Amazon’s Kindle had 90% of the U.S. ebook market in 2009. Now that it’s throwing that weight around, some readers are calling for a boycott. (Photo by ????. CC BY-SA 3.0)

Last week, I really thought I was going to boycott Amazon.com. In an ebook price dispute with a big-five book publisher, Hachette Book Group, Amazon has been throwing its weight around, making certain publishers’ titles vanish. On closer examination, it’s not obvious that Hachette holds the moral high ground.

There’s no question Amazon is a scary beast. By 2009, the year before Apple launched the iPad, Amazon controlled 90 percent of U.S. ebook sales. That number has fallen to about 60%, but Amazon’s ebook revenue has reached the multi-billions. Amazon gained its market share selling ebooks at a loss. Historically, the wholesale price of a $26 hardcover has been $13. Amazon started out paying $13 wholesale for ebooks, which it sells for $10.

Apparently, Amazon has signaled to Hachette and the rest of the publishing industry that those days are over.

“Lower bids on author manuscripts, few options for authors, more homogenized titles (you think there are too many vampire novels now).”

Readers and publishers cry monopoly. The $10 ebook isn’t sustainable for publishers or writers, they say. Amazon’s market-share grab will stifle creativity, put customers at a disadvantage and slow the pace of innovation in digital publishing.

Here’s the rub: $10 is the price readers like paying for an ebook. In the U.S., ebooks sold at $10 earn more revenue than any other price point, according to a TechCrunch writeup of data from Luzme, an ebook search site. Measured in dollars, ebooks priced at $10 sell more than 1.5 times the runner-up, which is the $2 to $3 price point.

Still, Amazon is a scary beast. Just look at their price-earnings ratio. In 2013 it was 529.75, more than five times Facebook’s. Other top Nasdaq 100 stocks don’t even come close. Here’s the PE ratios for the top 5 Nasdaq 100 companies, ranked by market cap as of June 2.

Investors like Amazon’s meager earnings, it seems. Possibly they view its ebook strategy as a long-term strategy. Once market share is bought, profits will go up, along with pressure on suppliers.

That’s what digital consultant Michael Clarke argued last year, after a District Court ruling that supported Amazon’s pricing strategy: “lower bids on author manuscripts, few options for authors, more homogenized titles (you think there are too many vampire novels now), and a (sic) even greater focus on genres and blockbusters.”

Amazon’s margins are low, and not just because of its ebook pricing. Amazon is plowing cash into warehouses and data centers. Its capex increased to north of $3 billion, last year, on revenue of $74 billion. The top two categories were fulfillment centers and technology infrastructure.

In 2003, when Apple wanted to sell songs a la carte on its newly launched iTunes service, music labels balked. “They thought that would be the death of the album,” Steve Jobs recalled later. In 2005, consumers sued Apple in a class-action lawsuit that brought Jobs from his deathbed to testify in 2011. They alleged a music-downloading monopoly. Boy does that seem laughable in 2014.

Hachette chief executive Michael Pietsch has led the publishers’ fight with Amazon. Here’s what he has to say, via a company statement issued last week: “Amazon indicates that it considers books to be like any other consumer good. They are not.”

Well, that’s true. But books are like some other consumer goods. For example, they’re like video games. Game publishers like Take-Two Interactive and Ubisoft pay pennies per disc to manufacture the product. The $50 price of a triple-A console title reflects the creative effort up front, requiring tens of millions in high-risk investment.

Books and video games are also like music. To produce an album, a label puts down a cash bet in a hits-driven business. Paying $18 for a compact disc reflected that up-front investment, we were told in the aughts.

Have iTunes and the $1 download ended innovation in the music industry? Have free and “freemium” ended innovation in video games? They have not.

I admire Pietsch. He’s emerged in this dispute as a businessman of principle and courage, fighting for his employees, his writers and his customers. But as a bookworm, myself, I have this question: Is he fighting to protect good books? Or is he fighting to preserve an industry status quo?