Higher Amazon e-book prices expected to coincide with iPad launch
Amazon and publisher Macmillan finalized their agreement for higher-priced e-books over the weekend. The deal is expected to serve as a template for other publishers, and the new prices should take effect in March, when Apple's iPad goes on sale.
While Amazon said a week ago it would "ultimately" have to concede to Macmillan's demands for higher e-book prices, a formal settlement between the two companies came over the weekend, and Macmillan-published books went back on sale on Amazon.com. The Wall Street Journal noted that the agreement between the two parties will likely "set the stage" for changes in the e-book market in 2010, as Apple enters the fray with its new iPad.
"By agreeing to accept a new pricing model, Amazon has publicly acknowledged the sudden emergence of a rival that may not only threaten its highly popular Kindle franchise but also its total domination of e-books," the report said. It noted that new, higher prices, at least for Macmillan, would begin when the iPad goes on sale in March.
It is Apple's entrance into the e-book market, with its new iBooks application and accompanying iBookstore, that has caused a new rift between publishers and Amazon. Following Macmillan's lead, Hachette Book Group and HarperCollins have both announced their intent to ink new deals with more flexible price structuring with Amazon.
Based on their content deals with Apple, publishers will offer new hardcover bestsellers for between $12.99 and $14.99 on the iPad's iBookstore. Publishers want to offer books under the same pricing structure on Amazon's Kindle.
Last week, Hachette CEO David Young said the price increase is not a way for publishers to make more money on books. In fact, he said, they will make less on each e-book sale under the new model, but authors and agents will be able to make money on every digital sale. He and others in the publishing world believe the new prices will "protect the long term viability of the book marketplace."
While Amazon has dominated the e-book market since its e-ink Kindle reader debuted in 2007, Apple's entrance with its $499 iPad has forced the bookseller to renegotiate its content deals under pressure from publishers. With Hachette, Macmillan and HarperCollins, three of the five major publishers highlighted by Apple at its iPad unveiling have revealed their interest in higher e-book prices.
The moves confirm comments from Apple co-founder Steve Jobs, who said that publishers were upset with Amazon and could begin to pull their content from the bookseller. Declining to elaborate, he simply said that the Kindle and iPad would offer bestsellers at "the same" prices.
The Journal also noted that the only major publisher that has not struck a deal with Apple for iPad content is Random House. The company is said to be "studying the matter."
While Amazon said a week ago it would "ultimately" have to concede to Macmillan's demands for higher e-book prices, a formal settlement between the two companies came over the weekend, and Macmillan-published books went back on sale on Amazon.com. The Wall Street Journal noted that the agreement between the two parties will likely "set the stage" for changes in the e-book market in 2010, as Apple enters the fray with its new iPad.
"By agreeing to accept a new pricing model, Amazon has publicly acknowledged the sudden emergence of a rival that may not only threaten its highly popular Kindle franchise but also its total domination of e-books," the report said. It noted that new, higher prices, at least for Macmillan, would begin when the iPad goes on sale in March.
It is Apple's entrance into the e-book market, with its new iBooks application and accompanying iBookstore, that has caused a new rift between publishers and Amazon. Following Macmillan's lead, Hachette Book Group and HarperCollins have both announced their intent to ink new deals with more flexible price structuring with Amazon.
Based on their content deals with Apple, publishers will offer new hardcover bestsellers for between $12.99 and $14.99 on the iPad's iBookstore. Publishers want to offer books under the same pricing structure on Amazon's Kindle.
Last week, Hachette CEO David Young said the price increase is not a way for publishers to make more money on books. In fact, he said, they will make less on each e-book sale under the new model, but authors and agents will be able to make money on every digital sale. He and others in the publishing world believe the new prices will "protect the long term viability of the book marketplace."
While Amazon has dominated the e-book market since its e-ink Kindle reader debuted in 2007, Apple's entrance with its $499 iPad has forced the bookseller to renegotiate its content deals under pressure from publishers. With Hachette, Macmillan and HarperCollins, three of the five major publishers highlighted by Apple at its iPad unveiling have revealed their interest in higher e-book prices.
