Amazon capitulates in Macmillan e-book disagreement: Higher e-book prices ahead?

japansurrender It appears the feud is over, with the publisher winning this time. Turns out Amazon’s pulling Macmillan titles was just a token gesture.

Amazon has posted the following announcement to its Kindle Community forum:

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.

I can’t help but find this decision disappointing.

As I said before, allowing the publisher to set the standard retail price is anti-competitive. (Attorney C.E. Petit explains more about that aspect, in a post Paul Biba has since reprinted on TeleRead.) If the publisher is allowed to dictate these terms to every e-book vendor, then it becomes harder for consumers to find a bargain.

On the other hand, it’s interesting that Amazon doesn’t mention that Macmillan claims its $14.99 price point represents the high end of a variable pricing scheme that could range down to much less than Amazon’s $9.99 after a time. If Macmillan is serious, that could be good for the consumer—especially if it applied universally, to places such as Fictionwise or BooksOnBoard as well.

On the gripping hand, as a commenter to my previous post on this story pointed out, Macmillan has had a pretty shoddy track record of instituting variable pricing so far, with e-books still selling at full hardcover prices at Fictionwise on titles that have long since gone to paperback in print. It would be nice to see a little “variable pricing” love there.

I suppose we could say that Amazon’s $9.99 pricing has driven Macmillan to compromise with its $13 to $15 price range, which is much better than $20-$30 for new hardcovers. If so, that is definitely an improvement.

And the variable pricing will allow Macmillan to get a better idea of the price elasticity of demand for its books and might end up resulting in even lower prices overall.

I would not be surprised if other members of the “big six” publishers followed suit with similar agency arrangements, despite Amazon’s “belief”. It just does not make sense for them not to.

It is some consolation that the e-book market is still relatively young, and there is still plenty of room for things to change. And the same consumers who have announced they will boycott books priced over $9.99 and have complained so vociferously about e-book “windowing” tactics now have something else to blame the publishers for.

Here are some other interesting editorials and analyses of the situation from Charlie Stross, Tobias Bucknell, Andrew Wheeler, Henry Blodgett (Silicon Alley Insider), TechCrunch, and GalleyCat. Here are MobileRead discussion threads on the original incident and Amazon’s capitulation.

Previous coverage on TeleRead:

Related: Techmeme roundup.

22 Comments on Amazon capitulates in Macmillan e-book disagreement: Higher e-book prices ahead?

  1. Eric Montgomery // January 31, 2010 at 7:02 pm //

    The term “Glass Jaw” come to mind.

  2. Eric Montgomery // January 31, 2010 at 7:05 pm //

    I won’t be surprised one bit to see all of the other publishers follow suit and raise prices very shortly. Amazon has proven that they’ll cave under pressure and the publishers will take advantage of it as quickly as possible.

    You can’t help but play conspiracy theorist and wonder if Apple agreed to the higher pricing knowing that Amazon would eventually be heavily damaged in the ensuing feeding frenzy of publishers trying to get their share of the pie.

  3. I do believe that the publisher has the right to set their price with a vendor, and if the vendor refuses to honor that price, it is the publisher’s right to refuse to sell to that vendor.

    So let them set higher prices as they will… at which point, the consumers will decide what prices they will accept, and vote with their wallets.

  4. Disappointing, yet I was fairly sure Amazon would give in after making the point.

    Now let’s see if Macmillan’s true purpose is to tier the pricing similar to print books or if it’s to set the price point for the ebook version of popular books to $13-$15 even after the paperback is out. (Not-so-popular books don’t really count.)

    As my own personal bellwether I’ll use Robert Jordan’s Wheel of Time series (Macmillan/Tor). The 12th novel was released last October, is still in hardcover, and wasn’t planned to be released in ebook format until November 2010. Will they now sell the ebook right away for $15 or were they lying? I’ll give them maybe a month for this since they weren’t planning it so soon.

    Also, the back list of the Wheel of Time series has been slowly released (up to number five now, I think) at $15 list each, even though the oldest has been in paperback for almost twenty years and all of them are $8 paperbacks now. Will these ebooks now drop to paperback price or were they lying? The ones already in ebook don’t need any additional time before they drop the price, if they indeed ever intend to do so for popular books. If they don’t drop in the next week we’ll know.

    I suspect Macmillan wants to set that new, higher ebook price permanently for anything that’s still selling well. I hope to be surprised and see the hardcover come out in ebook and the previous volumes drop to paperback prices. We’ll see.

  5. Alexander Inglis // January 31, 2010 at 9:13 pm //

    Missing in all this is the notion that e-books belong priced relative to mass paperbacks or at least trade paperbacks — not hard covers.

