Michael's Blog

One day after the launch of the IPad, Macmillan – one of the major book publishers in the US – announced to Amazon that they would not agree with the Amazon pricing of their content anymore. The following weekend a showdown happened that eventually concluded with Amazon giving in and changing their pricing model. This was the first public locking of horns about ebook pricing and may be symptomatic of future discussions between publishers and digital distributors.

Amazon wanted to sell books for their Kindle ebook reader at 9.95, Macmillan said they want to determine the pricing of books themselves, not undercut their hardcover editions by that much and sell at least some of them at a higher price (14.95), just like they have always done with distributors/booksellers of paper titles. Macmillan stated that they would not allow Amazon to sell their books. This was communicated by their CEO John Sargent via a paid ad in an online newsletter on Saturday.

Amazon promptly withdrew all Macmillan titles – e- and paper books – from their online store (which had the effect that Macmillan titles shot to the top of the other online retailers, like Barns & Noble).

Eventually, Amazon gave in, allowed Macmillan to set their own pricing and re-instated all titles.

In the meantime, other publishers, like the french Hachette Group, have joined Macmillan. Harper Collins have also expressed their dissatisfaction with Amazon’s pricing.

Amazon’s Kindle Team posts a letter to their customers citing a mission for inexpensive ebooks.

So this was to a big part prompted by the introduction of the IPad by Apple, who will open an ibook store in competition to Amazon, so far the dominant ebook distributor.

The Apple IBook store will work according to the “agency model”, in which publishers determine pricing of their titles, proceeds are split 70/30 between publisher and Apple. Amazon, on the other hand, operates on a low cost model, buying books at a big wholesaler’s discount (70%) from the publishers and selling them at bargain pricing.

So the result is that ebook prices are going up. In the short term. In the long term there will be competition, and many more of these battles will be fought. No publisher will price themselves out of a competitive market, and if titles are available on a variety of platforms, from a variety of distributors, this can only be a good thing in the long run.

2010 will be an exciting year in book publishing and distribution. Old business and pricing models will have to be questioned and revised, and even traditional media producers must re-think, ideally before technological advances, market changes and consumer behaviour force them to.