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.