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Summary:

Five major publishers were highlighted by Apple (NSDQ: AAPL) at Wednesday’s unveiling of the iPad and the iBookstore. Two days later, one of…

Kindle DX $100 Bill

Five major publishers were highlighted by Apple (NSDQ: AAPL) at Wednesday’s unveiling of the iPad and the iBookstore. Two days later, one of them was starring in a different e-reader drama when reports emerged that Macmillan titles were no longer being sold directly by Amazon.com (NSDQ: AMZN). Macmillan wants to set its own prices, preferably in the $12.99-$14.99 range, instead of wholesaling them to Amazon, which prefers lower rates even when it means selling at a loss. Amazon wants to sell Kindles and to make e-books into a kind of currency. Macmillan wants to keep consumers from getting in to the habit of thinking e-books are $10 or less. Amazon wants to sell more books. Guess who is caught in the middle.

Macmillan CEO John Sargent prompted the weekend drama with a Thursday lay-down-the-law visit to Amazon, where he told execs the e-tailer could stick with the current pricing but wouldn’t get new titles and would have to winnow others. As he explained in a full-page ad in a special Saturday edition of Publishers Lunch, by the time he got back to New York Friday, Macmillan books were being pulled off the virtual shelves.

Amazon ended its radio silence about the decision late Sunday afternoon with a blunt (and belated) message to customers. The gist: we tried to hold the line on low e-book prices, now it’s up to you. The full message posted on the Kindle forum is below:

—————————————————-
From the Amazon Kindle team:

Dear Customers:

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.

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 customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. We don’t believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.

Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!

Thank you for being a customer.

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  1. The “monopoly over their own titles” comment is kind of funny.

  2. Nnamdi from Nigeria Monday, February 1, 2010

    This is just wrong of Amazon. Of course Macmillan have monopoly over their own titles! They paid the authors for the rights, didn’t they? And they’ve spent money marketing them, haven’t they? If the customer places such little value on their books not to want to pay the $14.99 for them, then that’s for Macmillan to deal with. But trying to force them into a situation that homogenizes their offering is just plain stupid and even more dictatorial than Macmillan’s approach.Let the publishers fix their own prices and then come up with offerings to justify their own prices; or isn’t that how a free economy runs anymore?
    Amazon’s attempt to try and rehash the whole content homogenization stunt by Apple that led to the crash of the music industry might not be a very cool idea.. and they should stop trying to suck up to people either, some of their own policies aren’t that customer friendly!

  3. Amazon initially blackmailed Macmillan by dropping sales of Macmillan’s books from Amazon – both physical and eBook (not just eBooks). Amazon certainly looked like a THUG with this move.Now this “capitulation”. Amazon is just trying to retreat from its THUG position.The remark about Amazon wanting to sell eBooks for $9.99 even if it was for a loss is just plain false. Amazon splits revenue from ebooks at 70% for itself and 30% for the publisher. This is hardly a loss to Amazon and is certainly unfair to the publisher – who faces a huge revenue loss compared to what it gets selling a hardcover book.I bet other publishers will want what Macmillan just got from Amazon. You Betcha!

  4. One of the authors affected by the Amazon/Macmillan dust-up this weekend has a few things to say on the subject–somewhat salty language but an astute analysis: http://whatever.scalzi.com/2010/02/01/all-the-many-ways-amazon-so-very-failed-the-weekend/

  5. The article is wrong about pricing. Macmillan wanted to sell books at prices from around $5 to around $15. Not all of them would be in the $13-15 range – only the newest and priciest ones.

    1. Staci D. Kramer Joe Monday, February 1, 2010

      I should have made that more clear. Thanks.

  6. Mercedes Lackey Monday, February 1, 2010

    OK folks, here is a response from a real book writer, and someone who was affected by this, since Macmillan/Tor is one of my publishers. (I’m Mercedes Lackey)

    Amazon’s response was posted on the Amazon Kindle Forum on Amazon’s site, apparently by someone who has absolutely no grasp of how publishing–or anything else–works. OF COURSE Macmillan “has a monopoly on its own titles,” you moron! And Nabisco “has a monopoly on Oreos” and Ford “has a monopoly on Mustangs and Shelby Cobras!”*

    The book business in general is tanking. How bad? Bad enough that almost everyone I know saw their royalty checks plummet to 50% last year, some going down to 10%. Well duh, you can’t buy books when you don’t have a job. (I am often forced to roll my eyes when I tell people that and they look at me bewildered and say “But I see tons of people in the bookstore when I go, how can that be?” I have to explain patiently that “Tons of people in the store does NOT equate to sales.”)

    Amazon has the publishers by the short and curlies. Unlike traditional bookstores, the One Ton Gorilla can demand a discount of 50% on the cover price and get it (as opposed to the chain-store’s 30% and the Indie’s discount of 20%). This is why a new HC, with a cover price of $25 is Amazon Priced at $15. And this is why the price of books has gone up, so publishers can keep their very slim profit margin. (And believe me, it is slim).

    Macmillan’s desired pricing model is not as draconian as it seems. They want $15 for the e-copy of a Hot New Bestseller–same as the heavily-discounted price of the dead tree copy, so that the e-copy does not compete with the same book in dead tree, and Macmillan can recoup their substantial investment in the book. This does NOT mean that MY new book in e-copy would be $15. Mine would likely be, oh, $12. And Joe Schmoe’s would be–you got it–$9.99. Plus, in Macmillan’s model, over time that $15 per e-copy would start going down. In 6 months, say, it would be $9.99. And in two years? Probably $4.99, same as a paperback.

    So if you JUST CAN’T WAIT–you pay a premium. Same as with any other product.

    * Now here is some irony. Amazon is claiming to be a publisher when it comes to obtaining exclusive rights to e-copies of books. Yet not that long ago I actually approached them to write Kindle-exclusive content. I wanted the same terms I would get from any of my other publishers; advance against royalties, half on signing, half on publication. I was told then, in exactly these words, “Amazon is not a publisher.” (But of course I “should feel free to write the content and publish it via the Kindle platform at their generous terms of 30% royalty”**).

    So…..three months ago, they WEREN’T a publisher. Now they suddenly are. Oh, except when it comes to treating an author like a professional.

    ** Lest you wonder why I didn’t take advantage of such GENEROUS TERMS, another author ran the numbers for a series of his that was abandoned and discovered rather quickly that he would be making less money than a first-time writer.

    (Oh, and one more thing. The “Advance against royalties”, often shortened to “Advance” is a essentially a no-interest loan, paid out over time to an author, so that he can write the damn book without worrying about where the mortgage payment is coming from. Most of us (especially now) absolutely require these advances to keep writing. It’s a gamble on the part of the publisher that your book will be profitable, because if it is not, YOU don’t have to pay it back.)

  7. @Mercedes Lackey:
    “(I am often forced to roll my eyes when I tell people that and they look at me bewildered and say “But I see tons of people in the bookstore when I go, how can that be?” I have to explain patiently that “Tons of people in the store does NOT equate to sales.”)”

    There’s actually more to it than that. My mother is an author with 15 published fiction books, but hasn’t sold one for years. What has happened in the last few decades is that people continue to buy best-sellers, but less well known authors find that no one wants their work. Publishers would rather spend their money on ‘sure things’ than gamble on smaller authors. After all, even if they sell enough for a new author to break even, it’s not likely to be enough to pay back the investment many times over. A new Steven King book, OTOH, will pay back its (much larger) investment almost immediately.

    So even if those people in the book store are buying, they’re tending toward the more well-known authors, leaving the little guys out in the cold

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