In the midst of the latest battle over e-book prices ($9.99 vs $14.99) between online retailer Amazon (AMZN) and the publishing giant Macmillan the e-book industry is faced with a series of serious questions. Whether Amazon will be approached by other publishers-the top 6 at least (like Macmillan) to raise the price of e-books sold trough Kindle to $14.99? If so what happens to the users (Something for users to think)
Amazon currently offers e-books(for new releases and bestsellers) at $9.99 in a move that is aimed at driving Kindle sales and increasing demand for digital books. But since this pricing policy of Amazon might land up hurting sales from bestsellers and higher priced hard covers for some of the publishers Macmillan has asked Amazon to sell their books for $12.99-$14.99. Although Amazon did pull Macmillan titles to protest Macmillan’s pricing plan, they were eventually being forced to give in.
The ultimate result being that Macmillan gets to keep their profit margins. Macmillan’s Sargent said that “in the future Macmillan would set the prices for e-books and retailers such as Amazon would take a 30 percent commission — the same deal Apple has entered into with Macmillan and other major publishers”.
In its statement, Amazon said “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 dollars for a bestselling e-book” and that they do not expect other publishers to follow the same policy as Macmillan.
Paul Aiken, executive director of the Author’s Guild, disagreed to Amazon’s beliefs over the pricing war and said he does expect other publishers to follow Macmillan’s path.
Aiken told “It’s hard to imagine that there’s a responsible publisher out there with adequate clout that won’t be following suit,”. “There are at least five other publishers who can get this deal from Amazon.”
Aiken also brought another interesting blend to the entire price was debate. He says that Macmillan’s pricing model will, for the time being, actually mean more money for Amazon and less for publishers.
Why So? How about this…..In the existing model, Amazon is paying the publisher half the book’s list price and then sells the e-version in the Kindle store for $9.99. But this model does result into a loss for Amazon for books (bestsellers) priced over $20.
“Taking into account a 30-percent commission to Amazon and e-book prices of between 12.99 dollars and 14.99 dollars, Macmillan’s pricing plan would result in even less money for publishers in the short term, Aiken noted”.
“But Sargent is definitely playing a long game here,” he said. “Everyone knew that Amazon wasn’t going to sell books at a loss forever. They’ve been willing to lose money on e-books to sell Kindles and to lock in a customer base,” Aiken said. “That game was going to end at some point. And when it ended was up to Amazon”.
Aiken also said “Once Amazon decided that it had captured enough market share, that it had control of the industry then it could dictate terms to publishers,”. “At some point we all knew the squeeze was coming.”
Amazon shares dropped close to 6 percent on Wall Street on Monday – closed at 118.87 dollars.