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Amazon cedes to Macmillan with Apple looming

updated 10:45 pm EST, Sun January 31, 2010

Amazon claims Macmillan wants unfair price hike

Amazon in an unusual weekend update revealed that it has accepted Macmillian's pricing terms for e-books on the Kindle store. The online retailer said it would involuntarily agree to Macmillan's price increase requests and accept the publisher's agency model, which will raise the prices of popular titles from Amazon's previously insisted-upon $10 to a typical $13 or $15. Amazon in its defense argued that it was strongarmed by its dependence on publishers and made the unusual claim that Macmillan had a "monopoly" on its own books, letting it dictate the terms of how they're sold.

"We will want to offer [Macmillan books] to you even at prices we believe are needlessly high for e-books," the bookseller wrote. "Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay $14.99 for a bestselling e-book."

In an attempt to prevent other publishers from following in Macmillan's path, the Kindle maker asserted that it doesn't expect other publishers to follow suit and that independents can use the $10 price point as an option.

Although unstated by Amazon, the move is likely to be at least partially spurred on by the entrance of Apple into the e-book store field and the launch of the iPad. Apple is increasingly thought to have accepted higher prices in advance for all publishers as a means of luring them towards its shop. Amazon has had to sell many e-books at a loss to itself to maintain its seemingly low prices, and its business model until recently took between 50 and 70 percent of the revenue of a book versus the rumored 30 percent at Apple's store.

Macmillan and possibly others have decried Amazon's model as unsustainable in the long term.



By Electronista Staff
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Comments

  1. charlituna

    Fresh-Faced Recruit

    Joined: Sep 2009

    +4

    no shocks here

    Macmillan as the product creators (loose term) should have the right to set the price. if they overcharge themselves out of sales, it's on them. Amazon is just the store same as Barnes and Noble etc

    And Amazon really never had a leg to stand on. They wanted to play hard and be all 'okay then, we won't sell your titles' but there's still The Nook, Sony's ereader and yes soon the iPad. So MacM had nothing to worry about.

  1. legacyb4

    Mac Elite

    Joined: May 2001

    +3

    What Amazon had hoped to capture

    was first to market like Apple had with the iPod & iTunes Store.

    Too bad it didn't work...

  1. jpellino

    Fresh-Faced Recruit

    Joined: Oct 1999

    +5

    How dare Macmillan...

    ...hold a monopoly on their own books! The cads!

    This is what happens, boys and girls, when disruptive technologies disrupt each other.

  1. MyRightEye

    Fresh-Faced Recruit

    Joined: Apr 2008

    +3

    Charging $15 for a glorified PDF

    is simply going to cause rabid piracy of eBooks in the ePub format.

  1. MacnnChester

    Fresh-Faced Recruit

    Joined: Jun 2007

    +2

    Amazon and WalMart

    Amazon, like all new market makers, is trying to do the WalMart effect of lowering prices via volume and of course low digital overhead. That in some ways isn't bad, but it can begin the proverbial race to the bottom and with that you get plastic c*** and bloatware on netbooks.

    Apple is trying to create markets in a different way. Create value added benefits and experiences and straightforward pricing structures.

    Both techniques require a balance between control and free markets and that is a balance that I hope is always dynamically being tested. Neither way alone will do the job.

    Yet the Amazon / WalMart way will be touted as an open, free market and Apple will be called a "walled garden." Oh well, no one is monopolizing things yet. I just hope that checks and balances are in place.

    This is how democracy and capitalism are supposed to work and it isn't pretty and it isn't totally free or unregulated, so liberals and conservatives can get off their soap boxes.

  1. legacyb4

    Mac Elite

    Joined: May 2001

    +1

    Yet at the same time, music publishers were slamme

    for complaining about Apple forcing the $0.99/song issue for years...

    Go figure!

  1. Feathers

    Grizzled Veteran

    Joined: Oct 1999

    +2

    Amazon FUD

    Two things that whilst mentioned above are not given the prominence they deserve. Amazon were taking 70% of the sale price of eBooks, that bares repeating, seventy percent! Secondly, Amazon claimed to be losing money whilst taking that hefty 70%. How do you lose money on an eBook? I don't believe the bandwidth costs $7.50 on a $9.99 eBook. The storage cost is amortized over every sale of the digital copy also. LegacyB4 is right, Amazon tried to corner the market, or should we say monopolize it and this has failed. If Amazon had obtained the choke hold it wanted, what would have happened then? Apple have entered this market at exactly the right time.

  1. repi8

    Fresh-Faced Recruit

    Joined: Apr 2007

    +4

    Intermediary vs. Marketplace

    What is at war at the moment are two models of sales of e-books. What Apple is offering is the same as it has offered for music, video and applications. It provides a marketplace on which content producers can advertise and sell their products and Apple takes a percentage of the sale price. For applications the price is completely in the hands of the producer, for music and video, Apple has negotiated a range of prices. The incentive for Apple to run these stores is to enable consumers access to content that they can enjoy on Apple hardware. The key source of profit for Apple is not the sale of content but rather the sale of hardware on which that content can be enjoyed.

    Amazon is in a different business. Their profit is in the sale of content. Opposite of Apple they are selling Kindle to enable consumers easy access to the content they sell. Their key source of profit are not Kindles but rather books that people buy to read on Kindles or Kindle apps on other hardware. To make that business profitable they have established themselves as intermediaries between the producers (publishing houses) and consumers. In this system Amazon is negotiating prices with the producers, licensing the content for electronic distribution and selling it for the prices they decide on to the consumer, making a large profit with the difference between the two. Their key interest is in licensing content cheaply and selling it expensively.

    From the viewpoint of publishers Apple offers them a way to sell books directly to the consumer and enables them with the freedom to set and change the prices to match what the consumers are willing to pay - definitely a lot better deal than what Amazon offers. From the viewpoint of consumer it means that we'll be most probably paying higher prices for the new editions of expected bestsellers, but also possibly lower prices for older items. But in any case we'll be buying from the publishers "directly".

    In the case of Amazon, we're buying from Amazon which established itself as a kind of dictator that tells publishers what they can charge and us what we need to pay. One can argue that it is a benevolent dictator that has worked for the advantage of the consumer. But that happened only because it was also in the interest of Amazon. Is such a dictatorship good or bad? Well, we have lots of examples both from history and present time and it to a large degree comes down to sustainability - a point that publishers are making as well.

    But what about iTunes store and fixed prices? Well, Apple fought for fixed prices to make online music store - something that has not worked before at all - feasible. By fixing prices to $.99 it made purchases simple and cheap enough that we the consumers were ready to buy music online. Once online music store became a dominant way to purchase music, Apple enabled variable pricing. All the time, though, - unlike the Amazon kindle model - the music was still sold by music producers offering it on a marketplace build by Apple and not Apple licensing the music from producers for sale online.

    To get a more detailed description of Amazon model, see http://www.antipope.org/charlie/blog-static/2010/01/amazon-macmillan-an-outsiders.html

  1. aardman

    Fresh-Faced Recruit

    Joined: Nov 2009

    +4

    doublespeak

    "a monopoly on its own books", oh that's straight out of Psystar's winning playbook.

    "involuntarily agree to MacMillan's price increase requests". They were served a court order? Maybe reluctantly, or kicking-and-screamingly, but it was still voluntary.

  1. luckyday

    Fresh-Faced Recruit

    Joined: Apr 2008

    +3

    Amazon

    Amazon was going to accept all along. They just wanted to ensure that the customer knows they aren't the reason for the price increase.

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