    As far as I am concerned, $9.99 is already too high for an e-book, spanking brand new or not. At the very most, that price is sustainable for the short window during which the hard cover is in market and before wide distribution of a paper edition — at which time we ought to expect the e-book edition to drop below the paper price.

  6. I agree that retail price should be set by the entity selling to the consumer. We publishers set suggested retail price but if a retailer wants to have a sale, that should be its right (and Amazon has been far more fair about its sales than other vendors who insist that publishers take a hit on discounted eBooks without giving them the choice of whether to accept the discount).

    As far as what ‘fair’ prices should be, I’ve bet my company on the notion that eBooks should be affordably priced. Macmillan has bet their company on the need to price discriminate over time (traditionally using hardbacks to attract those purchasers who have to have the book right away, and paperbacks to go after those who are unwilling to pay the higher immediate price). Macmillan’s push to set high initial eBook prices follows the logic of their business model and reflects their fear that Amazon may be setting them up with the $9.99 pricing.

    Alexander, I so completely disagree with you on the idea that the ‘value’ of eBooks is less than that of hardbacks. Hardbacks are a bulky and highly perishable product. eBooks are forever. As someone who’s just completed a move, I’ve both had to get rid of hundreds of books and moved hundreds more (dozens of which ended up getting ruined when our rains flooded our garage). My electronic library moved without cost and without loss. I understand wanting to pay less, and believe the economies of eBook publishing allow us to charge less, but I certainly disagree that they’re worth less.

    Rob Preece
    Publisher

  7. Thank you Alexander Inglis, for approaching the point I am about to make.

    If the cost of publishing a book is the same for e as for hardcover, they’ve got some explaining to do w/r/t the price of trade paperback, and mass-market paperback. E should *definitely* be cheaper than hardcover, regardless of the timing of the release. But paperback is almost never released at the same time as hardcover. Timing will play into the formula. This does not bug me; the insistence that e costs the same to bring to market as print bothers me a lot. Especially since e comes *without* right of first sale.

    Of course there’s no way on this earth that I’ll pay even 9.99 per volume for The Wheel of Time series. That thing’s been out forever, except for the most recent one. And at this rate (Kindle ed’s of the first couple in the series aren’t back up on Amazon’s site yet), it’ll be a couple of years before I get there. Macmillan had better mean what they say about dropping the price as the title ages.

    Especially considering that their titles will be able to remain ‘in print’ basically forever with almost no added cost to Macmillan. No estimating the size of the next print-run, no placing orders with the pesky printer — just leave everything on the server, and let readers pay and download forever.

    Maybe someday publishers will even start focusing on increasing the numbers of people who read.

  8. I may be wrong, but if the other major publishers follow suit, the anti-trust folks might decide to get involved.

  9. GJN, see the Petit blog post linked in my post. According to him, due to a recent Supreme Court decision, it will be practically impossible to get any resale price maintenance scheme found a violation of anti-trust laws.

  10. Richard Askenase // January 31, 2010 at 10:09 pm //

    Listen, folks. MacMillan will NEVER sell it ebooks lower than $9.99 or even at that price. They will NEVER sell their ebooks lower than the paper backs. That has been their history on this.

    They want to destroy ebooks. And they won’t. But they will cause much collateral damage as they go down.

    This is really a fight- and the publishers cannot win. Do not buy fiction ebooks over $9.99. Make that message clear.

  11. Rob Preece, Publisher says that “ebooks are forever”.

    Oh really? And the DRM that burdens them is also forever. DRM persists even after the authenticating server shuts down. It lasts even after the publisher changes it’s business plan and moves to a different DRM system. Sure, I can always read “my” ebook as long as my current device is functional. At best that might be a few more years, which is a long long ways less that “forever”.

    Macmillan’s ebooks are burdened with highly restrictive DRM. I can only read a book I buy on certain devices. I can only read it as long as the company supports the current DRM system. I can’t lend it. I can’t sell it.

    You don’t really buy a Macmillan ebook. You are really buying a very limited and restrictive reading right.

    I’ve decided that the value to me of DRM encumbered ebooks is roughly one dollar. That’s what I’m willing to pay for a limited book rental.

  12. Richard, never say never. If you look at the list of Macmillan/Tor ebooks on Mobipocket.com (http://tinyurl.com/yjxoabg) you’ll find a few rare $8 novels. (Note that Mobipocket has always sold ebooks at exactly what the publishers want, what we’ll now be seeing at Amazon.)

