Amazon Reluctantly Agrees to Higher eBook Pricing

[sjo]

This is patently false. I see this posted frequently around here and it is not accurate. Apple makes most of their money from hardware, but by all reports the iTunes Store makes hundreds of million dollars per year. Apple does not disclose figures from the iTunes Store.

This source is from 2008: http://www.wired.com/listening_post/2008/03/apple-apparentl/

I'd bet Apple makes close to a billion per year from the iTunes Store.

What you said is untrue. Apple announced just last week that itunes store is not making any profit. If it did in 2007, then the addition of App store has destroyed the profit of the itunes store.

http://seekingalpha.com/article/184...end-12-26-09-earnings-call-transcript?page=-1

 

[MacBram]

Why is Amazon being painted as bad cop? They are trying to keep prices low for their customers (at the expense of publishers profits).

If this was the music or movie industry, everyone would be a lot more upset.

For whom? for poor little Amazon? They are being painted as the "bad cop" here because they are acting like the Walmart of the book industry. I never thought I would say that, but it sure seems like that is the case.

Apparently, they are taking a loss on each book. Must be because they are so altruistic towards their customers? A bit like Walmart did with DVDs I guess. And there was a bit of criticism about that too -- of course a lot of Walmart customers were happy about it, but it seems to lead to an entitlement mentality in which you should be able get anything for next to nothing, damn the consequences.

I think there would be a similar reaction if this was movies. I see the same movies on iTunes and Amazon for 14.99. If Apple or Amazon decided they were going to make all new movies 9.99 no matter what, I think there would be some issues there too.

I think the music industry was a little different. The iTunes store got people comfortable with paying something for downloaded music as opposed to nothing, and Apple wasn't artificially lowering the price. Now the prices have eventually gone up to 1.29. Apple also needed to establish that people should be able to pick and choose tracks and not be required to purchase a whole album. Imagine if you had to purchase all of an author's work when you wanted just one book.

 

[kjanice2009]

ONE DOLLAR for each book, CD, DVD or Blu-ray is the fair price for something that does not exist physically, that can be copied at no cost and that can be downloaded from Internet using P2P networks, so distribution is at no cost for the owners. That will boost sales thousands of times worldwide and stop piracy overnight!!! BUT THEY ARE TOO GREEDY to acknowledge. A shame for them, because Internet is here to stay.

The private will always be considered as the most improtant problem in Publishing industry.

 

[SandynJosh]

Always Shoot Up, never down

The problem is that the iPad is inferior to the Kindle in direct sunlight

So in my opinion, ...the iPad price SHOULD be lower......Lower quality and all

Oh yes, of course, grayscale always trumps full color in customer preference, just as text only is better then interactive graphics. You probably consider a steroscope a better choice over a color magazine. You know what, I don't even read printed text in full sunlight due to the glare off of the white paper.

 

[soLoredd]

eBooks suck. Look, I'm all for digital distro and "ease of use" (really, how hard is it to turn a page??) but eBooks are going to ruin everything associated with real books. What do you do with book clubs? One thing that makes book clubs great is sharing of books you've read. How do you do that with eBooks? My family loves to share books.

I think a great alternative is to bundle the digital version with a book in the store. The impact can be far better than digital copies with movies.

 

[LagunaSol]

In the same way that BMW has a monopoly on the BMW X5, Coke has a monopoly on Coke Zero, and I have a monopoly on my fingerprints.

Monopoly.

Monopoly.

Mon. O. Po. Ly.

Eh. The meaning's gone.

Heh, you often see forum commenters griping that Apple has a monopoly on Macs or on iPods or on OS X. Well, duh.

And for Amazon to make a public statement that Macmillan has a monopoly on their own titles...well, duh. Amazon's brand just lost a few dozen IQ points with that humdinger.

Personally, I'll have a hard time paying $15 for an eBook from Amazon, Apple or anyone else unless it's not just plain text - say an architecture book with lots of high-res photos and perhaps some multimedia thrown in - and even then I'll hesitate. All due respect to authors, but there's certainly more cumulative blood, sweat and tears put into a music album recording or a feature film (also sold digitally). How can an eBook justify an equal or higher price?

 

[soLoredd]

Oh yes, of course, grayscale always trumps full color in customer preference, just as text only is better then interactive graphics. You probably consider a steroscope a better choice over a color magazine. You know what, I don't even read printed text in full sunlight due to the glare off of the white paper.

You are only a troll. If there is a way to "ignore" your posts on this site, I'll push the button and do it.

Books are rarely published on white paper. Especially paper backs. The off-white color is fine for sunlight reading. You all are nitpicking. Folks have been reading books for centuries on all types of paper. Now all of a sudden it's an issue? Give me a break.

