Amazon pulls Macmillan titles in first e-book skirmish

If you want to buy Hilary Mantel's popular, prizewinning "Wolf Hall" from Amazon.com today, you'll be getting it from some third-party vendor. Same for Orson Scott Card's "Hidden Empire" and the Hungry Girl cookbooks. In the place where the Amazon price should be, you'll find only a double dash.

That's because those books are all published by Macmillan, and Amazon has pulled all Macmillan books from its cybershelves. Macmillan, one of the big six publishers, includes publishing houses Henry Holt & Co., science fiction-focused Tor/Forge and the Tiffany of fiction, Farrar, Straus and Giroux.

Apparently the dispute arose from tensions over e-book prices. Amazon likes $9.99 for e-books, but publishers do not. The New York Times reports:

A person in the industry with knowledge of the dispute, which has been brewing for a year, said Amazon was expressing its strong disagreement by temporarily removing Macmillan books. The person did not want to be quoted by name because of the sensitivity of the matter.

Macmillan, like other publishers, has asked Amazon to raise the price of e-books to around $15 from $9.99.

The $9.99 price is a loss leader for Amazon, which has used it to help gain e-book market share for its reader, the Kindle. Publishers are concerned about the downward pressure on prices.

Up until Tuesday, a publisher like Macmillan had no real alternative if it was unhappy with Amazon's e-book prices. But when Apple announced its iPad and an upcoming iBook Store on Wednesday, the e-book landscape changed. Five publishers were announced to be working with Apple; Macmillan is one of them.

The dispute between Amazon and Macmillan has bled beyond e-books, however. All formats of Macmillan books are now unavailable for purchase from Amazon. And that may be tough on the publisher.

Who loses? Will people seeking Macmillan hardcovers and paperbacks on Amazon buy from the secondary retailers? Will rival online retailers Barnes & Noble and the independent Powell's see a sudden bonanza? Will people leave their screens and walk into their local bookstores to get "Wolf Hall"? Or will they simply get "The Help" instead?

After the jump: on e-book pricing

Macmillan isn't the only company that's been unhappy with the $9.99 price point. The tension has been public since Amazon announced the Kindle DX in February 2009.

"We do not agree with their pricing strategy," Simon & Schuster Chief Executive Carolyn K. Reidy told the New York Times. "I don’t believe that a new book by an author should ipso facto be less expensive electronically than it is in paper format."

Amazon CEO Jeff Bezos disagreed: "E-books should be cheaper than physical books. Readers are going to demand that, and they are right because there are so many supply chain efficiencies relative to printing a paper book."

Bob Miller, president and publisher of the foward-thinking HarperStudio, was on Reidy's side. "It only costs us about $2.50 to $3.00 less for us to publish the e-book, not $18.00 less," he said last year. "We need to find the right pricing somewhere between the hardcover list price and the money-losing $9.99 that Amazon is teaching consumers to expect."

"The pricing in publishing has very little to do with manufacturing costs and most to do with the cost of author talent," the unnamed head of a publishing house told Publishers Weekly in May. "That does not go away when you sell an e-book."

Author Cory Doctorow disagrees: "Although there are sunk costs in book production, including the considerable cost of talented editors, copy editors, typesetters, PR people, marketers, and designers, the incremental cost of selling an e-book is zero," he writes today on BoingBoing.

Without seeing publishers' balance sheets, it's hard to say for sure -- is asking $15 for a ebook greedy or essential to a viable business model? 

Author John Scalzi proposes this solution:

Do I think Macmillan (or anyone else) will be able to sell $15 e-books? They could; after all, they sell $25 hardcovers (and similar amounts for e-books, depending on the retailer). Now, some people won’t spend that much for a book, so they pick up the book later when it’s an $8 paperback. That’s fine, too. Likewise, I think it’s fine to attempt to charge $15 (or more) for an e-book for a brand-spankin’ new release to service the folks who just can’t wait, drop it to a lower price point (say, $10) later on in the run, and then drop it again to $8 or so when the paperback hits. That’s how I would do it, in any event.

Sounds like a good idea to me, too. But will publishers and online retailers think so?

-- Carolyn Kellogg

Image: A screenshot of Amazon's "Wolf Hall" page, taken at 7 a.m. on Jan. 30, 2010.

Comments

[jim duncan]

I agree. I think this is going to push pubs to just not release ebooks to Amazon until they think they are worth the $10 price tag. Let Apple get them initially for the 14.99 price and then give it to Amazon three months later . Maybe Amazon will change their minds then.

[Peter Miller]

Let me get this straight -
Amazon, a distributor, thinks it can dictate pricing to a manufacturer, thereby failing at Amazon's #1 job, facilitating buyer freedom of choice.

