As an obsessive reader, as well as being strongly interested in economics and business models design and execution, I paid attention to the conflict between Amazon and Hachette around e-books.
Indeed, what is interesting in this conflict is the reflexive survival behavior of the current leader faced to a challenger who definitely want to change the world.
Amazon, as many challengers who want to introduce disruptive changes into the market, comes with arguments which state that
- Change and healthy competition will incept new dynamics into the global market, thus providing side benefits to the current incumbents
- Lower prices does not necessarily mean lower revenue, and create a win-win relationship with customers
- Generated benefits spread out into all components of the value chain, thus motivating contributors to value thus reinforcing positive market dynamics
- Industry incumbents think "in the box" too much, and are blind to emerging and raising competition
Challengers arguments are fact based:
About the price of e-books: Costs are simply far lower than for a paperback copy
With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out of stock, no warehousing costs, no transportation costs, and there is no secondary market — e-books cannot be resold as used books. E-books can and should be less expensive.The Amazon Books Team
About the blind spot:
They [Industry incumbents] think books only compete against books. But in reality, books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we [Amazon + Readers alliance] want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.The Amazon Books Team
About the positive win-win market dynamics:
The important thing to note here is that the lower price is good for all parties involved: the customer is paying 33% less and the author is getting a royalty check 16% larger and being read by an audience that's 74% larger. The pie is simply bigger.The Amazon Books Team
Incumbent who feel threatened in their fundation often react through legal actions, instead of trying to open their mind and benefit from these insights brought in by competition to build on top of it. We could also see this kind of struggle in France between Taxis and VTC (acronym for private drivers) using Uber. In IT domain, the result is often massively hegemonic companies grasping main of the market value after the market revolution occured. Market could benefit from more innovation from threatened companies which often have the cash to fund interesting ideas from their people, and also bringing insights unravelled by competition into the equation.
By the way, I stand for more people being able to access to knowledge, and e-books clearly go into this direction. That's why I support Amazon in this conflict.
You can read the entire letter from Amazon Books Team on http://www.readersunited.com/