Macmillan Pushes Amazon into Higher Ebook Prices

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Online retail giant Amazon and publishing giant Macmillan locked horns over Kindle ebook pricing, and in the end Macmillan won. Macmillan's win means Amazon shoppers will be paying up to US$14.99 for ebook versions of the publisher's titles.

The battle over ebook pricing prompted Amazon to temporarily pull Macmillan's titles from its online store. Macmillan CEO John Sargent fired back with a full page ad in Publishers Lunch blasting Amazon for refusing to agree to the company's "agency model" for pricing titles.

"I gave them our proposal for new terms of sale for e books under the agency model which will become effective in early March. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles," Mr. Sargent said. "By the time I arrived back in New York late yesterday afternoon they informed me that they were taking all our books off the Kindle site, and off Amazon."

He added, "The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model."

Despite the prospect of making more money, Amazon balked at Macmillan's new ebook pricing scheme, but ultimately caved in and agreed to the new terms.

"Macmillan, one of the 'big six' publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases," Amazon said on its company forums. "We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books."

Amazon's ebook pricing battle came on the heals of Apple's introduction of the iPad, the company's multimedia tablet and ebook reader. The iPad will ship with iBooks, an application for reading ebooks, and access to Apple's new iBookStore for selling ebook titles.

The iPad is seen as a competitor to Amazon's Kindle ebook reader, but with the ability to play additional multimedia content in books and to display content in color -- features the Kindle doesn't offer.

So far, Macmillan is the only publisher to push Amazon into a new pricing scheme, and it's unclear if the publisher made the move in an effort to dictate ebook pricing at Apple's iBookStore. Since the company successfully pushed Amazon into higher ebook pricing, it may well try to force Apple into the same price bracket, too.

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6 Comments Leave Your Own

Michael Baughn

You know they are just cutting their own throats.
If they raise prices on e-books why would anyone want to pay hundreds of dollars to view them?
We will just go back to the hard covers and paperbacks.
Now if Macmillan finds that the cost of printing to be exorbitant now and in the future, and their profit margin starts going down, well, that will be because of their greed.
There is no way that the cost of producing an e-book copy matches the cost of hardcover editions. This is greed first and foremost.
It is also sad for the hundreds of thousands that have already bought the Kindle, they will be stuck with the rising cost of titles.
For myself, I’m glad I held off.
I will just be content to buy my paperbacks as always.

aardman

Amazon was getting into distorting its business model by sacrificing its retail margins to give Kindle an edge.  They should be thankful that MacMillan dope slapped them back to reality.  Kindle will never, ever be successful at the hardware business.  Kindle gave them this illusion that they might be a hardware player, but that pipe dream collapses as soon as the Apple’s of the world muscle in on the e-reader business.  They should stick to what they are good at, and in that, they are the best in the world.

aardman

I mean Amazon, will never, ever be successful at the hardware business.

Woody

@ Michael Baughn:

Your argument would make sense if you were just buying the book for the paper and ink.  But you’re not. You’re buying it for the ideas on the page. Ask yourself this: Which would general public pay more for, the new Stephen King novel, or some random work of fiction by an unknown author on Lulu.com?

Big-name authors get big fees, just like big-name actors get big fees in Hollywood. Macmillan thinks they have a product that justifies the price—based on the content, not the means of getting that content to you.

zewazir

Big-name authors get big fees, just like big-name actors get big fees in Hollywood. Macmillan thinks they have a product that justifies the price?based on the content, not the means of getting that content to you.

There is only one tiny fact getting in the way of this analysis: paperbacks cost less than the e-version for the same authors. When it comes to reading for entertainment, the convenience of an e-reader is not going to outweigh a 50% price difference, especially when you toss in the initial cost of the reader.

When “e-versions” of music hit the market, the price of songs and albums were at least competitive, if not lower than the media versions. And it took off like a Titan III with no payload.

MacMillan seems to be looking only at e-version costs vs. hardcover. I think that will prove to be a mistake because the vast bulk of sales come from paperbacks.

BurmaYank

When it comes to reading for entertainment, the convenience of an e-reader is not going to outweigh a 50% price difference, especially when you toss in the initial cost of the reader.

@ zewazir:  Perhaps you have already read an ebook on a Kindle, and in that case, we must disagree about whether or not “...the convenience of an e-reader is not going to outweigh a 50% price difference.”  But what I discovered when I was able to do so is that this new mode of book-reading was quite pleasant in its own right, and so much more convenient in multiple ways than paper-book reading, that I could see paying double the price to read an ebook.  And I think I would not have expected that prior to experiencing my own hands-on Kindle-reading.

As to whether the additional cost of the reader would outweigh those benefits, that question will be irrelevant to me because I will be reading all my Kindle ebooks on my iPad, which I would have bought anyway, regardless of whether it is a better or worse way to read a book.

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