    However, you are still substantially correct for Macmillan, at least up to now (we’ll see if they change). The few exceptions seem to be books by Scalzi and Sanderson, of which the two on the first page (Old Man’s War, Mistborn were once released by Tor for free, without DRM. I know because I got them both at the time, from Tor’s site. Perhaps the other paperback-priced novels were also free at one time or another.

    So yeah, probably other than ebooks that Macmillan at one time released for free, they’ve never felt an ebook novel should be less than $14 no matter how old, no matter if the paperback has been out for ages.

    I actually don’t mind paying $15 for an ebook if it gives me extra value in some way. I’ve purchased an e-ARC from Baen before — the extra value of which was to get it several months before hardcover printing. (Downside being the lack of editing, though that was actually kind of interesting. I was able to see the authors’ thought processes in many scenes.)

    But I digress. In general I also won’t be buying an ebook for more than $9.99, or more than the paperback if it’s out. So I’m with you, Richard.

  13. Binko, even DRM-crippled ebooks are forever. At least for the computer-savvy (and it doesn’t take much knowledge). If the device goes defunct or the original database file access goes away, there are de-DRM methods for every scheme. Or, alternatively, the ebooks are available via various online sources. Ethically I have no problem with re-acquiring an ebook that I have paid for, even if it’s technically illegal. Therefore I have no problem paying what I consider a fair price initially. The writers, editors, publicists, etc., do deserve to be compensated.

  14. Binko,

    I’ve bought most of my eBooks from Fictionwise (or Gutenberg) and I focus on the multiformat side. I agree that DRM reduces value, especially for those of us who sometimes switch our reading devices (which is pretty much everyone who’s been in this business for more than a couple of years). Although DRM is a limitation, we’re not comparing DRM eBooks with an ideal solution but with heavy and destructible paper books.

    As a publisher, I have chosen not to use DRM on books I offer directly or through distribution (except for Mobipocket/Amazon where DRM is part of the process). I understand, however, other publishers making the other choice when they see the product of so much labor on their part and on the part of the authors whom they represent, essentially stolen by pirates.

    Again, part of my logic in selecting a low price model was that morality has a price. It’s easier to say, “hey, I’ll just buy the book” when it’s priced at $3.99, and easier to search for a pirated copy when it’s $18.99. That said, I’ve found some of my books pirated–which shows that we haven’t found a fully satisfactory solution.

    I still feel that eBooks are a more value-rich experience than paper, even if downgraded as a result of DRM. Of course, your mileage may vary.

    Rob Preece
    Publisher

  15. I appreciate the well spoken reply. Right now I’d say that ebooks are a potentially more value-rich experience than paper. But they aren’t there yet.

    I have a first generation Kindle and I have experienced many problems with poor formating, illegible maps and charts as well as a general lack of sound editing, proof reading and layout.

    But I really hate DRM. I hate the idea that, if my Kindle breaks, and I decide to buy a Sony Reader I can’t read my books unless I want to delve into illegal cracking software. I could probably live with DRM if the publishers were to agree on a common system that actually considered the rights of consumers.

    There’s really no reason why I shouldn’t be able to transfer my ownership to another person. And there’s no reason why I shouldn’t be able to read a given ebook on every device.

    Ebooks are in their infancy and many of these issues will sort out over time. But I’ve decided that I will just say NO to any ebook with DRM until the day that my rights and needs are better considered.

  16. Richard Askenase // February 1, 2010 at 2:27 am //

    Let’s not get sideracked by the old DRM debate. That is NOT what this fight was about. It was about pricing and who controls it.

    And my concern is that the $9.99 price is dead for alllarge pubishers- no matter what the paperback price is.

    How is this NOT anti-consumer? How is this not anti-trust?

  17. The issue at hand in this dispute has always been about the publisher’s right to price their own product, regardless of whether that price is high, low, or in-between. Amazon said – and has done so similarly on other occasions – “Toe the line or we remove your items for sale.” It’s an attitude that will come back to haunt Amazon, be that by way of a suppliers boycott, or by way of competition from a rival that simply does it better. I’m not certain, but Amazon has a habit of trying to “bully” suppliers because it wants to globally monopolise sales. Amazon’s biggest problem may be that it is not that strong a company, compared to true global concerns. Perhaps that’s why they have capitulated here?

    As for MacMillan, they and the other big publishers are only now (and reluctantly, I might add, because they don’t really want to be in ebooks) entering the ebook business and are trying to adopt old, old practices that simply do not work in the e-publishing industry. The prices they want to set are to high, plain and simple, but that is THEIR mistake to make and find out, not Amazon’s to force.