Anyone should be able to sell any book or e-book at any price through Amazon. This is the customer's decision, it is not Amazon's decision. This mindset will hurt Amazon tremendously over the long haul. If I'm buying a book, I'll not go to Amazon because the unique expensive choices I might be interested in are not there. Amazon will provide me with inferior set of choices. If I'm selling a book, I'll not use Amazon because I can sell freely via other channels.

A more efficient path to irrelevance in publishing for Amazon I cannot dream up.
Is this not ironic? The company that was founded on the free flow of commerce via the internet is now acting out some bizarrely rationalized market censorship enabled attempt at market share, leading only to self-destruction?

Will someone please buy a Economics book for Amazon Management?

[Dana]

I would NEVER pay $15 for an ebook, unless it was an out of print/rare book that I could not afford otherwise. I don't think that electronic books should cost as much as a bound copy. It doesn't cost as much to produce them.

[Sharona]

Baen books has been publishing ALL their books in e-book format for over 10 years. They publish on multiple platforms, including HTML. Everything is Open Source. They have a sophisticated pricing strategy that seems to work. They charge $15 for an advance reader copy (even before the book hits hardcover). Then they charge $6 once released, or you can pay about $15 to get their entire set of 5-6 releases for the month. This seems to work for them. Just a thought.

[Gerard Collins]

I think Scalzi's pricing scheme makes the most sense. If publishers want a high price for hardcovers and ebooks as new releases, fine. A certain segment of book buyers is always willing to pay a premium for something new by an author they love, or for something in the zeitgeist -- to get the book that everyone seems to be talking about. As someone who pays attention to those things and makes a note to pick up the title for less once it comes out in paperback (or the hardcover gets remaindered), I'm used to delayed gratification. What I don't get is why some books have their electronic editions still tied to some variation of the hardcover price long after the mass-market paperback has come out.

How much is an ebook worth? Well, how much does the cheapest edition of that title sell for? Then a little bit less than that.

[allaire8]

In the music world iTunes was in the same situation with their $.99 per song pricing that music producers do not agree with. The upstarts (so to speak) want to attract customers with their low, low prices undercutting every competition. With this, the low price will lead to the impression that books should be very inexpensive and not worth the expense when we’d spend $15 on most anything else and not think twice about it. Part of that is the demand and appeal of reading today, but it leads to undervaluing the product. The perception is that digital versions are less to produce which is modestly true for now, but that could easily change in a second. So, why not price them only slightly less expensive than the print versions which may also help sustain the interest in print, which I prefer. Book-readers can be great for textbooks or people who read a lot but they will never replace the experience of the printed book and that loss would be horrible for society.

[Teresa]

If publishers are saying it costs only a couple dollars less to produce an e-book, then they've been ripping book readers off for years. There 's no way I will pay the same price or a couple dollars less for an e-book as I would pay for a printed copy. While I will pay a little more than $10 for an e-book, I won't pay *that* much more. And their cost argument is skewed; it's valid if they were producing *only* e-books. If they offer a print version and an e-version, the latter costs nothing over and above what they've expensed producing the printed version. So, right now, the sales for e-versions are pure profit. If they're worried that e-books will outsell print, they better get out of their "this is way it's done" business model and start thinking of e-books as the future. That sort of business inflexibility can put you out of business. Just ask the newspaper industry.

[P J Evans]

It isn't just the price, it's also that it's protected so you can't make a backup, or read it on a different reader, and it _expires_.
If Amazon can't tolerate actual competition, then maybe they need legal attention.
Note that this isn't the first time they've run into opposition:
their demand that authors use only their print-on-demand service in order to sell through their site;
their missteps with _1984_ a year or so back;
their hiding of GLBT books, also a year or so back.
One is accident, twice is coincidence, more than twice is clearly a pattern or practice.

[Zaphon]

Well a couple things.

I own a kindle, I buy a lot of books for it. In the past month I've bought 7 or 8 books. Of those, 4 of them I actually checked the price Amazon was selling the Hard Cover for on the release day, and this may be a shocker to you, but the hard cover was actually CHEAPER than the Kindle version. Secondly, I bought the kindle for the convenience, as I was running out of room in my house to store books. But if they think for one second that I'm going to pay more for digital versions than what I pay today, I'll go right back to buying them on hardcover.

Also, Amazon does let people sell stuff on their site, through their third party sellers program. As was noted above, the books are still available through third parties, at a price that is most likely considerably higher than Amazon's price. Any of these book companies could setup an account and do it this way, but than they would also have to deal with fulfillment, etc., which are things they don't really do to the end user today. Instead they let companies like Amazon do that for them. And now companies can choose not to work with Amazon, but it's their loss. I'm not buying an iPad, I wanted an Apple Tablet (running Mac OS X similar to the third party Modbook), not a 10" iPod Touch. Plus I really like my Kindle and it's display, I don't really need a backlit color display that is not going to work nearly as long as my Kindle does.

