The Amazon-Macmillan Fiasco

You have to hand it to the publishing industry — there’s never a dull moment.

Saturday morning I logged into twitter and found a flurry of tweets from many established authors in the romance industry. Evidently, readers could no longer buy certain books on Amazon and these authors were urging people to go to Barnes and Noble, Borders, or other book sellers to buy their newest releases.

Of course I was curious… and yes, I was thinking that this could be a good blog topic. So I followed the trail of tweets, blog posts, AP notices and Opinion Columns to learn exactly what happened to these poor books (and their authors). What I got was a crash course on ebook publishing, business ethics, and what all of this means to readers. There is a lot to it, but I’ll try to give you the brief, easy-digestable version here.

1) One of the biggest selling points for Amazon’s Kindle, is that all ebooks bought through Amazon are priced at $9.99 or less. This includes pricey hard covers, which can cost up to $28 in print.

2) Macmillan Publishing, one of the big 6 NY Publishers (who owns Tor, St. Martins, and other famous imprints), wanted to control the pricing of their ebooks, basically introducing them at ~$15 and then sliding the price down the longer it was on the market.

3) Amazon said no. Why would they want to keep the price at $9.99 when essentially they were  taking a $5 loss on their hardcover books with each sale? (For an explanation of how they are losing money by selling hardcovers for Kindle at $9.99, go HERE) Well, they wanted to sell more Kindles, of course. With Amazon, it was all about the Kindles, not the books. They wanted to monopolize the ebook market, just like they did the print market. What better way than to under price their books? Sure, they’d take a loss for a few years, but people would flock to them to buy books on the cheap, effectively putting the competition out of business. (Well, at least the Indie Bookstores.) Then, after they acquired a sufficient number of loyal buyers (and enough other stores went out of business) they could raise the price to whatever they wanted.

4)  Macmillan and other publishers worried that readers would expect this type of discount forever. Who would buy the hardcovers at $28 when they could get the ebook for less than half that? Publishers make most of their money from hard covers sales.  Publishing in general would take a hit so huge that they probably wouldn’t be able to recover from it — at least not with their current business model.

5) Macmillan decided to counter Amazon’s pricing scheme by delaying the ebook releases for a few months (or years) after the print releases so they wouldn’t eat up too much of the hard cover sales. Or another idea – they would go to Apple, who was looking to start up an ibookstore to compete with Amazon and would give publishers greater control over pricing.

6) Amazon decided to show their muscle, hoping that Macmillan would see  how much the bookstore giant affected their bottom line. What they didn’t count on was the finicky buyer. People liked to shop at Amazon, but many didn’t mind shopping elsewhere to buy books if they had to…unless they owned a Kindle, of course. Instead of folding Macmillan took out an ad in Publisher’s Marketplace where they protested Amazon’s business practices.

Hence, the fiasco I woke up to Saturday morning. Throughout the weekend  tension rose as both parties ruffled their peacock feathers at each other and waited to see who would back down first. Finally, on Monday, Amazon put out THIS STATEMENT that essentially told Macmillan that they won, and Amazon would agree to their pricing terms. Of course the sock market reacted and Amazon’s stock price dropped under speculation that the power shift in the ebook market may soon change.

 Are there any real winners or losers in this power-play? Will it be “business as usual” now or will we have some lasting changes to the ebook market? And how will the introduction of the iPAD and iBookstore affect Amazon? Only time will tell. In the meantime, tell me what you think. I want to hear about it!

If you want to read more about this fiasco, Scott Westerfeld (SF Writer) has a very reader-friendly summary HERE. And, of course, you can follow the Dear Author threads HERE. Or the AP wire HERE. Or another Tobias Buckell’s (SF writer) take HERE.

One Response to “The Amazon-Macmillan Fiasco”
  1. This is a complicated issue… I like that I can buy new releases for under $10 on my Kindle. In fact, it takes no sales away from authors because very rarely in my life have I ever been able to afford $30 hardcovers. I always have to wait for paperback and many times I lose interest before a book ever gets there. I know I’m several behind with Dean R. Koontz because of this. (btw, one of the first things I did when I bought my Kindle was buy one of his newer books I’d missed. Royalties from ten dollars is better than royalties from zippo lol)

    I don’t think that any argument could convince me that wider audience and easy accessibility is a bad thing!

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