Friday, March 19, 2010

More News From the Amazon/Apple Front

The New York Times reported on Wednesday that is demanding that publishers sign a three-year e-book contract containing "a detailed list of concessions" or face the threat that Amazon will no longer sell their e-books.

Does this sound familiar?

It should.

On January 29, Amazon pulled Macmillan's books off their website after the publisher approached Amazon to discuss the "agency model" deal they had cut with Apple for the sale of e-books. At that time the New York Times reported here:
Under this [agency] 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 $9.99 pricing for e-books has long aggravated publishers, who believe that electronic books should be priced in the $13-$15 range. It has been widely reported that Amazon chose to take a loss on e-book sales in order to subsidize sales for their Kindle e-reader. Amazon's approach certainly helped make the e-retailer #1 in the U.S. in e-book sales (with 90% of the market according to the New York Times).

To date, five of the Big Six publishers (Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster) have signed agency model deals with Apple, ensuring that the publishers are the only ones able to set e-book prices. Random House, the largest of the Big Six, is the sole house among the Big Six not to have reached terms with Apple.

Ten days after the Amazon/Macmillan showdown, the Wall Street Journal reported that Amazon had backed down, reaching agreement with Macmillan and putting the publisher's books back on sale.
By agreeing to accept a new pricing model, Amazon has publicly acknowledged the sudden emergence of a rival that may not only threaten its highly popular Kindle franchise but also its total domination of e-books.

Specific terms of the Macmillan agreement couldn't be learned. However, they are expected to include higher prices for e-books, mirroring those offered by Apple on its coming iPad device.
Thus far, Macmillan is the only one of the so-called Apple 5 to actually have agreed to a deal with Amazon. Apparently Amazon has spent the 5+ weeks since that report, planning their next move. Wednesday's New York Times reported:
Amazon has agreed in principle that the major publishers would be able to set prices in its Kindle store as well. But it is also demanding that they lock into three-year contracts and guarantee that no other competitor will get lower prices or better terms.
Meanwhile, on Wednesday, Publishers Lunch reported that Amazon is not willing to consider agency model deals with independent publishers:
At least one independent publisher of scale was told categorically by Amazon in a recent phone call initiated by the etailer that Amazon would not negotiate agency selling terms with any other publishers outside of the five initial Apple partners. This publisher was told that if they switched to an agency model for ebooks, Amazon would stop selling their entire list, in print and digital form.
Given the uncertain publishing landscape, no publisher is going to be eager to sign on to a three-year contract with Amazon.

So to summarize, five of the Big Six have signed agency deals with Apple with Random House sitting out. One of the Big Six (Macmillan) has signed a similar deal with Amazon.

I have to say I suspect readers who have ordered the iPad are going to be surprised to learn that they'll be paying $14 on average for Apple e-books when they've grown accustomed to the $9.99 Amazon price point. Of course, the iPad is not solely an e-reading device so it may not matter to the majority of the iPad's users.

1 comment:

Colleen said...

Since the iPad isn't yet available in Canada and the Kindle only recently, this is mostly moot for me. However, with this lag between the US and Canada, it's really interesting to watch how it plays out since the result will, of course, be at play here in the next few months. On a related note, Apple has been advertising for an e-publishing manager for the Canada market to launch the iPad here. I can't wait to see one up close and personal.