updated 12:35 pm EDT, Fri April 30, 2010
Amazon cuts physical book prices to hurt Penguin
Amazon today was reported as having dropped the prices on some of Penguin's physical books to force a deal with the publisher for e-books [subscription required]. Coming weeks after Penguin stopped providing Kindle books on April 1st, Amazon has cut the costs of some brand new hardcover books to the same $10 it would normally charge for a digital edition. The price slash would be especially painful for Penguin as it and other publishers hate major discounts on new titles.
The move is believed to once again have its roots in a dispute over the agency pricing model, which would let Penguin and other publishers set the price and leave Amazon taking a fixed percentage of the revenue. Amazon has normally insisted on a wholesale model where publishers are paid a fixed amount and Amazon sets the price. A refusal to budge triggered similar behavior from Amazon with Macmillan and led to Amazon temporarily pulling that publisher's titles until it was forced to allow higher prices.
The now multiple disputes at Amazon all started roughly on the verge of the launch of the iPad, which may have sparked a conflict in which Apple was willing to allow prices higher than $10 to court publishers frustrated with Amazon's tendency to sell e-books below cost. Amazon had allegedly tried to threaten smaller publishers into maintaining wholesale deals, but it has since signed deals with independents and most majors that permits agency pricing on the majority of its Kindle titles.