Amazon vs Macmillan, Round 1

It’s Amazon vs Macmillan, round 1. And nobody is really going to win this one.

I don’t have a dog in this hunt, at least not one in the lead pack, since I don’t do eBooks. I appreciate the convenience factors like being able to carry a baby library around in my pocket. But I just prefer to read from print. Which shocks some of those who know me mostly as an equally voracious reader and techie, almost as much as finding out that that same techie does something as old fashioned as counted cross-stitch embroidery for relaxation. But that doesn’t mean I’m not affected by it.

In case you haven’t heard the news (I’m drawing most of my facts as posted here from the January 30th New York Times article, although I’ve done more reading elsewhere to verify and expand on what’s there), apparently there’s been a dispute brewing for the past year or so between Amazon.com and the major publishers over eBook pricing. Amazon’s Kindle titles run a pretty steady $9.99, which is highly discounted over the same book as a new hardcover. The publishers want them to charge more in the $15.00 range. This has come to a head with the release this week of Apple’s new iPad and the opening of their new iBook store, since Apple plans to offer the same books but with the publishers having more leeway in setting the prices. Not complete freedom, but priced using a formula that will bring things pretty much in line with what they’ve been asking Amazon to do. Macmillan is one of the really big guys who have signed on with Apple and Amazon has responded by effectively pulling Macmillan from its shelves. It says temporarily, but I haven't heard an end date.

How do you pull books from the virtual shelves of an online bookseller? Easy. Look up a title from Macmillan or one of its imprints, such as Farrar, Straus & Giroux or St. Martins (a HUGE name in the mystery world), on Amazon. You won’t see an eBook edition even listed, while other formats will be offered for sale only through third party (marketplace) sellers. You can’t buy an eBook edition at all and you can’t buy any other format directly from Amazon...OK, so what, I can still buy it, right? Yup, but marketplace sellers operate according to different rules, especially when it comes to shipping. Marketplace sellers don’t have the same standards in terms of speed or even packaging (this is from experience—I’ve bought out of print books this way). Some do, but it’s not something to rely on, varying by individual seller. While the cost will increase exponentially if you want multiple books—there’s no free shipping for purchases over a certain amount. Au contraire, there isn't any kind of volume discount—you have to pay the same fixed rate per book no matter how many books you buy, even if they're all from the same seller

There really aren’t any wholly good guys here. Amazon isn’t trying to keep its low pricing out of altruism and overflowing generosity towards its customers. The pricing is to help grow eBook sales, more specifically to encourage people to buy its proprietary eBook reader over other options, figuring to dominate a growing industry through volume of sales rather than per item profit. You can buy Kindle books from Amazon; you can buy other eBook formats a variety of places. And in my opinion they’re abusing power with this move, which affects everyone from the sorts of new authors looking for an audience that St Martins brings out, who will lose sales, to people on limited budgets who primarily use Amazon gift certificates they’ve received to meet their book buying needs and can no longer get the books they want, or at least not the same way.

The publishers lost me by justifying their actions with the “concern” quoted in the Times article: they’re afraid such pricing “devalues books”. Puh-lease. I suppose it explains a lot if they really do believe that all the value in a book lies in the price charged for it. This is why they wholeheartedly embrace high priced best selling one offs while cutting solid selling paperback edition only authors by the dozens. Me, I always thought it was the contents that provided the value in a book. Plus they're not averse to some bullying of their own. Macmillan has offered to let Amazon buy books on the same "agency model" they've just signed with iBooks, i.e. publisher sets the pricing with 70% going to the publisher. Or they can keep their current "wholesale model" and related pricing, paying 50% of the wholesale hardcover price, but then they will have a delay of seven months before they would have access to the books. As would Kindle readers (unless they went with another format bought elsewhere - Kindle does support a few other formats, and for a fee can convert others). While sorry, but how the sorts of major publishers who increasingly seem to publish based more on marketing plan than quality can talk with a straight face about anyone else devaluing books is simply beyond me. Seriously, I’d be more sympathetic if they were demanding the 60% increase in pricing because of rising costs for necessities like paper, printing, warehousing, shipping, etc. But these are eBooks. The lack of such things is a big part of the point. This is pretty strictly about profit for them too, just profit going to them instead of to Amazon and using a different model.

Competition is good. Giving people more options so that they aren’t stuck with Kindle or else is a genuinely very good thing. If you’ve any doubt, Amazon’s actions here show they’re not afraid to use their marketplace power to play the bully to get their own way. But that doesn’t mean the publishers are in the right either, nor have they shown much hesitation in bullying for their own ends. While I don't see a lot of concern from either side about the effect of their battle on readers or authors—the two other groups directly affected by it. This isn’t about giving people more choice or just keeping Amazon under control, and it's certainly not to free up more money for the authors who write the books or for saving customers money because they love them. It’s about two different sides trying to force their preferred method of leveraging a profit for themselves on an industry. The industry itself is hurt, as it is still in the process of establishing itself, with pricing one of the tools for doing so. While the public ends up caught by the basilisk stares of the two sides, each too focused on waiting for the other to blink to consider any collateral damage.

Feel the Force... come over to the Dark Side. Forsake the eRead (at least temporarily), head out to your local indy brick and mortar bookstore, and celebrate the joys of paper and print with a major investment. And no, you don't have to follow my personal purchasing model to do so.

Comments

[Robin Agnew]

That's going to be a killer for St. Martin's/MacMillan authors I would imagine. That's a terrible story.

