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Steve Jobs has made a deal with Rupert Murdoch, which may end the days of cheap e-books from Amazon.  (Source: Reuters)
Enjoy $9.99 bestsellers while you can, following the Macmillan concession, everyone wants more out of Amazon

As we predicted, the recent concession by Amazon.com in terms of electronic book pricing to “big six” publisher Macmillan opened the floodgates leading other top publishers to demand more.  

Amazon.com's electronics books have many downsides -- the potential to lose your book eventually due to compatibility, ownership concerns, and dependency on battery life of the device being used.  They also have significant upsides -- a lot of classic works are available for free, you can transport 1,000s of books in a single bag and it's much easier to locate your books.  However, the biggest advantage of all was pricing.  Whereas hardcover best sellers typically retail for $15 to $25 on Amazon.com, best-sellers have been available in e-book form for the bargain rate of $9.99.

Macmillan recently won in a battle with Amazon to raise those prices.  Amazon has agreed to raise the price of Macmillan 
New York Times bestsellers to $12.99, or in most cases, $14.99.  

Now Rupert Murdoch, the media mogul who owns HarperCollins books -- another big six publisher -- is demanding a price bump of his own.  In a conference call Tuesday, he complained, "We don't like the Amazon model of selling everything at $9.99.  They pay us the wholesale price of $14 or whatever we charge.  But I think it really devalues books and it hurts all the retailers of the hard cover books."

Murdoch commented that he was looking to renegotiate News Corp's deal with Amazon and says that Amazon has responded that it is "ready to sit down with us again."

HarperCollins Books publishes such bestselling authors as Michael Crichton and Janet Evanovich.

Besides the Macmillan concession, another factor driving up prices is new competition from Apple.  Apple recently debuted its iPad tablet computer.  While its name has been the bunt of many jokes, curiosity about the new device is high.  Apple looks to use the device to become a major competitor to Amazon and second-place Sony in the electronic books arena.  

Apple already has a deal in place with Murdoch.  He comments, "Apple, in its agreement with us, which is not been disclosed in detail, does allow for a variety of slightly higher prices."

It appears that the final blows are being struck that will ultimately spell the end of cheap e-books.  Will that hurt the format's popularity?  Or will customers stomach the changes?  That remains to be seen in coming months.



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Half-truths
By zzatz on 2/3/2010 2:54:16 PM , Rating: 1
This story presents a very misleading picture of what is happening in the publishing world.

Amazon has been selling ebooks below cost in order to drive competitors out of business. If they succeed, do you think prices will stay low? Amazon is fighting Walmart, and using Walmart's own tactics. We've seen what that leads to: lower prices but fewer choices. Suppliers going out of business, people losing jobs.

This article leaves out a key issue for publishers, dynamic pricing. Books on paper come out in hardback at higher prices, and early adopters are willing to pay those prices. After hardback sales decline, the trade paperback comes out at an intermediate price. Eventually, the mass market paperback comes out at the lowest price.

Many people are willing to pay a premium to get products as soon as possible. Look at the prices people are willing to pay for Intel processors or graphics cards. Others will wait for lower prices. I'm happy with my Core2 Duo, and wait for paperbacks.

Macmillan has said that they are interested in dynamic pricing; the price of an ebook should track the price of the paper edition. I won't pay $15 for an ebook, so I'll wait for the $7 edition. That's why the $15 price isn't worth raging about; that's not the final price.

The major publishers aren't there yet, and their track record is poor. But I see signs that this problem will be solved soon, so it's a lesser issue. Amazon's grab for monopoly power, coupled with its willingness to hurt authors and readers in its tactics, is a much more serious problem.

On a side note, most people don't have any idea of publishing costs. From what I've read, printing and shipping of paper books is only 3% to 10% of the total cost. The major publishers have huge economies of scale in printing. Most of the cost is in acquisition, editing, layout, proofreading, and marketing. Most of the cost of a book is the same for paper and ebook versions.

Smaller publishers have higher printing costs, but can skimp on editorial and marketing expenses. So they have a larger difference in cost between electronic and paper editions.

I'm angry about the way publishers have been dragging their feet, stumbling in circles, and otherwise failing to adapt to the digital world. But they may sort it out. But I'm certain that the Walmart business model is bad for authors and readers alike, and will not support Walmart or Amazon's quest to become the next Walmart.




RE: Half-truths
By cmdrdredd on 2/3/2010 5:11:33 PM , Rating: 2
Aside from what you said, most of which I agree with. I STILL see Pirate Latitudes on the Sony eBook store, Barnes & Noble.com and Amazon.com for $9.99.

According to the article this is one Author who is covered by this publisher and should have it's price moved or be unavailable no?


RE: Half-truths
By pepito perez on 2/3/2010 7:25:25 PM , Rating: 2
You are missing the point: Dynamic pricing, as most of the traditional market structures and techniques, do not apply to the digital content. In the real world if I'm not willing to pay 15$ for a hardcover I'll wait for the paperback. In the internet world if I'm not willing to pay 15$ for an ebook I'll take my P2P of choice and download it illegally. MP3s and Divxs prove it: DVDs at 29.99, good winds for the pirate ship to sail. With NetFlix at 9.99 who bothers downloading illegal content? Apparently the publishers didn't learn the lesson.


RE: Half-truths
By zzatz on 2/4/2010 2:18:46 AM , Rating: 2
I agree that publishers are driving piracy, but disagree as to which specific policies are doing it. DRM is a serious miscalculation, as it makes the legitimate product less valuable than the infringing version. Distribution is another issue, as publishers (and music, film, and TV producers) are hobbled with regional licenses that don't work in the Internet age. The key is to make purchases easy, and price is part of that, but the least important part. It's amazing how hard it can be to get people to take your money. Make it easy, and people will pay, and some people are willing to pay high prices. I won't, but I'm happy to have those people pay the lion's share of the development of the product.

That's the problem with the Amazon/Walmart model, they cap the price of the premium version, not the low end version. That means that the costs must be spread over more buyers, and only blockbusters and best sellers make money. I like books, TV shows, music, and movies that are quirky and appeal to smaller but significant audiences. That sort of content used to cover its costs with small sales at premium prices, and then later become available at prices I was willing to pay.

Some people are willing to pay higher prices, and those higher prices help drive diversity in the market. People who buy hardbacks make the paperbacks I buy later more affordable; they subsidize my purchases. They also make it more likely that books that appeal to me will be published.

I see no reason why a high initial price which drops over time cannot work for ebooks. It's a model that's good for readers and authors.


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














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