– Alex
Thought I’d better post this breaking news, which Rob and Louise and Stephen and Dusty and I just found out about and which affects many, many of our writer/readers:
Amazon.com has pulled books from Macmillan, one of the largest publishers in the United States, in a dispute over the pricing on e-books on the site.
Here’s the story:
Amazon Pulls Macmillan Books Over E Book Price Disagreement
I’ve been reading about this all day b/c so many friends are affected.
I’d love to learn what others think of this decision. Feels a lot like info control to me.
Just call me "Paranoid Pari" today . . .
Everyone is assuming that Amazon is the one who pulled the books off. What may have actually happened, though, is that Macmillan is the one who decided to removed Amazon as a seller of its books, both in ebook and paper form, and that’s why the books have disappeared off the shelf. Amazon can only sell what publishers and authors give it to sell.
JMH,
From what I’ve read so far, it IS the publisher that did it.
I posted on Twitter a few minutes ago that if the one who pulled the books is Amazon, then they’ve just slashed my ability to purchase for my Kindle. They’ve arbitrarily changed my access and breached the implied contract I had when I purchased my kindle last month. It’s the equivalent of a corporate hissy fit.
If it’s Macmillan who’s done this, they’ve just made a really ugly point that a whole group of customers aren’t important to it–not important enough to work out the issues behind-the-scenes without throwing a corporate hissy fit.
Either way, it was a dumb PR move.
What seems to be at stake, though, leaves me a little incredulous: Macmillan is said to want to have the ability to raise the ebook prices so that the ebook sales don’t undermine the hardcover sales. Most publishers make the most mark-up on hardcover, so it’s understandable from that perspective as to why they’d want to do this… but wanting to do something because it conveniently helps you to not lose money in the short term does not necessarily make that a good long-term business decision. Everybody would like to make more money. Welcome to the club.
There are two models of business that Macmillan should really be eyeing — iTunes and Walmart. Millions of people shop at each, and millions of people are used to getting more for less money. They are not going to suddenly be willing to pay more money for the same experience. Unless Macmillan’s plan is to make those $14.99 ebooks have a ton of extras, ebook buyers who are used to getting their books at $9.99 are going to feel ripped off. I wouldn’t be surprised at a boycott. (Already going on at Amazon, according to Galleycat.)
What the publishing industry needs is a new model, not trying to force ebooks into the same model as hardcovers. One possibility would be to do something like Netflix, but for ebooks–you "rent" the book the week it comes out, but at far less than the hardcover price… but after a certain number of days, you no longer have access to it. If you want to keep it permanently, you click to pay a higher price and keep it. Or something like this, where the ebooks are available at a reasonably low price.
The updated NYT story says it was Amazon’s way of playing hardball.
Motoko Rich, my colleague, spoke with a person who had a direct conversation with a person at Macmillan familiar with the conversations with Amazon. Macmillan offered Amazon the opportunity to buy Kindle editions on the same “agency” model as it will sell e-books to Apple for the iPad. Under this model, the publisher sets the consumer book price and takes 70 percent of each sale, leaving 30 percent to the retailer. Macmillan said Amazon could continue to buy e-books under its current wholesale model, paying the publisher 50 percent of the hardcover list price while pricing the e-book at any level Amazon chooses, but that Macmillan would delay those e-book editions by seven months after hardcover release. Amazon’s removal of Macmillan titles on Friday appears to be a direct reaction to that.
Macmillan has not yet returned a request for comment. Amazon refused to comment.
Dusty, that’s a more complete report than what I had been able to find thus far, so thank you.
Would the "agent" model ultimately mean more royalties to the authors, I wonder.
I still think raising the price on ebooks is a bad idea.
Toni, i agree that there needs to be, as you put it, a "new model" for e-books.
But I don’t think that model should be dictated by Amazon using this kind of tactic. They’re basically trying to tell not just McMillan, but ALL publishers, "we’re the big dog, you publishers are our bitches, and you’ll set the prices we want." I’m not happy about that at all.
Argh. Sometimes the Brave New World seems woefully infantile, doesn’t it?
That does it. I’m THROUGH with Macmillan!
Oh, wait….
Oh, I definitely agree with that, Dusty. What Amazon did at that moment was not only completely disrespect their vendor, but they completely disrespected their customers. I have a Kindle. Yesterday was the last day I could have mailed it back for a full return. If I could mail it back *right now,* I would, and demand a refund. They’ve pretty much guaranteed that I’m going to find other places to shop.
