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Apple, Amazon waging war over e-book pricing

updated 10:25 pm EST, Tue January 26, 2010

Apple willing to avoid Kindle's cut-rate rates

Apple is hoping to undo Amazon's lead in e-book readers by letting publishers set their own prices, a last-minute leak claims tonight (subscription required). To garner support for its 10-inch tablet, Apple is reportedly recommending that publishers sell hardcover bestsellers in digital form for either $13 or $15 but isn't locking them into the $10 target that Amazon uses for Kindle books. The deal would mean less revenue per book but would still give more control to publishers, who have often been forced to give Amazon books at half their paper value regardless of how much the text costs.

Those publishers that have met Apple tell the WSJ that Apple will continue to take the 30 percent cut it already has from app, movie and music sales at iTunes: under this model, a $15 book would only make the publisher about $10.49. Amazon would offer $14.50 on a book worth $28 as a hardcover, but it would knowingly take a $4.50 loss to reach its $10 target price at the Kindle Store, making its strategy a relatively unsustainable bid for market share over which publishers have little control. Apple's approach would give publishers more flexibility in the long term and also help them manage expectations for pricing.

Kobo, a recent but growing e-book retailer, adds that Apple's approach could set profit margins more in line with what publishers are used to, even if the revenue itself is lower. Apple may also be banking on assumptions that its name and the exposure through its online store could make up for lower revenues through sheer volume.

The behind-the-scenes negotiations, which may have been underway even on the Tuesday evening before Apple's event, have purportedly made Amazon furious and have led it to openly state its objections in discussions with publishers. One publisher characterizes the situation as "intense" and a "chess match" in which Amazon is trying to keep publishers on its side while Apple tries to lure them away.

While neither side is likely to confirm anything until after Wednesday's event, Amazon itself may have indirectly confirmed Apple's maneuvers through a slew of announcements made in the days since Apple set the 27th as the date for its likely tablet release. Notably, it offered a 70/30 revenue plan for publishers willing to keep their e-book prices below $10. It also hastily launched an app platform despite not being ready until February, and has been offering frequent Kindle Store shoppers a promo that lets them keep a Kindle even if they're dissatisfied and get a refund.

Apple isn't expected to actually ship its own device until March but could use the time to secure deals and otherwise drum up publicity for the release, which would also stress color publications and give readers Wi-Fi in addition to likely 3G. Textbook publishers should already be onboard as McGraw-Hill confirmed its deal in an interview today.



By Electronista Staff
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Comments

  1. Bobfozz

    Fresh-Faced Recruit

    Joined: Jul 2008

    -1

    No sympathy for Amazon

    Amazon has been running loss leaders for years, but this might be too much. And they tried to control the publishers. Amazon wanted it all. For Apple, coming in behind Amazon, it made them (Amazon) easy pickings. Maybe Apple will become more of a household word than Amazon. I'm betting on the other "A" name, Apple.

    Apple has put no computer manufacturers out of business, has "hurt" some telecom businesses, but Amazon put a lot of bookstores out of business, good stores. Thumbs down on Amazon.

  1. cvbcvb

    Fresh-Faced Recruit

    Joined: Nov 2003

    +1

    How about "G"?


    > And they tried to control the publishers. Amazon wanted it all. <

    This sounds like Google to me...

    CVB

  1. Peter Bonte

    Fresh-Faced Recruit

    Joined: Aug 2001

    +6

    Amazon flop

    As a small publisher i can say that the Amazon kindle is a flop for me, they take 70% of revenue so the 99 cents model is hard to sustain, no international sales because they charge $3 extra for roaming, 16 gray's is not a lot and the user base is a hundred times smaller than the iphone.

    I do hope it will be easy to ad books to the iTunes bookstore and that we can keep the 70% revenue. This model will naturally evolve in the $0.99 pricing we now know in the appstore, that will trigger a new book revolution in the next few years.

    ---
    My first Kindle project, a Belgian European style comic for 99 cents
    http://www.amazon.com/dp/B00359FCN8

    A good and easy system in iTunes would be heaven on earth. :)

  1. testudo

    Forum Regular

    Joined: Aug 2001

    -2

    Re: No sympathy

    And they tried to control the publishers. Amazon wanted it all.

    And how is this different than Apple and the music industry?

  1. danviento

    Fresh-Faced Recruit

    Joined: Dec 2005

    +1

    Finish the Stats, plz

    If you're going to spell out the publisher's final take on each sale for digital copies, why not do the same for physical copy sales? Yes, it's going to be relative to each book due to investment in book stock and variances in shipping rates and further printings in the same period, but a rough estimate would be helpful.

    Not that the ebook market is all that large (yet), but I would bet they're making more per unit with digital copies than the paper copy when it's all said and done.

  1. Peter Bonte

    Fresh-Faced Recruit

    Joined: Aug 2001

    +1

    Re: No sympathy

    For me the difference is 70% vs 30%, amazon adding 3$ for roaming when i buy a book over wifi and it holds the right to lower the price when they see fit. Apple created a fair and uniform system and it worked, it's no coincidence that the Amazon MP3 store is practically a carbon copy.

    Amazon had a virtual monopoly for e-books but Apple is going to change that in a heartbeat.

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