Amazon Battles Apple By Arm-Twisting Publishers

bizwriter writes "Apple has upset the e-book pricing cart by agreeing to a so-called agency model, where the publisher sets the price and the seller takes a cut. This goes contrary to the degree of control Amazon likes, so although it apparently gave in to Macmillan back in February, it turns out that Amazon continues twisting arms. The problem publishers face is that Apple has a most-favored-nation clause, so it gets the best deal that the publishers offer. If the publishers give in to Amazon, then they also have to provide the same terms to Apple."

Comments

Meanwhile

[zippthorne]

Barnes & Noble's device is fairly decent, although its missing Wikipedia and some of the features could be better done. Why is this is being set up as an Apple vs. Amazon fight when, of the several companies putting out eReaders, Apple is the only one who doesn't actually have a device available for sale right now?

Re:Meanwhile

[maxume]

Because Apple is the one with the contracts that (potentially) hurt Amazon's business (whereas Barnes and Noble is trying to run the same sort of business as Amazon).

Re:Meanwhile

[teg]

Exactly, there's Sony, B&N and others. I think par tof Amazon's success is that the press talks about no one else

I think Amazon's success is based on how easy it is to use, and get books on it. The Apple mantra, "it just works", sure applies there. Go to Amazon, purchase and a minute or two later, it's on your Kindle. Many others providing this hardware don't have as integrated a solution as Amazon does - other than B&N, probably none. Also, their hardware is good.

Now we have Apple who has, imo, a very half-assed device and they're unfortunately getting more attention then superior competition which means they'll probably get more sales than they deserve.

"Half-assed"? Apple does a lot of things, but "half-assing" is not one of them. They do, however, have evil lockdown schemes - even to the point of trying to censure publications in app form. Europe doesn't have the weird American "violence good, boobies very bad" attitude, so there have been cases of German magazines being censured by Apple. Other than the worrysome censoring and lockdown, I'm sure it's going to be a very good general purpose device. The Kindle is a specialized device - with e-ink, it'll last a lot longer and be a lot better when reading text books.

This is unexpected, how?

[Auckerman]

Competition from a new contender that is known to be a strong player causes the strongest early market entrant to throw a hissy fit, news at a 11.

Until I can actually BUY an e-book, not rent them for life, the entire market will remain irrelevant to me.

Amazon is fighting for their life here, remember

[kithrup]

This goes contrary to the degree of control Amazon likes

Forcing an "agency model" on any retailer is going contrary to both history and market standards. The general model for booksellers is to buy wholesale, at somewhere around 40%-50% of MSRP, and then sell at some price between that and MSRP. Amazon has discounts of MSRP all the way from 55%, to only a few percentage points. Barnes & Nobles has similar prices (if you become a "B&N Member," for US$25/year, the prices are pretty much the same as Amazon's. A bit lower sometimes, a bit higher sometimes.)

What's really going on here is power: the publishers have decided they don't want retailers undercutting each other -- that leads to a single player having market dominance, which allows them to try to force concessions (lower prices, content changes, etc.) from the publishers. As examples of this, see Amazon and Wal-Mart.

When Apple joined the ebook market, however, they were able to take the same "we don't care about making a profit on content" attitude they have for music, and offer it to the publishers. And the market share Apple can offer with the iPad is probably at least as large as Amazon's current market share with is Kindle. (And unlike Amazon, Apple won't be paying the end-user bandwidth costs.) This gives publishers who are willing to sign up with Apple enormous negotiation power with Amazon -- over ebooks. Amazon's only negotiation power that can counter that is the physical book market.

Personally, I would certainly be offended if someone said, "You will sell this product at a price we dictate, and only take 15%. You cannot charge more to make more money; you cannot try to maximize profits through selling more by offering it for less. And if 15% of an arbitrary price we set isn't enough for you to make profit -- or even enough for you to run your business, tough." And I'd fight it as best I could.

Of course, that's also pretty much Amazon's attitude towards the publishers. So a pox on all of them, really.

huh?

[arcite]

"Until I can actually BUY an e-book, not rent them for life, the entire market will remain irrelevant to me."

