In Amazon's increasingly public negotiation with publisher Hachette, the world'd biggest bookseller has employed a series of tactics to push Hachette into agreeing with its terms:
-- Keeping low stocks of Hachette print titles, making buyers wait weeks for books when they could get them previously in days
-- Ceasing discounting on Hachette books, making them more expensive and therefore less appealing to readers
-- Making pre-orders of upcoming Hachette books unavailable
It's this last tactic that Hachette and any publisher at odds with Amazon should fear the most. Let me explain why.
Related: How Hachette Can Beat Amazon
At the very high end, the books business is all about best-sellers. The five largest publishers in the world make a sizable chunk of their revenues and a majority of their profits on hits, that is, books that make millions more than what it cost to bring them to market. Most of the cost of publishing a book comes in the form of acquiring and developing the content. That includes any advance that might have been paid to the author, the investment in editing, packaging, printing and distributing the book, and the opportunity cost of devoting resources to that book and not another, more profitable project (like, in the case of duds, burying the money in a hole in the ground).
Most books published by Hachette and, indeed, most other publishers, do not make as much money as they cost to produce. But there are a few, take Donna Tartt's The Goldfinch (a Hachette title), that make a lot more, and these successes make up for all the other failures -- in a good year, that is.
Aside from writing a damn good book, it takes a lot to make a hit. One of the most important things is getting a book onto the best-seller list when all of the marketing and public relations efforts are being made so that readers are surrounded by a chorus of voices -- from their friends on Twitter to Good Morning America to the New York Times best-seller list -- that chant, "buy this book." And all this publicity is often scheduled around the time the book comes out, for obvious reasons.
And what is the most important factor in getting on the best-seller list the week a title is released? Pre-orders.
When the New York Times compiles its best-seller list, it looks at sales across retailers. When a book comes out that week, it looks at sales at each retailer plus pre-orders from the previous months -- however long they've been available. That's how books that have just come out shoot to No. 1 in that first week. It's not that there are lines around the block of fans waiting to get their hands on the latest James Patterson and they all buy the book in stores at once (not that Patterson doesn't have droves of fans).
When Amazon, the nation's largest bookseller, makes it impossible for fans to pre-order a title, the retailer is making it much less likely that book will hit the best-seller list in its opening week. So, when the author appears on Good Morning America, they won't be able to say that the title is a No. 1 New York Times best-seller. And this has the potential to really hurt sales.
As you watch the conflict between Amazon and Hachette, mark June 19 on your calendar. It's the day J.K. Rowling's latest title (under the pen name Robert Galbraith) comes out: The Silkworm. It a Hachette book and if you want to pre-order it on Amazon today, tough luck. Should the negotiations continue through June, it will be interesting to see just how large an impact Amazon pre-orders will have on a title that, by all rights, should start off pretty high on the New York Times best-seller list. The following week's list should tell us a lot about Amazon's nuclear option and just how worried Hachette and other publishers should be.
(Should the book start high on the best-seller list, it may be due to Amazon competitors banding together to lift Hachette titles.)