I’m surprised no one has hacked the Kindle yet. Apparently B & N’s Nook E-reader (what an unfortunate name) has been hacked allowing you to read whatever kinds of books you want on it.
DRM should die. If we can’t get the books we want from Amazon for our Kindle, we should be able to get them somewhere else.
Meanwhile, looks like some online e-booksellers see an opportunity…
Okay, so here’s the thing that annoys me no end. My last book, Kill Her Again, is paperback — which costs about 8 bucks new.
Yet on this Omnilit.com store in the article that Dusty linked to, the book is priced at $14. WTF? Who sets this price, the retailer or the publisher? And if the publisher is charging 14 bucks for an 8 buck book, they are completely out of their minds.
They just don’t get it.
I’ve always said that, as a business model, publishing is the goofiest way of doing business ever. Bookstores can send books back that are torn by them, or have coffee (available in their stores) spilled on them, and the publisher has to eat the cost. Plus, the author–the very reason the book exists in the first place–gets the least amount of money of anyone. It never made any sense to me.
Now they want to sell a VIRTUAL commodity for the same price as one that has printing, shipping, and shelving costs. This also makes no sense, and I’m very sure that we aren’t done seeing this whole thing shake out. I am not making any decisions on how I am using electronic media until it does, and I’m willing to bet others aren’t either. Remember the whole VHS vs. Beta mess? Which is now moot, of course. It’s the same thing with eBooks. I’m willing to wait until other people waste a whole lot of money, but I’m not wasting mine, and I’ll stick with buying paper, for now.
MacMillan’s CEO speaks:
To: All Macmillan authors/illustrators and the literary agent community
From: John Sargent
This past Thursday I met with Amazon in Seattle. I gave them our proposal for new terms of sale for e books under the agency model which will become effective in early March. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles. By the time I arrived back in New York late yesterday afternoon they informed me that they were taking all our books off the Kindle site, and off Amazon. The books will continue to be available on Amazon.com through third parties.
I regret that we have reached this impasse. Amazon has been a valuable customer for a long time, and it is my great hope that they will continue to be in the very near future. They have been a great innovator in our industry, and I suspect they will continue to be for decades to come.
It is those decades that concern me now, as I am sure they concern you. In the ink-on-paper world we sell books to retailers far and wide on a business model that provides a level playing field, and allows all retailers the possibility of selling books profitably. Looking to the future and to a growing digital business, we need to establish the same sort of business model, one that encourages new devices and new stores. One that encourages healthy competition. One that is stable and rational. It also needs to insure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated.
Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.
The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market.
Amazon and Macmillan both want a healthy and vibrant future for books. We clearly do not agree on how to get there. Meanwhile, the action they chose to take last night clearly defines the importance they attribute to their view. We hold our view equally strongly. I hope you agree with us.
You are a vast and wonderful crew. It is impossible to reach you all in the very limited timeframe we are working under, so I have sent this message in unorthodox form. I hope it reaches you all, and quickly. Monday morning I will fully brief all of our editors, and they will be able to answer your questions. I hope to speak to many of you over the coming days.
Thanks for all the support you have shown in the last few hours; it is much appreciated.
All best,
John
http://www.publishersmarketplace.com/lunch/free/
I never been confused by math before. But I am now. Reportedly, the current model is a 50/50 split on ebooks priced at $9.99 and the proposed model is 70/30 (Macmillan/Amazon) on books priced at $13.99. I don’t understand how Macmillan can say "we would make less money in our dealings with Amazon under the new model." If a cut of 20% more on a higher priced ebook equates in their minds to making "less money" I can see why publishing is in financial trouble.
The faulty underlying assumption, IMO, is that readers will buy the same numbers of ebooks at the higher price as they would at the already well-established lower price — a price that many readers have already protested as being too high for an ebook. I assume that writers would earn more royalty on a higher priced book (although, you know what they say about assumptions), but I think I’d rather take a chance on making more money by selling more books at the lower price. Of course, it’s not up to me.
I read somewhere (sorry, can’t remember where — probably Scalzi’s blog or Mashable) that Amazon is determined to keep the lower ebook prices so more people will buy Kindle (their big money-maker). And that if ebook prices were the same across the board, they’d lose e-reader sales to Apple’s iPad. It appears Apple has convinced publishers (well, one so far) to bloody their knuckles with Amazon on its behalf.