    Ebooks ahve been around for over a decade now, it is just this last year or so that they have entered the mainstream. Behind the scenes, and the true driving force behind this e-revolution are the fully established independent e-publishers, with the infrastructure and pricing models already in place and working. EPIC has many of these in their ranks as members. They sell ebooks from $1.99 upwards, but very rarely up at the $9.99 mark. Not only that, they introduce highly talented authors to the world, and will introduce more in the coming years as ebooks become huge. Not only that but you have independent ebook retailers like allromanceebooks.com and omnilit.com, one company that has MORE books than Amazon, most of them from these very independent publishers I refer to. You can do yourself a favour by checking out what is avaialble from independents instead of what antics and blunderings the Big Six and Amazon are up to, entertaining though that is!

    Rob Preece is correct in what he says. Ebooks are here to stay. He is also right – and the independent publishers agree – that DRM is not the way to go. Many independents do not apply DRM to their books and sell them DRM free, and it is only occasions where distributors insist on putting DRM to a publisher’s titles that you will see DRM on those books. DRM does NOT provide the protection that people believe, and is much more hassle than it is worth. MacMillan and co., will come to see that DRM, coupled with excessive pricing will chase customers away.

    I would not fear what they do though, because they are largely unaware of how established the independent publishing industry has become. Someone mentioned that they are “out to ruin ebooks”. Won’t happen. There’s already a huge industry with a huge following that is only going to get bigger and bigger, and it will be driven by independent publishers and indepedently-published authors.

    You’ve already seen one major author, Stephen Covey, retain his ebooks rights from his print publisher to go independent. Expect more to follow. Actually, the title of his book, “The Seven Habits of Highly Effective People” kind of speaks for itself, doesn’t it?

  18. Steve Jordan’s comment is correct.

    Speaking as a consumer–I love ebooks. But there is no way in Hades that I’m going to pay $14.99 for ANY ebook. I don’t care who wrote it or who published it.

    I can find thousands of excellent ebooks for less than $10 (even less than $5) in practically every genre.

    These NYC publishing houses have absolutely no clue. They’re trying to impose their wasteful, antiquated business practices on twenty-first century business models. And Amazon is making themselves look just as bad with these antics.

    Inflated prices? Delayed releases? Give me a break. I’ll be buying ebooks that fit my budget, and from what I’ve seen, I won’t be buying ebooks from “The Big Six” any time soon.

  19. My question is simpler: How is it *not* price fixing?

    Price fixing does not require antitrust action.
    All it requires is collusion to artificially raise prices to gouge consumers.
    Read Amazon’s statement and it reads as a roadmap to the FTC for price-fixing charges. All it needs is for one more BPH to *tell* Amazon to take the Apple deal or else.
    Quote: “Price fixing requires a conspiracy between two or more sellers or buyers; the purpose is to coordinate pricing for mutual benefit of the traders.”

    http://en.wikipedia.org/wiki/Price_fixing

    With Steve Jobs as the publicly acknowledged go-between, the so-called Agent model is a pretty well documented case of collusion among the BPHs to force higher consumer prices on retailers *and* prohibit discounting. The latter part seems to be getting lost in the cited legal analysis. (I remember a case where Panasonic lost a case trying to prohibit retailers from discounting their products by threatening to withhold shipments.)

    Ultimately, the war over the future of ebooks is now officially on; it didn’t have to be this way, but MacMillan, egged on by APPLE fired the first shot. It is up to *consumers*, not Amazon to react; BY *NOT* buying any MacMillan book, e- or p-, and by complaints to State AGs and the FTC referring to the Jobs interview with Mossberg, the MacMillan open letter, and Amazon’s reply. I’m sure NY’s Cuomo wouldn’t mind taking a pro-consumer populist issue like this forward; the poitical climate is just ripe for it.

    Anybody who think this is not right, you have to choices: take it meekly or take it to your State AG.

    Squeaky wheels and all…
    Here’s the list:
    http://en.wikipedia.org/wiki/State_Attorney_General

    Stop talking, start squeaking.
    Or not.

    But if not, please stop complaining about the prices, okay?

  20. My big problem with this is that McMillan seems to believe the fiction that we own these books. We don’t; we’re renting them. If we want to battle the price hike, that’s the message we need to get out.

    DRM = renting, so give is a big price break. Half the list price or lower, I’d say.

  21. Felix, it may be price-fixing.

    But thanks to that Supreme Court decision Petit mentioned in the blog post I link, it may not be anti-trust price-fixing.

    We’ll just have to see.

  22. I understood that.
    My point is that there are other laws that apply and other venues to challenge anti-consumer behavior.
    50 Attorneys General with political ambitions and large staffs gotta be good for something.

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