Apple's iPad deal gives Hachette pricing leverage against Amazon

Posted:
in Current Mac Hardware edited January 2014
Joining the other publishers who, after striking content deals for Apple's iPad, have looked to increase standard e-book prices beyond $9.99 will be Hachette Book Group, the company announced this week.



While the letter from Hachette CEO David Young did not specifically mention Amazon or changing prices of new books to between $12.99 and $14.99, it did state the company intends to transition e-book sales to an "agency model." That model allows the company serving the content to take a cut -- in Apple's case with the App Store, 30 percent of all sales.



"There are many advantages to the agency model, for our authors, retailers, consumers, and publishers," Young wrote. "It allows Hachette to make pricing decisions that are rational and reflect the value of our authors' works.



"In the long run this will enable Hachette to continue to invest in and nurture authors' careers--from major blockbusters to new voices. Without this investment in our authors, the diversity of books available to consumers will contract, as will the diversity of retailers, and our literary culture will suffer."



Though the terms of the deals Apple has struck for the iPad's iBookstore are officially unknown, it has been widely rumored that publishers will price new hardcover bestsellers at $12.99 and $14.99. Publisher Macmillan wanted the ability to set those prices on the Amazon Kindle e-reader, which led to a temporary suspension of sales of the publisher's content from Amazon.



But shortly after, the two companies reached an agreement, with Amazon reluctantly agreeing to sell most hardcover releases between $12.99 and $14.99. Amazon, however, noted that it felt the prices were "needlessly high."



In addition to Macmillan, Hachette is joined by publisher HarperCollins, which also intends to renegotiate its deal with Amazon for e-book prices. News Corp CEO Rupert Murdoch said the new prices will be "slightly higher," but in the wake of Apple's iPad agreements, Amazon is finally "ready to sit down" and have discussions.



Hachette CEO Young, in his letter to agents, said the move to an agency model is not a way to make more money on e-books.



"In fact, we make less on each e-book sale under the new model; the author will continue to be fairly compensated and our e-book agents will make money on every digital sale," he said. "We're willing to accept lower return for e-book sales as we control the value of our product--books, and content in general. We're taking the long view on e-book pricing, and this new model helps protect the long term viability of the book marketplace."



All three companies -- HarperCollins, Hachette Book Group and Macmillan -- were specifically highlighted by Apple last week when it introduced its new iBooks application for the iPad. They, along with Penguin and Simon & Schuster, have agreed to content deals with Apple.
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Comments

  • Reply 1 of 116
    igeniusigenius Posts: 1,240member
    Who is Hachette Book Group? What sorts of stuff do they publish? Are they big?
  • Reply 2 of 116
    al_bundyal_bundy Posts: 1,525member
    there was a story yesterday that the winners of this price war are Barnes and Noble and Borders
  • Reply 3 of 116
    tbelltbell Posts: 3,146member
    Seems like Apple is forcing the prices up on the consumer to the benefit of publishers and itself. There is no reason people should pay the same or more for electronic content.
  • Reply 4 of 116
    saareksaarek Posts: 1,031member
    I feel very strongly that when I purchase downloadable content (be it video, music or in this case books) it should be cheaper than the physical medium.



    I do not wish to devalue the content of books or the creativity of music artists as their public statements claim.



    The simple fact is that with a physical medium they have to manufacture it, store it, ship it, stock it and sell it through a store who obviously put a mark up on top of the price, based on this why should I pay the same and even occasionally pay more (considering how quickly DVD's etc come down in price) for a downloadable version?!?!?!



    I have a large collection of DVD's and Blu Rays (around 400 of them) and a large collection of music on CD which I have imported into iTunes, I pay for my stuff and would happily go digital, but I refuse on principal to be shafted by these pricks, everyone else will make there own choice but until they stop ripping us off I will stick with traditional media.
  • Reply 5 of 116
    Why Apple fix music price but not book price? Double standard?
  • Reply 6 of 116
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by iGenius View Post


    Who is Hachette Book Group? What sorts of stuff do they publish? Are they big?



    I don't know if they're big, they started in France, the US branch started in 2006, so it's understandable that they aren't well-known in the US. They have roughly 18 imprints in the US, I've only heard of one. I have heard of several of their major authors, take a look here:



    http://en.wikipedia.org/wiki/Hachette_Book_Group_USA



    Notable authors:



    Ansel Adams, Sherman Alexie, David Baldacci, James Bradley, Marc Brown, Christopher Buckley, Jimmy Buffett, Stephen Colbert, Michael Connelly, Ted Dekker, Nelson DeMille, Emily Dickinson, Malcolm Gladwell, Lisi Harrison, Christopher Hitchens, Mary Ann Hoberman, Dr. Martin Luther King, Jr., Robert Kiyosaki, Elizabeth Kostova, Nelson Mandela, Patrick McDonnell, Brad Meltzer, Joyce Meyer, Stephenie Meyer, Todd Parr, James Patterson, Mark Penn, David Sedaris, Anita Shreve, Anne Rivers Siddons, Nicholas Sparks, Jon Stewart, Trenton Lee Stewart, David Foster Wallace, and Cecily von Ziegesar.



