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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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RE: I'll make a prediction...
By jwilliams4200 on 2/1/2010 4:19:57 PM , Rating: 2
Personally, I am actually happy to see this. I expect I will be buying more e-books at the higher prices, because I will have more e-books to choose from. Currently, I am often disappointed that I cannot find an e-book of a book I would like to buy -- but if the authors/publishers made more money from their e-books, I'm guessing the selection will increase. Also, traditionally hardbacks are around double the cost of a paperback, and new releases are exclusively hardback for around a year. But the cost of publishing a hardback is not a lot more than a paperback. The publishers are just taking advantage of higher demand to charge more for new releases. If they cannot do something similar for e-books, than e-books will not be available as soon as hardbacks. I want the e-books ASAP, so I am willing to pay more.

What I would really like to see going forward is to eliminate the middle man. Have authors publish directly to e-book, and set their own prices. Then I could patronize the authors who write good books at a fair price, and I know that most of the purchase price is going to the authors.


RE: I'll make a prediction...
By fic2 on 2/1/2010 6:39:28 PM , Rating: 2
I agree with the last part. There is a CNBC special about the music biz. One of the bands they talk to is Bare Naked Ladies. They self-publish now. They said they sell less CDs/songs, but make more money than they used to. I can't believe that more bands haven't gone this route when their contracts are up. I would think this is the model that will be moved to as bands coming up now do it just to get their music out, then get signed and realize they are getting ripped off, then go back when their contracts are up.


RE: I'll make a prediction...
By atlmann10 on 2/2/2010 1:23:43 AM , Rating: 2
Yeah jwiliams4200 you have the valid view here. This publisher Mcmillan is so stabbing the general public in the back with this. I get what your saying, but the reason this is being done is because they signed on as a specific publisher in the new iPad and are afraid there gonna loose there butt's. Since the pre-release the iPad has been criticized even by the MAC faithful, the PC people are crucifying it. However this is one of a few publishers that signed on pre-delivery (I think there were 4), and this thing has blown up in there face for now. The publisher is doing this on a property (an e-book) which probably costs them less than zero to deliver. They still make full price on their print books (and readers on print books from what they say are dwindling faster than dry leaves in a camp fire), so jack up the price on the e-books and there still getting fat paychecks (the publishers not the authors). This is utter greed and fear from them because there books will also be available on the app store for free or a couple bucks. This means an iPhone user downloads it they make nothing, if an iPad reader downloads it they get paid but the market is predicted as exceptionally limited for that specific device. Either way it is the executive directors trying to get mega bonuses nothing else. This publisher should be banned and protested.


"And boy have we patented it!" -- Steve Jobs, Macworld 2007














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