[TooMuchProfit]

Amazon dictating a price aside, I'm to be convinced a book with virtually -ZERO- production costs is worth $15, let alone $9.99? That's profit gouging.

[Steve]

"The pricing in publishing has very little to do with manufacturing costs and most to do with the cost of author talent," the unnamed head of a publishing house told Publishers Weekly in May.

The reason he's unnamed is because authors actually receive about $1.50 per hardcover published, much less for paperbacks. Manufacturing cost is $2.00 - $3.00. The rest is promotion, overhead and profit.

[Damion]

Authors have to pay rent/mortgage. Editors need salaries, and they're vital for the exact reason that Xlibris self-publishing does not equal a book from FSG. The "near-zero production costs" argument really does not take any of this into account.

"Authors actually receive about $1.50...The rest is promotion, overhead and profit"? That's right -- promotion and overhead are not little extras, they are absolutely crucial, if "overhead" = finding, acquiring, editing, indexing, cover-designing, marketing, sending out review copies, placing excerpts in magazines, etc etc etc. (Never mind that authors receive advances, often more than the royalties the book ever earns.) None of this is price gouging, which is why publishers don't make much profit.

As for the argument that the incremental cost of another e-book is zero, isn't that like saying that there's no difference between a putting on a concert for 25,000 people and putting on a concert for 25,001 people so why should tickets cost money? All the costs for publishing a book (see above) need to be spread across the cost of all copies sold.

[Apple iPad]

Bad move on Amazon's part. Amazon has become way to big for themselves. This is why monopoly's are bad new's for everybody.

[Allen Harkleroad]

This news makes me so glad that I am self-published and don't rely on large book publishers for income. ~ Allen Harkleroad

[Tab Cocovillea]

Eventually, all authors who are to remain successful will operate as any self-contained business. They will form a book production studio, or LLC, for each title they e-publish, which will be similar to the model for movie production. They will pitch an idea, get financial backers, editors, PR, designers, artists, photographers, advertising, enlist the support of the blogosphere to support their whisper campaign, and so on. All with the goal in mind of moving those bits into the iPad, Kindle, nook and whatever other devices follow to maintain a physical book price. It'll cost, but keep people excited and they'll pay any price.

[Craig Faustus Buck]

Book pricing is not based on printing costs, nor even solely on production sales and marketing. Publishers must take into account the cost of attempting to nurture new authors and mid-list authors who may not turn a profit until their third or fourth book (if they're any good). If price wars force publishers and retailers (including Amazon) to cut back, these authors will see their markets dry up because only the blockbusters can guarantee a return on investment. This would be a tragedy for readers of all tastes.

Craig Faustus Buck

[Rudeger Frutz]

These book publishers need to wake up and smell the eInk!

If they try to pull that on a savvy consumer market, then people will just do what they did with music; either download pirated copies illegally (in which case they make $0), or sign up for perfectly legal downloads from overseas that charge a tenth of what the publishers demand in North American.

This is no longer a regional market; this is global. Change with it, learn to adapt, or get left in the dust.

Amazon is right: why should I pay the same $ for an eBook that I would for a physical copy? How can they possibly justify that? There is no physical component to the books "publication", no ink, no paper, no machinery, no assembly line, no factory, no transportation fees, no physical storage required, heck, you don't even need employees to lift the darn things. The reprint value is equivalent to a computer automatically hitting "copy & email" to the consumer.

And they want me to pay $15 for that? Never.

[James Smith João Pessoa, Brazil]

Never buy from Amazon They are the worst on-line retailer I've ever used. They don't deliver the product and don't respond to complaints. In fact, they don't even acknowledge that a complaint has been made.

I can understand if there's a shipping delay. I can't understand ignoring a customer concern sent directly from their site using a feature there specifically for customer concerns.

Before you buy anything from Amazon, consider flushing your money down the toilet. At least then, you'll know where it went.

[Tiffany]

Rudeger Frutz,

Do you read correctly? If not there was a post some way above yours. I'll post it here:

Authors have to pay rent/mortgage. Editors need salaries, and they're vital for the exact reason that Xlibris self-publishing does not equal a book from FSG. The "near-zero production costs" argument really does not take any of this into account.

"Authors actually receive about $1.50...The rest is promotion, overhead and profit"? That's right -- promotion and overhead are not little extras, they are absolutely crucial, if "overhead" = finding, acquiring, editing, indexing, cover-designing, marketing, sending out review copies, placing excerpts in magazines, etc etc etc. (Never mind that authors receive advances, often more than the royalties the book ever earns.) None of this is price gouging, which is why publishers don't make much profit.

As for the argument that the incremental cost of another e-book is zero, isn't that like saying that there's no difference between a putting on a concert for 25,000 people and putting on a concert for 25,001 people so why should tickets cost money? All the costs for publishing a book (see above) need to be spread across the cost of all copies sold.

I am a writer and I too, would like to make a living.

Thank you.