Amazon and Hachette cut a deal

Amazon and Hachette have finally negotiated a peace treaty to the war.

Hachette won an important victory on Thursday in its battle with Amazon: the ability to set its own prices for e-books, which it sees as critical to its survival. But even as the publisher and retailer announced a negotiated peace after sparring since January, hardly anyone seemed in the mood for celebratory fireworks. ...

And even if Amazon got less in the deal than it originally wanted, it still controls nearly half the book trade, an unprecedented level for one retailer. And the dispute showed it is not afraid to use its power to discourage sales.

I don't know the details, but it looks to me like the deal gets the major details right: Hachette gets to set prices for its own products, Amazon has to offer incentives to get lower prices. In other words, Amazon has to give up something to get something in return. That's the way any business transaction should work. If one party can get what it wants through threats alone, you don't have a commercial exchange -- you have extortion.

I don't know what the long term effects of the deal will be, but I'm thrilled that Amazon won't be able to force Hachette to lower prices just by threatening the publisher with oblivion.