February 1, 2010
Amazon Drops, Then Undrops Macmillan eBooks in Pricing Dispute
In a bit of a dust up between Amazon and Macmillan, Amazon temporarily suspended sales of electronic titles of e-books in a pricing dispute. Amazon wanted to hold the line at $9.99 for titles. Macmillan basically felt that the royalty deal Amazon announced, that publishers and authors who listed their books at $9.99 or less would get 70% of the sale, was not a good deal for their authors. The company insisted on higher prices for its titles, leading to Amazon's suspension. That lasted all of two days when Amazon reluctantly gave in. Macmillan e-books are still not available via Amazon, but they will be back with new pricing. Why the sudden turn around? Amazon acknowledges in its announcement that "Kindle is a business for Amazon, and it is also a mission." Kindle is not only a business, but it's not the only game in town all of a sudden.
The leverage that Amazon might have in the e-book market compared to that of Apple with the music publishers is much lower. Apple still dominates in music sales because it had such a head start in defining a legal music download ecosystem both in selection and customer service. Because music files are not as portable between music stores and hardware, its hard to switch sources. Customers get locked into Apple because there is not much ability to buy music from anyone and play the music from any computer or portable device. The e-book market is a bit different. Kindle may have had a head start. Significant competitors, however, came out of the woodwork before Amazon could reach that same level of invincibility. Hence the cave-in to Macmillan's pricing demands.
One point that comes out of all of this is a reminder that e-books are going to be tied to hardware to an extent. Want to buy books for the Sony reader? Go to the Sony bookstore. It's the same with Barnes and Noble's Nook, and even the Apple iPad book store. Even though Apple embraced the EPUB format, their book downloads will only work with the iPad. This is a far cry from, say, buying a CD from anyone and playing it on any device. Another point is that publishers have the power to set their prices for their products across a range of stores and devices. This fact seems to be lost in discussions about the Google Book Settlement. For all the power Google may have as a dominant distributor should the deal go through, it's the publishers who really own the product and set the terms of sale. [MG]