The moves confirm comments from Apple co-founder Steve Jobs, who said that publishers were upset with Amazon and could begin to pull their content from the bookseller. Declining to elaborate, he simply said that the Kindle and iPad would offer bestsellers at "the same" prices.
The Journal also noted that the only major publisher that has not struck a deal with Apple for iPad content is Random House. The company is said to be "studying the matter."
Comments
I am a little concerned with read a backlit LCD. The kindle is very eye comfortable. But I do admit I read my computer screen much of the day and I am used to it. I think the kindle did some great breakthrough work here. It just needs to do a little more than just books. We're in a market where convergence wins. Kindle being so specific wasn't going to last against competitors that offer multiple features above and beyond just ebooks.
hope the few extra bucks there a year really helps Apple out.
Thanks Apple, thanks for that. A great win for the consumer there.
iTunes Store:
Opened over a year after iTunes itself and the iPod, so there was already a large number of iPods and iTunes users in the market.
Apple plays hard-ball refusing record company demands to sell only whole albums and arguing for a cheap 99 cent per track price.
Apple makes one concession to give them the DRM.
iBooks Store
Opened at the same time as iPad, so no installed user base.
Already one competitor in the market with a device and store set-up.
So, Apple decides to woo content providers by giving into their demands for higher prices for books.
The 'hardback' book concept is ridiculous in the digital domain - but it is clear that publishers in the past have clearly recouped initial costs and marketing with an initial sell-thru of these higher priced books. Clearly for much-hyped eagerly awaited novels like the Harry Potter series this probably reaps massive profits.
So while the consumer won with the release of the iTunes Store, we're being stiffed with iBooks - I hope that perhaps Apple start playing hardball if the iPad/iBooks establishes itself.
Thanks Apple, thanks for that. A great win for the consumer there.
Why are you blaming Apple, it's the publishers that made the demands. They wanted the higher prices, wanted them regardless of service, want the DRM.
Thanks Apple, thanks for that. A great win for the consumer there.
Well, to be honest, the Amazon model was not sustainable. In many cases Amazon was buying the e-book for $14-15 ( I think it was half the price of the paperback but not sure) and was then selling in on the Kindle for $9.99 at a *loss for Amazon. Amazon's tactic was most likely to build an iTunes like dominance before others got into the game.
Apple makes one concession to give them the DRM.
Yeah... as if the content-owners were going to let anyone sell their music, back then, without DRM.
They only started allowing other sites to sell DRM-free music as a way to pressure Apple into allowing tiered princing on iTMS.
And your jump from the music store's 99-cent pricing - low enough to get people to buy instead of pirating - to the book store's taking 30% of whatever the publisher wants to charge convieniently skips-over the App store's pricing model.
Their is no Napster/Grokster-equivalent network for pirating Apps or eBooks, so their is no need to set rock-bottom pricing to encourage people to buy what they can otherwise get for free.
Don't like eBook prices? - I don't - so do what I do: don't buy any until they pull their heads out of their butts and set reasonable prices for eBooks.
$9.99 is questionable considering you don't even "own" the book
can't give it away can't resell it etc etc
$13.99- and up is just outright price gouging
How much is a physical book?
How much is a DVD?
How much is a movie on Itunes? or a TV show....
Sorry I'll stick with real books unless it is a very special manual or reference ...
$14.99 and up wha?
I have to agree.. thanks Steve, really appreciate the fact I'll have to pay five or so extra bucks a book now.. on my kindle for my iphone no less.
hope the few extra bucks there a year really helps Apple out.
Just that much less you'll have to spend on glasses for attempting to read books on your iPhone...
It has always been my understanding of economics that the consumer decides prices. Sure a producer can establish a starting price, but the buyers dollar votes determine if the product can be sustained at the set price. So, if you do not like the price of something. Don't feel compelled to pay it because you have no choice.
It was also my understanding that to print a book a contract was made between the author and publisher. The author (unknown) would get around $0.05 - 0.20 for each book sold. The rest went to the publisher to pay for marketing, printing costs, Editors and transcribers to review and edit, transportation, storage, and retained a small buffer for the seller to have their profit as well. That is the short list.