    Some of their authors are dead (Dr. MLK, Ansel Adams), so I guess their estates moved publishing rights to them from some other group.
  • Reply 7 of 116
    ivan.rnn01ivan.rnn01 Posts: 1,822member
    Quote:
    Originally Posted by JeffDM View Post


    I don't know if they're big, they started in France,



    In France they're real biggies. But all that is just about their NA division.
  • Reply 8 of 116
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by ivan.rnn01 View Post


    In France they're real biggies. But all that is just about their NA division.



    Good to know. Yes, that page was about Hachette USA, I should have made that clearer. Hachette USA sprung out of nowhere, I didn't know what to make of them and wasn't surprised if others hadn't heard of them.



    I wonder if the current iPad deals are US, rolling out to other countries soon after. Given that these are all international publishers, maybe there will be media available for for non-US buyers, but maybe it's not that easy given how they probably do their accounting and split up publishing rights into regions exactly the way the music and video industries.
  • Reply 9 of 116
    solipsismsolipsism Posts: 25,726member
    I'm disappointed that Apple didn't offer anything new to the electronic print. I hope this is just a start, but I was hoping for textbooks, magazines and comic books to be demoed to really show how a colour LCD is a better than E Ink.





    Quote:
    Originally Posted by TBell View Post


    Seems like Apple is forcing the prices up on the consumer to the benefit of publishers and itself. There is no reason people should pay the same or more for electronic content.



    Quote:
    Originally Posted by saarek View Post


    I feel very strongly that when I purchase downloadable content (be it video, music or in this case books) it should be cheaper than the physical medium.



    I understand your points but the bottom line is what will the market bare.
  • Reply 10 of 116
    Quote:
    Originally Posted by too999 View Post


    Why Apple fix music price but not book price? Double standard?



    Well, music is no longer fixed. However, it's simply a tactic to gain market share in a new industry. Amazon was beginning to dominate the e-book market since they took a loss on every book sold. Now they're about to get their rear-ends handed to them.
  • Reply 11 of 116
    maestro64maestro64 Posts: 4,182member
    Quote:
    Originally Posted by TBell View Post


    Seems like Apple is forcing the prices up on the consumer to the benefit of publishers and itself. There is no reason people should pay the same or more for electronic content.



    I found this all funny, first Apple changes the whole music industry by forcing them to sell singles at $0.99 and the argument was if an album cost $x and there y songs then each song is $0.99 which we all know most songs on most albums were garbage but there was no way the music industry would admit to that, so they have no choose than to agree with Apple. Which turned out to be a good things for all of us and Apple.



    Now they are doing the opposite strategy, Amazon has basically devalued the whole print industry. They showed people you do not have to pay the higher price. Which you know the publishing industry hates but they were stuck. They made books in hopes they would sell then found they were not selling as they like, struck a deal with Amazon to help clear out the warehouses. However, Amazon applied the same model to ebooks. Now Apple came in and said we can change that all for you, we will let you set your pricing and it will be on a better platform than a Kindle.



    Guess what it worked, all these publishers were more than happy to sign a deal with Apple so they can have leverage over Amazon. However this time Apple and the Publisher will benefit not the consumers.



    Then again I have Apple stock and I will benefit far more from that than a cost of a book.



    So I win anyway.
  • Reply 12 of 116
    bageljoeybageljoey Posts: 1,730member
    Quote:
    Originally Posted by TBell View Post


    Seems like Apple is forcing the prices up on the consumer to the benefit of publishers and itself. There is no reason people should pay the same or more for electronic content.



    Is Apple "forcing" prices up? Or is it that Apple, in competition with Amazon as a driver of digital sales (theoretically for now), just gives the publishers some leverage?



    This is how I imagine things played out:

    Up to now, if they wanted to sell e-books, publishers had to play by Amazon's rules because of their dominance in the market. If Apple came in and said, "we want you to provide e-books for our new ecosystem for the same price as Amazon," publishers might have responded "Meh. Talk to us when we see how iPad sales are going..." Apple needed to be abe able to announce publishers were enthusiastically on board *before* the iPad came out, so they had to offer something to get the publishers interested. Remember, Apple's model is to make money on hardware sales; their end goal is to sell iPads, not make a killing on media sales commissions.



    I suppose, you could fault Apple for the price rise, but I think saying that "Apple is forcing the prices up," implies that Apple *wants* the price higher, which I doubt.
  • Reply 13 of 116
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by saarek View Post


    I feel very strongly that when I purchase downloadable content (be it video, music or in this case books) it should be cheaper than the physical medium.



    It is cheaper, you can't compare it to the remainders or used price. The prices given so far that I've seen are for ebook versions during the hardcover phase of the release cycle. Amazon's price for a Harry Potter hard cover book is $20 (list: $30). If the ebook is listed at $15, it will be cheaper. We don't know how the ebook will be priced when the paperback is released. If they still list at $15 for when the paperback is released, only then will we know how serious they are.



