Amazon, Macmillan Fight Over Ebook Prices; After Amazon Removes Macmillan Titles, It Caves To Higher Prices

from the too-bad dept

On Friday, there was a sudden realization that Amazon had removed books published by publishing giant Macmillan, apparently over a dispute concerning ebook pricing. Of course, Amazon wasn't just removing Macmillan ebooks, but the physical books as well. After a bit of back and forth over the weekend, Amazon caved in and accepted the way Macmillan wants to price books, which means that Macmillan sets the retail price, and Amazon gets a cut. Previously, Amazon had paid a wholesale price and then got to set the retail prices itself.

I had been under the impression that when manufacturers tell retailers what the end user price is, it's a form of price fixing, but apparently not...

Of course, what may seem odd about this is that it appears Macmillan will make less per ebook under this model. That's because with its old wholesale pricing, Amazon was actually losing money on every ebook sold. As the NY Times notes:
In the model that Amazon prefers, publishers typically collect $12.50 to $17.50 for new e-books. Under the new agency model, publishers will typically make $9 to $10.50 on new digital editions.
So why are publishers specifically trying to limit their own profits from ebooks? Because they're afraid of ebooks cannibalizing hardcover book sales, which is why they're also looking to delay ebook releases. In fact, in this case, Amazon was given the choice of either increasing the retail price for consumers on Macmillan ebooks, or getting them many months later. All in all, this looks like publishers hurting themselves, yet again, by going against what consumers want in a misguided effort to preserve the way things used to be. Yet, in an age when users are punishing authors and publishers who don't treat them right, this could backfire in a big way.

Filed Under: ebooks, pricing
Companies: amazon, macmillan


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  1. icon
    Mike Masnick (profile), 1 Feb 2010 @ 10:41pm

    Re: Things not spelled out?

    I'm trying to come to grasp w/ the argument between everyone and TAM. What TAM says makes sense to me. The publishers are creating a artificial scarcity in books w/ the hard back books. First edition books usually sell more than other editions do.

    That's not an artificial scarcity, but a real scarcity. The determination of whether or not something is scarce or not has to do with the marginal cost to produce another one. If it's zero, the good is not scarce. If it's above zero, it's a scarce product. So the book publishers are creating real, not artificial scarcity. TAM's discussion is trying to redefine well accepted terms in economics because he never wants to be proven wrong.

    Meaning before the digital age this was a possible type of raping the customer, but now the shoes on the other foot because we can make the scarce good infinite now?


    More or less. Once a scarce good has become infinite, then the supply shoots up, and thus price in a competitive market gets pushed way way down.

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