Amazon To Customers: ‘We Will Have To Capitulate To Macmillan’

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 (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.