Hachette's digital sales.

"Hachette authors would get 100 percent of the sales price of every Hachette e-book we sell. Both Amazon and Hachette would forego all revenue and profit ... of every e-book until an agreement is reached," the letter said.

Amazon's proposal needs Hachette's consent. Should the publisher agree, Amazon said it would return to normal levels of on-hand print inventory, normal pricing in all formats, and pre-order options for books that have not yet gone on sale would be reinstated.

The Journal and the New York Times first reported on Amazon's proposal on Tuesday.

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