    Quote:

    The simple fact is that with a physical medium they have to manufacture it, store it, ship it, stock it and sell it through a store who obviously put a mark up on top of the price, based on this why should I pay the same and even occasionally pay more (considering how quickly DVD's etc come down in price) for a downloadable version?!?!?!



    In past discussions, there were multiple links that gave the cost breakdown for publishing a book. The printing & paper is only 10% of the cost. Distribution is 10%. Typical retailer portion is 40%. Apple takes 30% on most media they sell (iTunes store), and that doesn't earn them more than a sliver of net profit. There are still costs with maintaining the electronic store. The best you can hope for here with electronic distribution is a 30% reduction in cost.
  • Reply 14 of 116
    Quote:
    Originally Posted by TBell View Post


    Seems like Apple is forcing the prices up on the consumer to the benefit of publishers and itself. There is no reason people should pay the same or more for electronic content.



    If you read the article, this isn't about the publishers getting more money. The get LESS. And Apple is just getting it's usual 30%. If Apple used the same model as Amazon used, Apple would be LOSING money on each sale. As the publishers said, not a sustainable model and only sets up Amazon for a monopoly on the new market.



    The new price should still be less, however if you still don't like it then you can let them know by not purchasing it. They can decide if they can lower the price and still benefit everyone.
  • Reply 15 of 116
    ivan.rnn01ivan.rnn01 Posts: 1,822member
    Quote:
    Originally Posted by JeffDM View Post


    Good to know. Yes, that page was about Hachette USA, I should have made that clearer. Hachette USA sprung out of nowhere, I didn't know what to make of them and wasn't surprised if others hadn't heard of them.



    It was usual buy-out Ã* la mode of those not so old days. Time Warner Book Group was bought by Hachette Livre.



    Quote:
    Originally Posted by JeffDM View Post


    I wonder if the current iPad deals are US, rolling out to other countries soon after. Given that these are all international publishers, maybe there will be media available for for non-US buyers, but maybe it's not that easy given how they probably do their accounting and split up publishing rights into regions exactly the way the music and video industries.



    No any evidence so far. Not a bit.
  • Reply 16 of 116
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by AppleStud View Post


    Well, music is no longer fixed. However, it's simply a tactic to gain market share in a new industry. Amazon was beginning to dominate the e-book market since they took a loss on every book sold. Now they're about to get their rear-ends handed to them.



    It turns out that the loss is mostly the big name books. For other books, they offered publishers 30% of the total and kept the remaining 70%. This came up on another Mac forum, I think they linked to a story in NYT.
  • Reply 17 of 116
    bageljoeybageljoey Posts: 1,730member
    Quote:
    Originally Posted by saarek View Post


    I feel very strongly that when I purchase downloadable content (be it video, music or in this case books) it should be cheaper than the physical medium.



    Is it my imagination, or don't most new, hardcover books cost much more than $12-$15? I just pulled two hardcover books off my shelf and they said $27.99 and $24.99. Even if I bought them at a discount, they would still have been much more than $15...



    Has their been any talk of pricing for paperback titles and old catalogue books?
  • Reply 18 of 116
    Quote:
    Originally Posted by saarek View Post


    I have a large collection of DVD's and Blu Rays (around 400 of them) and a large collection of music on CD which I have imported into iTunes, I pay for my stuff and would happily go digital, but I refuse on principal to be shafted by these pricks, everyone else will make there own choice but until they stop ripping us off I will stick with traditional media.



    Then you should stick with traditional media. Nobody's arguing with you about your right to do that, I hope. As for me, I don't mind paying the same for digital as opposed to traditional. Sure, the publisher's printing costs and what have you have disappeared with digital, but from my perspective, my storage and schlepping costs have disappeared. I live in a small home with over-flowing bookshelves, so the digital format has an extra, tangible value to me.
  • Reply 19 of 116
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by ivan.rnn01 View Post


    It was usual buy-out Ã* la mode of those not so old days. Time Warner Book Group was bought by Hachette Livre.



    That makes sense.



    Quote:

    No any evidence so far. Not a bit.



    No evidence which way? I suppose there isn't any evidence either way.



    However, given the track record, I expect that non-US markets will be waiting a bit.
  • Reply 20 of 116
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by delreyjones View Post


    Then you should stick with traditional media. Nobody's arguing with you about your right to do that, I hope. As for me, I don't mind paying the same for digital as opposed to traditional. Sure, the publisher's printing costs and what have you have disappeared with digital, but from my perspective, my storage and schlepping costs have disappeared. I live in a small home with over-flowing bookshelves, so the digital format has an extra, tangible value to me.



    But you're leaving out one other cost for yourself, having to buy a special reader device when none was required before.



    Speaking of which, I haven't heard of (Apple) reader software for the home computer. At least there, you could take advantage of an already-made purchase.
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