Macmillan vs Amazon

[Ed Anger]

From Usenet:

To: All Macmillan authors/illustrators and the literary agent community
From: John Sargent
Re: Missing books on Amazon.com

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.
--end quote--

The post goes on for several paragraphs, explaining why they're right and
Amazon is wrong.  The key point is that until further notice none of the
MacMillan imprints, including Tor, will be directly available from Amazon,
either dead tree or ebook.

lolz.

[Grey Fox]

Too bad for MacMillan but when you go to a party and tell them "Agree to our terms or don't sell our books" and they answer "fine, so we won't sell your book" You're screwed.

[ulmont]

Summary of the whole thing:
http://whatever.scalzi.com/2010/02/01/all-the-many-ways-amazon-so-very-failed-the-weekend/

[Barrister]

With respect, a better summary of the whole thing:

http://arstechnica.com/tech-policy/news/2010/01/books-disappear-from-amazon-as-old-media-battles-new-retail.ars

[Grey Fox]

Boo on Amazon's part to once again backing down.

[The Minsky Moment]

McMillan's position is kind of hard to grasp, and I wonder whether they understand the nature of the medium.

First of all, as a general matter, if Amazon wants to drive adaptation and volume by taking a loss on themselves, smart publishers should be thrilled.  Second, I think its likely that the Amazon recommended pricing (which is really just that) has driven volume increases and will continue to do so.  I know for myself that books that I might have wavered or waited on I have purchased for kindle b/c it is "just" 9.99 so why not.

The only logical explanation is that McMillian - which makes a lot of "big" books - is concerned about cannibalization of its hardcover sales which fat profit margins and is trying to apply the brakes to digital distro take up.  That would be understandable were it not for the fact that the other industries to attempt such a strategy when confronted by an emerging digital distro model (eg  music, movies) are already classic business case studies for self-inflicted damage through luddite incompetence.

The hardware is still a bit rudimentary but the technology is improving quickly - and practically speaking, the business model for distributing textual information that operates by cutting down trees, processing them into paper, stamping ink on them, gluing them together with chemical and composites, and then shlepping them out to thousands of retail stores and wharehouses in heavy pallets doesn't make much sense in the long run.  As a publisher, you can either kid yourself about people's emotional attachment to ink and mildew and get run over by technological change, or you can try to get ahead of the curve.

[Barrister]

With respect though I can somewhat understand their point of view.  I gather that the physical cost of printing a book is almost negligible when compared to the cover price.  So when Amazon lists a book for $9.99 that lower price is almost certainly coming out of the publisher's pocket.

Now that being said, why MacMillan should care if Amazon choses to sell the e-books at a loss baffles me.

[Jacob]

Now that being said, why MacMillan should care if Amazon choses to sell the e-books at a loss baffles me.

Probably because they expect that Amazon are trying to get to a position where they can sell the e-books at that price without taking a loss by forcing MacMillan to lower their sale price to Amazon.  I'm guessing that they're planning to grab a dominant market share by selling at low cost and at high volume.

Meanwhile MacMillan's interest is to get the public to accept a higher price point as being "natural" so they can continue to reap the benefits.  Perhaps that's a foolish battle to fight, but if they want to fight it the time to do so is now, not later when Amazon and the low price point is more solidly established.

I can't claim to have studied this in depth, but it seems to me that Amazon's original strength is their ability to sell and distribute physical books in a way that's cheaper than traditional bookstores.  I don't reallys see how that strength transfers that much to e-books.

If I was in charge of a big publisher, my strategy would probably be as follows:

1. Try to gain control of the distribution of my e-books in a profitable way.  There's not much of a reason why the big publishers can't sell their e-books to consumers directly and cut out the middle man.  I mean, if you want to buy the e-books MacMillan publishes it's not that big a deal whether you go to this or that web-site.  So if I were MacMillan I'd definitely aim to set up my own site for that sort of thing.

2. To set the "natural" price for e-books in the market as high as possible.  If Amazon is fucking with that, they threaten my long term profitability.  I think that as e-books become more accepted, the publishers hands have the potential to grow stronger compared to the distributors.  I mean, they own the IP that people want, right?

So there could be decent reasons for this decision.

[Alatriste]

I have been following this battle in Charles Stross' blog

http://www.antipope.org/charlie/blog-static/

The key aspect seems to be, Macmillan is not fighting 9,99$ because they want higher prices. Macmillan wants a wider range of prices from 5,99$ to 14,99$ but the really vital point is, Macmillan wants to get back the power to decide the price of its own books.

Until now, Amazon was too powerful, but Apple has changed the rules overnight with the i-Pad...

[Jacob]

I have been following this battle in Charles Stross' blog

http://www.antipope.org/charlie/blog-static/

The key aspect seems to be, Macmillan is not fighting 9,99$ because they want higher prices. Macmillan wants a wider range of prices from 5,99$ to 14,99$ but the really vital point is, Macmillan wants to get back the power to decide the price of its own books.

Until now, Amazon was too powerful, but Apple has changed the rules overnight with the i-Pad...

That makes sense.

[grumbler]

I gather that the physical cost of printing a book is almost negligible when compared to the cover price.  So when Amazon lists a book for $9.99 that lower price is almost certainly coming out of the publisher's pocket.

No, not negligible at all, though the margins for the publisher are small (and, given that the seller can remainder unsold copies at any time), not available to the publisher until the distributor actually sells the volume.  Publishers should be jumping all over e-distributing, because it solves almost all of their cash-flow problems.  The actual cost of writing, editing, and layout is small compared to the cost of printing, binding, and distributing.

[grumbler]

The key aspect seems to be, Macmillan is not fighting 9,99$ because they want higher prices. Macmillan wants a wider range of prices from 5,99$ to 14,99$ but the really vital point is, Macmillan wants to get back the power to decide the price of its own books.

Not "get back," but "get" the power to determine the prices of its "own" books.  Retailers have always, in the past, had the power to decide what the book sold for, and McMillan only controlled what the distributor/retailer paid McMillan for it.

McMillan is interested in maximizing per-unit profit, not maximizing market share.  They are being short-sighted about this. 

I suspect other publishers are going to punish McMillan pretty heavily for this, and authors are going to go where the volume is high, because they get a per-book royalty, not a piece of the action.  In a sense, it is good to see McMillan volunteering to be the tethered goat, rather than leaving that role to chance.

[Alatriste]

That's completely different over here. This side of the sea usually publishers decide the price of books, not retailers, at least on the continent. I don't know what British publishers do.

Stross backs Macmillan against Amazon (and Google), tough, because Amazon leaves him a tiny per-book royalty, and volume is far too low to compensate. I don't know enough to judge who's right, honestly.

[Iormlund]

I can't claim to have studied this in depth, but it seems to me that Amazon's original strength is their ability to sell and distribute physical books in a way that's cheaper than traditional bookstores.  I don't reallys see how that strength transfers that much to e-books.

Inertia. People are used to buying books on Amazon.

[grumbler]

That's completely different over here. This side of the sea usually publishers decide the price of books, not retailers, at least on the continent.

That used to be the case here in the US, but pretty much all the retail chains discount in the US now.

Stross backs Macmillan against Amazon (and Google), tough, because Amazon leaves him a tiny per-book royalty, and volume is far too low to compensate. I don't know enough to judge who's right, honestly.

I fail to understand why Amazon would be paying him any royalties. What books of his have been published by Amazon?  I didn't even know Amazon published books.