You're really concerned what's going to happen to your ebooks when you're dead? Taking corporate paranoia to the afterlife is a little extreme, no?

Re:huh?

[Auckerman]

You're really concerned what's going to happen to your ebooks when you're dead? Taking corporate paranoia to the afterlife is a little extreme, no?

I don't have to buy a different set of eyes to read books purchased at different stores. They all work, as is. Where as, with ebooks, once you have a collection from Amazon, if you EVER want to read them again, you must do so on an Amazon supplied reader. If at any point in the next couple of years, Amazon decides to stop manufacturing those readers and yours dies, all of your books stop being readable.

We already know with DRM'ed music, that companies have taken their tracking servers off line, making moving the music to new hardware IMPOSSIBLE.

If I own something, I own it. I don't need the entity I bought it from to give me permission to use it.

Lesser of the two...

[semiotec]

One control-freak company wants to sell cheaper books, while another control-freak company wants to sell more expensive books?
I know which weevil/weasel I will go with.

and while this is just one side of the argument, but anyone who thinks Apple's deal with the publishers will work out better for the authors should read this:
http://techcrunch.com/2010/02/07/its-nsfw-because-the-word-fuck-is-in-the-url/

First they ignore you....

[bangzilla]

First they ignore you: ""
Then they ridicule you: "Ho ho - tiny little screen; who'd buy one of these toys?"
Then they fight you: "Crap - we better make our own ebook reader and screw around with pricing to protect ourselves. But we're kinda late and our pricing strategies are reactive and ill thought out"
Then they loose: "Double crap - all our best selling authors are now publishing their own book directly on the Kindle and taking 85% of the revenue rather than the 10% we used to give them. Ingrates!"

Feel free to bookmark this post and come back to it in 5 years time to see how it all came true.....

Re:First they ignore you....

[dloose]

I'm confused... Is Apple the "they" in your post? Who's pricing model is "ill thought out" and what is "ill thought out" about it?

You may be right. In 5 years, all authors could be publishing independently. But right now there's money to be made by selling books put out by the big publishing houses. Amazon and Apple are competing for that money.

I think you mean, "Then they lose". "Loose" is the opposite of "tight". "Lose" is the opposite of "win", "find", and "gain". This is important.

twisting is good, though

[pydev]

The headline makes it sound like Amazon is doing something bad. But Amazon is twisting publishers' arms to sell their books for less than they would otherwise. Publishers have wanted to charge excessively high prices for their books. And Apple has been trying to lure them by letting them get away with it.

Re:Alternate Headline

[eggnoglatte]

Huh? So Apple basically says "we follow whatever retail model you want, but if you give somebody else a discount, you have to give it to us as well".

How the hell is that strongarming? Of course anybody would always fight for getting a deal that at least matches what competitors get. Those have got to be the weakest demands any company with some market power has ever negotiated.

iphone runs both the B&N ereader and the Kindl

[ClaraBow]

Doesn't this mean that if you have an ipad, which runs iphone apps, that you will be able to buy from apple, or Amazon or B&N? What am I missing here?

Re:What's best for consumers

[Colonel Korn]

While it doesn't always happen, the company that provides the best prices and best selection to the consumers should be the winner. In music Apple unbundled the album and created a reasonable price point. More music is being sold, but music publishers are making less money. Consumer wins. In publishing the total cost of a book should be authors cut + cost of manufacturing + cost of distribution + marketing costs + profit for publisher + profit to distributer = total cost of book. E-books should dramatically reduce the cost of manufacturing and distribution and if things follow the music model, more books will be sold allowing for a reduction in profit margin due to volume. The consumer wins, if Apple and Amazon can strong arm the publishers not to add savings from manufacturing and distribution to their profit margins.

This particular case is Apple giving the publishers a way to strong-arm Amazon and increase prices for ebooks by 50%. If you want to look at it from the perspective of a consumer, then Apple's entrance to the market isn't very good. The funny thing is that Amazon did the same thing to Apple a few years ago by introducing the agency system to mp3 sales. The difference is that Amazon provided a superior product for the same or a lower price that forced Apple to then improve its own product by removing DRM. This time Apple is forcing Amazon to raise prices, so it's not quite as fun for those of us buying books.