Now there is an eBook. You have the Seller, Author, Publisher, Editor, and maybe a developer or secretary to copy and paste the book into a professional editor that outputs the ePub file. That removes distribution (profit for publisher), storage (profit for publisher), printing (profit), printing supplies (profit), capital equipment like printing systems (profit), facilities to hold and run the equipment (profit), artist for illustrations and cover work (profit)...etc.
A publisher could raise the pay of an author from $0.05 to $0.10 and tell everyone that they are raising author pay in the best interest of the market place and still retain a huge profit gain. In a statement like that they would not be legally liable for anything because they have not lied. They did raise the author pay by $0.05 a book. And the best part is that we have not raised our prices yet for books. That again will bring a huge profit.
So you have to ask yourself. If they came out with an electric car, would you all pay a premium and monthly fee to drive one all because you no longer have to buy gas to fill the tank? What about your electric bill for charging it? Maybe a bad analogy but I cannot see spending more money for something that does nothing more for me. Don't get me wrong, ebooks are the future. Printed publications have to move onto newer technology as the amount of information increases dramatically. There are only so many trees in the world, and an ebook is about as green, in that regard, as you can get.
Sure ebooks are convenient but it is still a book without all the color, and illustrations (at least all the ones I have seen so far). You don't really own the book, you cannot resell the book, loan it to a friend, or donate it to the public library. Instead everyone will have to buy the book to read it, which again increases revenue for the publishers. Starting to feel like the oil industry bought into books. Maybe they will claim a foundry has a rusty bolt so they can raise the book prices again next year by $5 a book. The year after that the keyboard will have a sticky spacebar and they can raise it another $5. Why not? It works for gas buyers.
I will still enjoy the printed page and buying new and used books and there will still be a very healthy market for them for longer than I would bother to imagine.
Thanks Apple, thanks for that. A great win for the consumer there.
In defense of both Apple and the publishers, they are not raising prices per se, but simply indicating that they want to have final pricing power as opposed to the one-price-for-all model that Amazon is currently using. Since Amazon has been subsidizing ebook sales by taking a loss, they are distorting true free market pricing. Amazon could easily have said, "No more subsidies," and begin charging what the publishers were selling it to them for.
Therefore you can't really blame Apple for coming out and deciding they don't want to take a $5 loss on a $15 book (that's 33% gone into thin air). But in order to make it attractive for people to use the iBookstore, you'd at least need price parity, so I have no doubt that Apple simply gave the publishers their own pricing power, and these publishers, knowing how successful Apple can be in these types of markets, decided that they finally have the leverage they need over Amazon to renegotiate the pricing structure.
In defense of both Apple and the publishers, they are not raising prices per se, but simply indicating that they want to have final pricing power as opposed to the one-price-for-all model that Amazon is currently using. Since Amazon has been subsidizing ebook sales by taking a loss, they are distorting true free market pricing. Amazon could easily have said, "No more subsidies," and begin charging what the publishers were selling it to them for.
Therefore you can't really blame Apple for coming out and deciding they don't want to take a $5 loss on a $15 book (that's 33% gone into thin air). But in order to make it attractive for people to use the iBookstore, you'd at least need price parity, so I have no doubt that Apple simply gave the publishers their own pricing power, and these publishers, knowing how successful Apple can be in these types of markets, decided that they finally have the leverage they need over Amazon to renegotiate the pricing structure.
amazon has also been taking 70% of their e-book prices vs. 30% that apple proposed. add to that the fact that amazon has been taking a loss to establish market dominance (unpublished sales figures notwithstanding), and you figure out why the publishers aren't happy...
What some seem to forget is that the iPod and all of their clones only really took off with the emergence of the low priced tracks and the elimination of DRM.
One of the problems which I see with e-books is the portability of the content, i.e. the ability of moving it from one device to another once I make the purchase and the lack of a standardized format. Why would I spend $14 for an e-book when I can spend the same amount for a physical book without the expensive "investment" in an e-reader.
Additionally after I viewed some of the Jobs presentation I sought out info on the upcoming HP tablet and found that it did many (if not most?) of the things which the iPad does, although perhaps not as "elegantly". I said to myself that the iPad may repeat the iPod device segment development with the inevitable more affordable 'clones'. But with the resulting pricing structure I question the success if they are basing it on the iBook / e-Book reader app.