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Amazon, Macmillan and the struggle for control of e-book pricing

Publishers Lunch Deluxe reported to its subscribers Friday (Jan. 29) that Amazon had removed all buy buttons from Macmillan titles, including titles on customers' personal wish lists, in a power struggle with Macmillan over who could set the prices on Macmillan e-books. This was the "first shot across the
purchasing bow in big publishers' efforts to reset ebook pricing above the loss-leader $9.99 price point and retake control over that pricing by moving from the wholesale selling model to an agency selling model," reported Publishers Lunch, "at least for ebooks published simultaneously with new hardcover releases."

Under the agency model, Macmillan would set the price for the e-book and Amazon or any other online retailer would serve as agent, taking a 30% commission.

It's unclear to me how this will affect the authors' income on sales of e-books--that's ANOTHER battle being fought on another front.

On titles for which Macmillan set prices of $12.95 to $14.95, Amazon.com was selling e-books at $9.99. "The $9.99 best seller that helped Amazon.com Inc. build a dominant position in the now-thriving e-book market was at risk of extinction Sunday after Amazon capitulated in a battle sparked by the launch of Apple Inc.'s new iPad," reported Jeffrey A. Trachtenberg and Geoffrey A. Fowler in E-Book Pricing Put Into Turmoil (the Wall Street Journal).

On Amazon's Kindle Community discussion page, you can find Kindle's announcement that it would probably be forced to capitulate to Macmillan, but it's the hundreds of comments posted I found interesting. Here's the message they were responding to:

"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."

For authors whose books were pulled from Amazon shelves, this was an alarming demonstration of the power Amazon has in the market (and a somewhat puzzling dig at the publisher's "monopoly"). For Amazon, as the WSJ story makes clear, this is about publishers struggling to maintain control over pricing on their own e-books. WSJ quotes literary agent and e-book publisher Richard Curtis as saying "The future of e-books, the future of publishers' control over their own destiny, and the future of retail pricing, is being forged right before our eyes."

The other major player in this story, the Apple iPad, is a threat to Kindle's domination of the e-reader market. Amazon's heavy-handed tactics in the struggle for control of the e-book market has made authors and customers consider alternatives to Amazon's Kindle. On the Kindle discussion list, C. Sutt wrote: ":but frankly if you hadn't decided to pull all of my Tor books as a strong-armed business tactic, I would never have found out about Baen's WebScriptions service and taken my business elsewhere. Will I be continuing to purchase books through Amazon for my Kindle? Probably.
Have you gotten me into the habit of checking elsewhere because I can't trust you to be accurate about what's 'in stock' or not?
Yes, you have.
Sincerely, a very annoyed customer--one perfectly willing to pay $15 for an ebook, particularly one that (like the Baen books) comes out *before* the hardcovers."

Here's Mike Shatzkin's analysis and account of the wild weekend of Amazon and Macmillan.

And here's the Monday morning report from Motoko Rich and Brad Stone: Publisher Wins Fight With Amazon Over E-Books (NY Times 1-31-10).

The e-book you read on the Kindle is software you license, not a book you own--as readers learned when Kindle pulled George Orwell's 1984 from their Kindle readers earlier this year (read Ars Technica's account of that incident.

Macmillan is a group of U.S. publishing companies, held by Verlagsgruppe Georg von Holtzbrinck, based in Stuttgart, Germany. Among Macmillan's many companies are St. Martin's Press, Tor, Henry Holt & Company, and Farrar Straus and Giroux (see entry for Macmillan on DailyLit). At a time when book publishers are struggling to survive and brick-and-mortar bookstores are in mortal competition with Amazon, this power struggle is of vital interest to book lovers and producers.

There's a round-up of links to stories on e-book markets, rights, and audiences under
Publishing and e-publishing on Writers and Editors
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