Random House Balking on iPad Distribution, Fears Price War

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Random House, one of the worlds largest publishing houses, is balking at a deal with Apple for distribution on the iPad and Apple’s iBooks Store for fear of a price war, according to a report from The Financial Times of London. The company’s CEO, Markus Dohle, told the newspaper that the business model being offered by Apple represented change, and that the company needed additional time to consult with both shareholders and authors.

At the same time, however, Hartmut Ostrowski, CEO of Random’s parent company Bertelsmann said recently at a press conference that the iPad, the Sony Reader, and similar devices were here to stay. He also acknowledged at that time that such devices were influencing the media industry, “like nothing else.”

As one of the biggest publishers in the world — the largest by sales — Random House’s catalog of books represents a big piece of the print world that Apple likely wants to have available through the iPad. It is being speculated that the company is stalling as a negotiating tactic to wring a better deal from Apple than the 70/30 split that Apple is insisted on with its other, new publishing partners.

CEO Markus Dohle specifically didn’t rule out a deal before the April 3rd launch of the iPad, but told The Times that he was treading carefully.

The situation could come down to who needs who more. With all of Random’s major competitors already signed up for the iPad, if the device leads to a big increase in the number of ebooks sold, Random could lose market share to those competitors. If the iPad does not lead to a renaissance for the publishing industry, the company’s current position could look prescient in hindsight.

Comments

Tiger

Well, if they need any indication from Apple’s part on it’s commitment to the iPad, they just ordered 3 million of the screens. It makes sense for them to try and negotiate the best deal they can, but whether they like it or not, the iPad will arrive in 2 weeks. They better be on board.

Lee Dronick

The iPad could help sell a lot of e-books. As Tiger said they better be on board.

CP

I don’t know if Random House is very worried. The iPad isn’t entering a world like the iPod. People aren’t stealing books and breaking the backs of the publishing industry by doing so.

They aren’t newspapers either. All of their content isn’t readily available online. For an example of the content that is online, in spite of Project Gutenberg being popular for almost 15 years, they continue selling reprints of classical literature through multiple imprints.

I’m not sure why Random House “better be on the iPad.” If you love John Grisham, would you forgo buying the next novel because it’s not available on your iPad? Probably not. Though someone who has never bought a John Grisham novel might buy one because it is on their iPad. Nevertheless, this is going to be a relatively small number of sales at the moment.

Random House doesn’t need the eBook revenue yet. Why not wait and see if the deal is profitable before being locked into it?

Apple is in a different position with these companies.

barryotoole

The iPad isn?t entering a world like the iPod. People aren?t stealing books and breaking the backs of the publishing industry by doing so.

Not yet. Once the iPad comes out, they will.

Wally

So instead of buying Dan Brown’s Lost Symbol from iTunes for $12.99, I buy the Kindle edition from Amazon for $9.99, and read it on my iPad with the Kindle iPad app.

This is better for Random House?

This is a bargaining ploy. They’ll sign.

Baker

I don’t think they’re worried; I think Amazon may have slipped them some extra dough.

damon

People aren?t stealing books and breaking the backs of the publishing industry by doing so.

ebooks are pirated heavily and will only get worse. “breaking the backs”—not sure how to quantify that, but it’s a huge concern. (e.g., http://www.networkworld.com/news/2009/122409-e-book-piracy-the-publishing-industrys.html)

If you love John Grisham, would you forgo buying the next novel because it?s not available on your iPad? Probably not.

Sounds like a statement from someone that doesn’t have and doesn’t use a reader currently. Once you do, you don’t want to go back to purchasing physical books. The reality is people ARE likely to forgo buying the next novel, especially if not released on day one and “find” a copy of the scanned version online for free for their beloved reader.

CP

I use a reader (Kindle). I also work in publishing.

My point was that the publishing industry is not in the same state as the music industry in 2001. Thus, Apple does not have the same bargaining power.

The link above is primarily speculative. Notice the question mark on the article title. The publishing industry is concerned, but not panicked. By 2001, pandora’s music box had already been opened.

The iPad is also not in the same position as the iPod. The iPad does a lot more than just work as an eReader. If I were looking at this from Random House’s perspective, I’d be wondering why I should equate iPad sales with eBook sales. How many potential iPad owners are also book buyers? If they were not book buyers, will they by them for their iPad when they didn’t buy them before? There are many more unanswered questions.

Random House will sign. Nevertheless, they are in a better position to bargain than the music industry leaders were.

barryotoole

So instead of buying Dan Brown?s Lost Symbol from iTunes for $12.99, I buy the Kindle edition from Amazon for $9.99, and read it on my iPad with the Kindle iPad app.

LOL.

barryotoole

the publishing industry is not in the same state as the music industry in 2001.

It will be, in a short while after the iPad comes out.


Apple does not have the same bargaining power.

I think Apple has more bargaining power. With the Mac-only ipod in 2001, it was just coming out of the dumps. Now, Apple is the 4th largest in market cap, only a bit behind Wal-Mart, which it seems to surpass soon. Also, there was no Windows version iPod and no iTMS in 2001. Now, there are over 150,000 apps waiting for the iPad, most top book publishers in Apples pocket.


The publishing industry is concerned, but not panicked.

True; they have to take their head out of the sand (their a$$).


If I were looking at this from Random House?s perspective, I?d be wondering why I should equate iPad sales with eBook sales.

in your opinion, they should be looking at the Kindle and/or the Nook?


they are in a better position to bargain than the music industry leaders were.

So they think. They’re gonna be surprised, very surprised.

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