[Mercedes Lackey]

OK folks, here is a response from a real book writer, and someone who was affected by this, since Macmillan/Tor is one of my publishers. (I'm Mercedes Lackey)

Amazon's response was posted on the Amazon Kindle Forum on Amazon's site, apparently by someone who has absolutely no grasp of how publishing--or anything else--works. OF COURSE Macmillan "has a monopoly on its own titles," you moron! And Nabisco "has a monopoly on Oreos" and Ford "has a monopoly on Mustangs and Shelby Cobras!"*

The book business in general is tanking. How bad? Bad enough that almost everyone I know saw their royalty checks plummet to 50% last year, some going down to 10%. Well duh, you can't buy books when you don't have a job. (I am often forced to roll my eyes when I tell people that and they look at me bewildered and say "But I see tons of people in the bookstore when I go, how can that be?" I have to explain patiently that "Tons of people in the store does NOT equate to sales.")

Amazon has the publishers by the short and curlies. Unlike traditional bookstores, the One Ton Gorilla can demand a discount of 50% on the cover price and get it (as opposed to the chain-store's 30% and the Indie's discount of 20%). This is why a new HC, with a cover price of $25 is Amazon Priced at $15. And this is why the price of books has gone up, so publishers can keep their very slim profit margin. (And believe me, it is slim).

Macmillan's desired pricing model is not as draconian as it seems. They want $15 for the e-copy of a Hot New Bestseller--same as the heavily-discounted price of the dead tree copy, so that the e-copy does not compete with the same book in dead tree, and Macmillan can recoup their substantial investment in the book. This does NOT mean that MY new book in e-copy would be $15. Mine would likely be, oh, $12. And Joe Schmoe's would be--you got it--$9.99. Plus, in Macmillan's model, over time that $15 per e-copy would start going down. In 6 months, say, it would be $9.99. And in two years? Probably $4.99, same as a paperback.

So if you JUST CAN'T WAIT--you pay a premium. Same as with any other product.

* Now here is some irony. Amazon is claiming to be a publisher when it comes to obtaining exclusive rights to e-copies of books. Yet not that long ago I actually approached them to write Kindle-exclusive content. I wanted the same terms I would get from any of my other publishers; advance against royalties, half on signing, half on publication. I was told then, in exactly these words, "Amazon is not a publisher." (But of course I "should feel free to write the content and publish it via the Kindle platform at their generous terms of 30% royalty"**).

So.....three months ago, they WEREN'T a publisher. Now they suddenly are. Oh, except when it comes to treating an author like a professional.

** Lest you wonder why I didn't take advantage of such GENEROUS TERMS, another author ran the numbers for a series of his that was abandoned and discovered rather quickly that he would be making less money than a first-time writer.

(Oh, and one more thing. The "Advance against royalties", often shortened to "Advance" is a essentially a no-interest loan, paid out over time to an author, so that he can write the damn book without worrying about where the mortgage payment is coming from. Most of us (especially now) absolutely require these advances to keep writing. It's a gamble on the part of the publisher that your book will be profitable, because if it is not, YOU don't have to pay it back.)

[Hitch]

Here's my $.02 about ebooks v. paper, and it's worth less than you're paying - while I'm a big lover of paper books, and have several thousand, room for new ones is precious, as are my dollars. There are tons of new-to-me authors--what I would call mid-list authors--I'd love to try, but I'm hesitant to spend a lot of money to experience their writing. This means that I allocate monies for used copies of their older books, in order to "sample" them, to see if I want to spend the bigger bucks for their newer works (like Tim Hallinan, from DL, as merely one example). When I buy a second-hand book to sample Tim's work, he gets bupkus, nary a cent. If, on the other hand, he has backlist books on the Kindle or other e-reader that are affordable, he gets whatever royalty, however meager, that is earned from that "copy." IMHO, for backlist titles, the world of ebooks is a grossly overlooked and, by many, underappreciated world for authors.

When it comes to newer titles, I think we are all faced with the reality that although many of us who are older are happier with the feel and smell of paper and ink, we are going to be out-voted by younger people who want the ease and portability of ebooks. Moreover, I applaud outfits like Project Gutenburg, for keeping older titles in the public domain available for those of us who still like a good read - even if it is out of profitable copyright.

We will all see whether or not MacMillan is able to command the higher prices for its ebooks. People will vote with their dollars and their feet, one way or the other. Price wars are always good for readers, and less so for authors...and I predict that the day of the midlist author being paid advances, given the advent of POD, is rapidly coming to an end; the instancy of payment for ebooks may be a very welcome "relief" for those authors straining to make ends meet.

[Kim Malo]

Well it's about to become moot since amazon has capitulated and agreed to raise prices. They haven't restored MacMillan books yet, but that can't be far behind. Dunno as I'm wholly in agreement on all of the above with either of you but thanks for reading and providing some additional food for thought.

[Hitch]

Amazon capitulating to MacMillan's demands simply means one thing to me, personally; that instead of capitulating myself, and paying MacMillan's same-as-paper price for an ebook, I'll simply wait an extra few days and buy the new h/c I want as a "used" book. MacMillan won't make ANY money from me that way, nor will the author, sad to say, but I'll be able to keep MY costs down.

EBooks are NOT worth the same as paper, as they are not resaleable nor really "collectible," and you cannot put them on your shelves, upon which to feast your eyes; they are simply information containers. But when I was able to buy ebooks on the fly, at a lesser cost than h/c, I could "justify" it to myself, and now I shan't be able to do so...so it's back to used books for me. I fail to see how either MacMillan or the author wins in that scenario, but Amazon (and other used-book vending sites) will still make THEIR commissions, regardless. I think it was a really bad move on MacMillan's part, and they should rework their business models to take into account that attempting to amortize or prorate the entire cost of the hardcover book printing, promo, etc., over both hardcover AND the e-versions is just not viable, for the reasons I mentioned above; ebooks are neither collectible nor resaleable - and with the Kindle, not even shareable.