Book Wars: Amazon Caves Into Macmillan Pricing Demands

Posted on February 1, 2010

The Book Wars began over Christmas when Wal-Mart and Amazon.com got into a pricing war over the sale of hardcover bestsellers. But that was nothing compared to what's coming. With the launch of Apple's iPad and Steve Jobs' announcement that he's going to sell ebooks for around $15.00 a book (Amazon.com sells them for around $9.99 or less), the Books Wars just went into a very hot phase.

This particular battle started when MacMillan asked Amazon.com to raise the price of all its ebooks for the Kindle from $9.99 to $15.00. Amazon.com refused and removed the buy button from all MacMillan titles. The New York Times reports:

Motoko Rich, my colleague, spoke with a person who had a direct conversation with a person at Macmillan familiar with the conversations with Amazon. Macmillan offered Amazon the opportunity to buy Kindle editions on the same "agency" model as it will sell e-books to Apple for the iPad. Under this model, the publisher sets the consumer book price and takes 70 percent of each sale, leaving 30 percent to the retailer. Macmillan said Amazon could continue to buy e-books under its current wholesale model, paying the publisher 50 percent of the hardcover list price while pricing the e-book at any level Amazon chooses, but that Macmillan would delay those e-book editions by seven months after hardcover release. Amazon's removal of Macmillan titles on Friday appears to be a direct reaction to that.

Later, Amazon.com announced that it was knuckling under to MacMillan, but that it was very unhappy about the forced price increase to its customers. Here's Amazon.com's statement:

Dear Customers:
Macmillan, one of the "big six" publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.
We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books. Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay $14.99 for a bestselling e-book. We don't believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.
Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!
Thank you for being a customer.

This is just one battle in what is going to be a long war over the price of ebooks.