I’m very uncomfortable with the various aspects of this that feel like a monopoly. On all sides.
The CEO said it best: "One that encourages healthy competition. One that is stable and rational. It also needs to insure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated."
Amazon is playing hardball because they are losing money under the current model. Right now, they pay 50% of the hardcover list price. From my understanding, based on orders, they can get a "discount" (wholesale) on the hardcover list price so that they would pay maybe 40%. But still, 40% of a $25 hardcover is more than the $9.99 they’re selling the books for. This is their loss leader–they can’t keep doing it indefinitely. Their Kindle sales will level off, and they’ll need to make up the money on the other end: books.
The agency model is fairer to everyone involved–consumers pay a little more, authors and publishers receive a little less. It’s a great balance.
Amazon is convenient, it’s easy to shop at, and they have a wide variety of merchandise. I’ve always been happy with their service. I have NOT been happy with the way they treat publishers and authors. There is a value to what we create–the STORY ITSELF. Some people may not see a value in a particular book, and they don’t have to buy it. Others will love it.
E-books are a double-edged sword. They make reading easy and convenient. But, de facto, because there is nothing tangible to hold, the perceived value is less. people forget they are paying to be entertained. They pay $10 to see a two-hour movie ONE TIME, but aren’t willing to pay $15 to read a book over 4-10 hours and keep it forever? I think the $14.99 price point that Apple and publishers have agreed to is right on. Obviously, mass markets will be cheaper (I heard $5.99, but I don’t know for sure.)
Amazon is playing hardball because they are pushing their monopoly. Apple, whether or not anyone likes the products, offers a choice. If the Kindle can only read Kindle-purchases, and the Nook and the iPad can read anything, consumers may start thinking about their e-reader purchases a bit more carefully. Competition is good–if one company can dictate the terms for an entire industry–essentially blackmailing them–that’s bad for consumers, readers, and the industry.
What Allison said – I have been screaming from the mountaintops for months. As a reader, it is the content I am buying, and format is merely convenience. I value the content. That’s what it boils down to for me.
I own a Kindle 2 (buggy thing that it can be, particularly when it sleeps a little too long while I’m trying to read at work – a night shift job on a psychiatric unit), but was immediately on a waiting list for an iPad the second the list became an option. Why? Because I already read ebooks and love the convenience. And Apple’s customer service leaves Amazon in the dust – always has IMO.
I think it is unrealistic for Amazon or their "boycotting-squeaky-wheel-customers" to believe they can set the prices for an entire industry on anything. If that’s in fact the case, I hope Amazon.com starts selling cars soon. I’d love a brand new Expedition for $9.99.
If people hate buying books so much, there are public libraries with waiting lists. They can read for free. Those of us who aren’t ridiculously opposed to paying for the actual value of books – what is written – will buy from the iBook store or BN or other realistic folks selling ebooks. I am getting more wary of Amazon’s practices in multiple areas by the minute. This latest move sort of feels like the last straw.
Library sales are also good for writers. Most libraries do not get the deep discounts that bookstores do, and having your books on their shelves for many years has the potential to introduce your books to a wider swath of new readers. Who may end up buying your books after that.
Since one of the huge benefits of eBooks is that backlisted works can continue to circulate indefinitely, I’m surprised so many publishers and writers are opposed to the idea.
The other day I was at a wonderful local bookstore and browsed the mystery/thriller aisle for favorite authors. Michele Martinez books were no longer on the shelves at this store at all, and her books aren’t that old. If I’d been perusing a ditgital catalog I might have stumbled upon them and purchased one or two (if I didn’t already have all her books). That isn’t possible in a bookstore, which has a finite amount of space available to display titles. In the long run, I think electronic works will help writers, rather than the opposite, but it will take a while. The public needs to be better educated, and again, the electronic format needs to sift down to whatever form it will ultimately take.
Only one cup of coffee, obviously!
My comment about discounts refers to royalties. I don’t know if everyone has the same type of contract I had for non-fiction, but my royalties were cut significantly when the retailers got higher discounts. Your mileage may vary.
