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Amazon has given in to publisher Macmillan in a pricing dispute, agreeing to raise its e-book prices 30 to 50 percent on bestsellers. Price increases on standard titles and on works from other publishers are expected to follow in the near future.  (Source: Amazon)
Amazon isn't happy but it says it has to play ball with Macmillan Books, adopting up to 50 percent price increases

Amazon, originally an online bookstore, has thrived off of the ever-expanding retail offerings its core business unit provides.  However, the company has also enjoyed significant success as an electronics company, producing the best-selling Kindle series of e-Book readers (manufactured by Foxconn).  The Kindle series currently owns over 60 percent of this emerging market.

However, all is not well for Amazon's e-Books division.  Traditionally, bestsellers have retailed for about $10 in electronic form, with the early chapters being provided as free samples.  Recently, however, pulled Macmillan from its store over a pricing dispute.

Amazon wanted to stick with its lower prices.  However, Macmillan wanted up to a 50 percent increase on prices of its bestsellers.  Writes Macmillan CEO John Sargent, "Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time."

He talked about the decision to pull the books late last month, writing, "I regret that we have reached this impasse. Amazon has been a valuable customer for a long time, and it is my great hope that they will continue to be in the very near future. They have been a great innovator in our industry, and I suspect they will continue to be for decades to come."

Now Amazon has given in to the publisher's demands, but not without doing a lot of complaining first.  Writes the Kindle team in their forums:

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.

Now that Amazon has bowed to Macmillan's wishes, though, it will be hard pressed to block other publishers from demanding similar increases.  Ultimately, this will likely have a trickle-down effect, raising e-book prices as a whole around 30 to 50 percent.

That's bad news for this nascent market.  While e-books have significant appeal -- in terms of portability (you can bring thousands in your book bag) -- there's still many downsides as well.  With electronic books, you're at the mercy of your current formats and devices -- once they become obsolete, there's the chance you may lose your book forever.  And many people enjoy the look and feel of an old fashioned book.

Through competitive pricing, Amazon and other e-book vendors were able to help customers overlook the downsides and embrace e-books.  With that pricing advantage vanishing, it should be interesting to see if the industry's growth slows.  Amazon's CEO has boldly predicted (several times) that e-books will soon surpass sales of print books -- however that is under current pricing.  Will e-books that are 30 to 50 percent more expensive be able to take control of the market in the same way?



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The Very Reason Why I Don't Have a Kindle
By DaveLessnau on 2/1/2010 1:48:20 PM , Rating: 5
Even before this upcoming price increase, I considered the prices of these e-Books to be obscene. Paying the same price for an electronic version of a book as for a physical version is the very reason I don't own a Kindle. The publisher has much lower publication and distribution costs (heck, they might be zero for the publisher -- the distributor is the one who has to operate and maintain the server) and the user has far more limited rights to the book. That should mean e-Books should sell at a substantial discount to physical books.




RE: The Very Reason Why I Don't Have a Kindle
By Oregonian2 on 2/1/2010 2:21:47 PM , Rating: 2
Because authors are paid a percentage, I understand, I gather then that authors will then become paid substantially less for their work in a world of dead-cheap eBooks. So why bother write anything?


By namechamps on 2/1/2010 2:38:44 PM , Rating: 3
No publication costs, no remainders, no stocking costs, no shipping costs.

Face it. It could be a win for authors too. The book never has to go out of print. No unsold books which are destroyed and charged against revenue by bookstores. No bargin discount books ($0.99 books, etc).

Given the publisher's role is much less in a digital world their cut should be less and authors cut more. So sale price goes down but % of sale price to author goes up and it is a wash.

No this is simply publisher trying to stay alive just like record labels did when it came to CD vs mp3s. It had nothing to do with artists and this has nothing to do with authors.


By Keeir on 2/1/2010 3:34:09 PM , Rating: 2
Errr...

What do you suppose an author typically gets paid today (per book?)

My sources has always indicated to me that even a successful author rarely earns more than 2 dollars a book (1 or less for mass-market paperbacks). 5 dollars per book should fairly pay an author, an editor, and the electronic content distributor. Perhaps lets throw an extra 1 dollar for marketing?

Authors need to get together and demand the much more fair 25-50% of an e-book fee. As it stands now, Publishers should be salivating over e-books. Pretty much 50-75% of thier costs disappeared but they still get full pay!


By ZachDontScare on 2/1/2010 4:46:28 PM , Rating: 2
Authors should be getting a far larger percentage of the cover price for ebooks. As other have pointed out, there's near zero per-unit cost on an ebook. No shipping, no printing, no paper, no distributors,... and that makes up most of the book's final cost.

If they are getting the same percentage on ebooks as they do printed boods, they're the real suckers.


By Oregonian2 on 2/1/2010 6:14:10 PM , Rating: 2
Yup, suckers who will stop writing books.


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