Amazon Caves To Macmillan, Agrees To Raise E-book Price

Macmillan is right on this one.

o rly?

$9.99 isn’t enough for publishers to make development costs back. If kindle publishing is going to be a sustainable business, it would help if Amazon didn’t drive publishers into extinction.

That’s all good and fine Lev, but think of it this way also: publishing an ebook is basically a one-time investment. They don’t need to churn out copies by any means, as it is in a digital format. Also, why would I even bother purchasing their $12.99-$14.99 ebook when I can go buy it on half.com, etc. for $7? That’s a physical copy that I fully own, with no DRM. I can even loan it to friends.

Granted the dynamics could change once the e-book market begins to comprise a large percentage of sales but for now I just really don’t see how that pricing model works. What Macmillan *could* have done is hold the higher pricing for the iPad books that have upgraded features; picture books for example.

I’ll probably wind up buy an iPad, and I already own a Kindle and love it. From a consumer standpoint though, I can’t care about Macmillan’s bottom line. It comes down to a question of “Is your digital book price worth it, compared to a physical book price?” Before, yes. Now? No.

It’s totally up to you whether you buy or not. Macmillan’s not getting in anybody’s face about that. But they have to be able to make enough to recoup expenses, duh, and most of the costs of a regular physical book actually carry over into ebook production. Printing and shipping the actual book just aren’t that expensive. What’s expensive is editor salaries, author advances, etc.

Bottom line, Macmillan just can’t sell ebooks for less than it cost to make them. And it costs more than $9.99.

I’m not buying your argument Lev.

No, printing and shipping aren’t expensive, but it has to be done over and over again. With e-books, it is done once. Granted, once for each format, but once it’s done, it’s done.

At this point, there are what…10 formats…if that? And most I assume of those format creators provide the method for publishers to e-publish. Of course, I freely admit that I might be wrong about that, but still… I can make a .lit file out of any text or Word file with the click of a button. No R&D necessary.

Yes, they have to pay editor salaries and author advances, but isn’t that already being done. And isn’t there a business model that says if they can sell more for less, ultimately they make more?

Macmillan is getting in EVERYONE’S face about it. They are forcing the issue with Amazon and with all of Amazon’s customers. I agree with garrenjakubiak: They should have done the higher price issue for illustrated books on the iPad.

In the meantime, I’ll swallow my pride and return to that evil store that I loathe that starts with a W, has a hyphen, and ends in “art” and pay $9.99 for a hard cover new release with a cover price of $26. And then I’ll share it with my friends.

Not sure what you mean by ‘already being done.’ It’s being done, by the publishers, and it’s really expensive.

Look at the numbers, if you can find them. They don’t lie. It costs literally nothing to make an e-book, physically — they just email the same file to Amazon that they sent to the printing plant. But the lion’s share of the costs of any book, in any medium, physical or electronic, isn’t printing and shipping, it’s everything else involved in developing the product. They’d have to sell a huge number — an unrealistic number — of ebooks at $9.99 to make back costs. Which ain’t gonna happen.Every publisher in NYC was waiting to see who would do break first. It just happened to be Macmillan.

If consumers don’t want to pay more for e-books, they can just go back to paper books. Macmillan would be fine w/ that. The only people who don’t want that is Amazon. That’s who forced the issue first.

(Walmart takes a huge loss on those hardcovers by the way, as I’m sure you know. They just want you in their store, and that’s what they pay to get you in the door.)

I cannot believe Amazon called Macmillan a monopoly!! Of course Macmillan should want charge a reasonable price to recoup their costs. How else will they stay afloat?

Think about it: All of the major publishers have taken huge losses in the last 5+ years. Proof is based on in their (high) layoffs, smaller print runs (excluding relatively select books such as HP, Dan Brown, etc), and major & minor bookstore have taken a huge hit as well. So while total costs have gone down from the smaller print runs and printing costs aren’t the largest chunk of all costs (Lev is right on this), your main source of total revenue has gone down as well.

Total costs is now either equal or greater than total revenue, i.e., negative profit. This means that you need a revised business model that includes more revenue generated from eBooks. But if Amazon holds the price of eBooks at rate that is too low for Macmillian, then Macmillan cannot generate a enough revenue to recoup costs. I’m not for Macmillan to gouge the buyers, but surely Amazon shouldn’t be able to hold down the price of eBooks to level to the point that Macmillan cannot sustain themselves. (I’m sorry. I had to rant.)

You’re preaching to the choir. I was laid off for 8 months (HUGE profit loss!) from the newspaper industry after being in it for 11 years. AND, my father’s business, which he has owned for 30 years is on the verge of closing because of higher costs and lower income.

I’m living your rant.

My “it’s already being done” comment was directed toward publishers covering the editor’s and authors’ advances. They are paying that and recouping their costs. An advance is simply an advance payment on future earnings. If they aren’t selling enough books to cover it, then the advances are too high. Cut those and recoup your costs.

Isn’t there also a theory that if there is more competition in the reader market, that there will be more readers and thus more sales? The New York Times is banking on that concept with the poorly-named iPad, and the rest of the news industry is watching with baited breath.

I understand what Wal-Mart is doing…the whole concept of loss leaders and what have you. I’m lucky enough to be one of those disciplined folks who can walk in with the intent of buying a $26 book for $9.99, and when I walk out, that is the only thing in my bag.

Let’s do the math from a buyer’s point of view:

a) Hardcover for $9.99 from Wal-Mart or Amazon that I can store on my shelf and loan to anyone I want at any time, and I don’t need any special equipment to read it, or

b) Digital copy for $5 more, with DRM constraints, that I risk losing if my hard drive crashes, and if I don’t have my Kindle (or iPad or whatever else you can plug in here), I’m S.O.L.

I’m S.O.L.D. I’ll take the hardcover, thank you very much.

I thought Amazon’s letter was great: Call the bully out onto the carpet. If I was Amazon, I would have told them to take their ball and go home. As a reader, I still might.

Your theory isn’t right though. You’re assuming that high readership & low price will lead to a higher revenue than low readership & high price. This is does not hold true, because there is a point of saturation (i.e., no more new readers) and that saturation point may not be a place where there is profit. And you cannot just continually cut costs or else there will no product.

The NYT model is saying the same thing as Macmillan’s. They are looking for a balancing point of readership & price in order to gain profit, but they don’t have Amazon dictating what they can and cannot do.

(I need a beer.)

The beer sounds good. I might join you.

And I’m not trying to be argumentative at this point. I’m just trying to understand:

Yes my theory assumes what you say. But it doesn’t assume that print readership will completely disappear. My complete theory goes like this: Print will continue to sell (though it will go down) and e-publishing will continue to increase in sales because of novelty, size and “simplicity” of technology – though it doesn’t get much simpler than the printing press.

Overall, I envision an increase in readership, and thus an increase in sales because you are reaching a group of people who were previously “too busy” to read, or will be more inclined to read because it’s the new and cool technology. Increase sales means increased profits.

Yes you lose some of your print sales, but what you gain in e-sales is much higher, right?

Otherwise, publishers (book and newspapers alike) are biting the hand that feeds them and killing themselves in the process. That’s a main reason why I was out a job for so long: Someone started giving the news away for free online, everyone thought it was cool, everyone jumped in the pool, and now everyone expects it to be free. There was not business model for it, and there still isn’t a good model.

Like I said, I’m not trying to be argumentative. I just like talking it though. And it’s so much nicer to talk to someone who doesn’t flame and who can have a civil discussion. So thanks for that!!!