One legal discussion (not an official opinion, but a rundown on whether it was legal for Macmillan to try to set the prices):
http://tinyurl.com/yfp7frn
Karen: Publishers and authors are not opposed to ebooks, I don’t know how that idea got started. E-books are one more format to read a book. What I object to is the tactics that Amazon is doing in trying to set the prices below what is profitable for the publisher and the author. There is a cost to producing e-books (not just technology costs, but trying to prevent piracy, marketing, etc.) Most businesses are allowed to set their own prices i.e. if they want to charge $7.99 for a book, they can charge $7.99 for a book. And authors deserve to be compensated for their stories.
I read that interpretation of the law and don’t wholly agree. I think Macmillion is fully in its rights in this matter. Essentially, Mac is offering a product (books) at XX wholesale price. The distributor/wholesaler (I’ll admit, I get them confused) who is Amazon can then sell the product for anything it wants. So if I buy a $5.00 discounted book and call sell it for $20, I’ve made a $15 profit. But more likely, I’d sell it for $9.99 and make a $4.99 gross profit.
What Amazon is doing is using bestselling books as loss leaders in order to entice customers to buy their proprietary product (the Kindle) which is a required purchase to get these bestselling books at $9.99. It was Amazon’s choice to sell these books at a loss in order to gain sales in another part of their business. Grocery stores do this all the time in their weekly ads. They’ll put eggs, for example, at some ridiculously low price, taking a "loss" but hoping to drive shoppers into their store where they’ll buy the milk, bread, and tuna for the week.
Amazon is absolutely able to sell the books for what they want because business often take a loss on one end in order to increase business on another.
But now they know that they can’t sustain the $9.99 price point unless the publishers agree to sell them the books steeply discounted. Why should the publishers–and the authors–have to suffer so that Amazon can start making profits on these books? Amazon is not the only e-tailer out there. They are certainly playing hardball by removing print books as well from their site. They believe that they will make Mac cave and agree to their terms. But they are doing it solely to support their proprietary product the Kindle, not because they think readers shouldn’t pay more than $9.99 for a book.
I honestly think this is a serious situation that hurts all of us, whether we’re with Mac or not. If publishers agree to this blackmail (and it is since Amazon is the leading on-line retailer) then the repercussions will be felt for a long time. The value of the content will continue to be eroded. I’m not a lawyer, but there seems to be something wrong with this whole thing, and I don’t think it’s the publishers in this case.
Amazon blinks:
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 liked that MacMillan’s point is that they want to price ebooks higher to coincide with hardcover for the initial weeks of release, but that then the price would go down. This would appear to suit all of the needs–the publisher’s need for the higher prices to not undermine the hc business, availability to everyone, and lower prices later for those who prefer to wait. That latter part being, to me, the key to this strategy’s success.
I am frankly surprised we haven’t heard a lot more unity of complaining among Kindle owners and Amazon Prime customers (I am both). While I buy from indies here and online, and BN here, I have also utilized the Prime shipping option, which has saved me money in the long run. But by eliminating the paper books, Amazon just shot themselves in the foot with me, and, I suspect, many others. If they keep that up–if they drag this out for very long, I will permanently shop elsewhere and demand a refund for my Kindle as well as my Prime membership. (Not that they’ll honor that, but I suspect if there’s enough fuss that hits them in their pocketbook–dissatisfied Kindle owners–then they’ll realize this was a stupid move.)
In fact, if I knew anyone who was about to buy a Kindle today, I’d highly recommend that they didn’t. This action proved Amazon is willing to sacrifice its customers’ needs when it sees fit, and it’s not for the long term greater good… because if they don’t come to an agreement with MacMillan, are they just not going to put those books back online? Including the paper ones? I don’t want to support a company who advertises one thing (you can buy all these books) and then throws a hissy fit and decides (oops, except those, ’til we’re through being dickheads).
I may feel rather strongly about that.
t
Amazon capitulates —
Over on Publisher’s Launch, there’s this link of them giving in:
http://www.publishersmarketplace.com/lunch/archives/006199.php
Just saw that Toni! This is great news. That Amazon accuses Mac of having a monopoly is a bit like pot/kettle . . . seriously, Amazon doesn’t sell any other e-books other than what is formatted for Kindle, nor do they allow Kindle titles to be sold elsewhere (if they do, I’m unaware as I don’t read books on an e-reader, which may change with the 2G iPad comes out . . . while iPad doesn’t bother me like some people, I would have preferred iTab or iSlate. I’ll just call it an iTab . . . )