Amazon, Hachette reach deal. So how big is the world of e-books?

Amazon and Hachette's dispute over e-book pricing reveals how important these digital sales are to the future of the publishing industry.

Amazon and Hachette Book Group resolved a months-long dispute last week involving e-book pricing. The agreement gives Hachette the ability to set prices for its e-books and addresses the sale of both physical and digital books through Amazon, according to Forbes. Hachette’s published works include popular authors such as James Patterson and Nicholas Sparks.

Both sides argued that they were fighting for the greater good. Last spring, in an official post by the Amazon Books Team, Amazon emphasized the importance of keeping “value high for customers in the medium and long term” when negotiating terms with a supplier. A statement from Hachette a few months later highlighted Hachette’s desire for an outcome that would best serve writers.

As negotiations broke down, Amazon removed the pre-order button on Hachette titles from its website and stocked fewer Hachette-published books, causing longer wait-times.

Retailers and suppliers negotiate contracts all the time – why did this dispute garner so much media attention? In the world of books, how big a deal is this agreement?

E-books arrived on the US book scene around 2007 and since then have grown to be about 30 percent of total book sales. More than a quarter of American adults read an e-book in the past year, whereas 69 percent read a print book, reports the Pew Research Center.

While the publishing industry has contracted over the past few years, books still represent the world's largest entertainment industry, according to consulting firm Rüdiger Wischenbart's Global eBook Report. At $151 billion, books and textbooks still rake in more money than movies ($131 million), magazines ($107 billion), video games ($63 million), and music ($50 billion).

Within the publishing industry, Hachette is one of the “Big 5” publishing houses. Its recent agreement is similar to the multi-year contract Amazon negotiated with Simon & Schuster, another of the “Big 5.” But since these negotiations are usually secret, there's no word on Amazon's contracts with the other three major publishing houses: HarperCollins, Macmillan, and Penguin Random House. 

How important are e-books to Hachette? Right now, e-books account for approximately 10 percent of Hachette’s total revenues, and Hachette expects that contribution to increase to 25-35 percent by 2017.

More than half of these digital sales come from a single source: Amazon. Hachette isn’t alone in depending on “the everything store” for distribution of e-books. A New Yorker article from earlier this year reported that Amazon makes up 65 percent of the e-book market in the US.