 

[Peace]

http://www.usatoday.com/marketing/media_kit/usat/audience_circulation.html

Circulation :
USA TODAY remains number one in total daily print circulation in the United States. According to the Audit Bureau of Circulations’ FAS-FAX report, USA TODAY’s daily print circulation was 1,891,604 for the period ending September 30, 2009.

This is the first "newspaper" that went almost full color.

Full color interactive "newspapers" or "magazines" will sell.

Terry McDonell, editor, Sports Illustrated Group
"What Jobs showed was so close to what we imagined. That made me feel smart. These empowered engineers have empowered publishers. Now, it’s not about turning on the firehose, it’s about creating something that has value."

Here's their first concept video that happens to look very similar to the iPad's main GUI.

http://www.youtube.com/watch?v=ntyXvLnxyXk

 

[SandynJosh]

Whatever happened to the producer of a product deciding what to charge?

That began to change in the late 1970s. Major merchandisers and big box stores began to dictate the prices they were going to pay (or else).

And the market deciding what it will bear?

While you had this sentence following your first sentence, it describes a totally different factor. "The market" in this case is the end user. What price an end user will pay depends on a group of factors, but available money or credit is the deciding factor.

If money or credit is tight, they will buy used books or wait for the paperback version, or just not buy anything. But a buyer that has the $500 to buy an eReader is not really that concerned about end costs.

 

[Gen]

Here's their first concept video that happens to look very similar to the iPad's main GUI.

http://www.youtube.com/watch?v=ntyXvLnxyXk

That's so cool. Once those kinds of interactive magazines become popular, tablets will sell nicely.
Imagine all the paper and distribution costs magazine companies can save by just distributing digital content.

 

[LagunaSol]

But a buyer that has the $500 to buy an eReader is not really that concerned about end costs.

Or perhaps the buyer that just spent $500 on an eReader is even more concerned about end costs.

 

[tadunne]

Digital copies should never be sold at similar prices to physical media (this applies to games and movies too).

1) A DRM'd digital copy has no resell value to the purchaser
2) There's near zero manufacturing cost
3) There is less risk for the publisher as no physical stock needs to be managed (i.e. paying up front making a book that might not sell)
4) Use the recommended retail price is bad, because most only companies sell physical media at less than RRP

The publishers need to understand that selling something that costs near zero to make at aggressive prices makes them more profit in the long run?

It does not cost them any more manufacturing costs to sell 1m or 10 copies. Which is different to physical media.

 

[eron]

The problem is that the iPad is inferior to the Kindle in direct sunlight

So in my opinion, ...the iPad price SHOULD be lower......Lower quality and all

What.. The Kindle is inferior to the iPad in the dark.

So, imo, the iPad price SHOULD be higher. Higher quality and all.

 

[little alien]

Amazon are the bad cop

ok, good on Macmillan's they are standing up to a company that bullies publishers into pricing, they start off asking the publishers for discount on the wholesale price and keep increasing it until there is zero profit for the publisher, whilst amazon still take their FULL share.

they are not the only ones, any large scale book retailer or supermarket chain are the same. and unless the publishers stand up to them at the beginning you will find it unsustainable for the publishers to keep producing the books in first place.

its all very nice paying very little for a product we all do it, and $12 really isnt that bad when you compare it to a football ticket.

publishers still have to pay wages for content creation from artwork to the written word,

and as with anything in dig format, computers cost money servers cost money along with the associated cost to account systems payment charges from banks oh and DRM costs.

 

[inkswamp]

Re: all the talk about Apple blocking the Kindle app...

Well, that's the way the game is played. There wouldn't be anything illegal about Apple blocking Amazon's app because Apple doesn't have a majority share of the ebook market nor are Apple's products the only way to buy and read ebooks, so there's no way to argue that they are a monopoly and behaving in an anticompetitive manner. Frankly, were I in Apple's position, I wouldn't hesitate to boot competitors off my platform. If those competitors don't like it, they can always make their own platform and hope the consumers vote against my way of doing things with their wallets.

 

[Smallville]

I never bought hardback books. No reason to when you can pay half the price for the paperback, and it's still the same book.

Now I have a Kindle ...

So, if variable pricing means that a "hardback" ebook is $14.99 and the "paperback" ebook release, say six months later, is $9.99, I'm still going to wait for the "paperback."

Maybe I'm cheap, but I'm patient enough to wait instead of paying a premium for the exact same item.

 

[peterdevries]

Maybe I'm cheap, but I'm patient enough to wait instead of paying a premium for the exact same item.

Nothing cheap about it.
A good book is still a good book 6 months later, a bad book will still be a bad book 6 months later..
Same with DVD movies: a Scorsese is still a Scorsese 6 months later, an Emmerich will still be an Emmerich 6 months later..

 

[peterdevries]

You know... I was thinking...

Since Apple pretty much gets a *bleep*load of cash from iPhone apps... Couldn't they sell the iPod (and soon the iPad) at VERY low prices? I mean, it would get a ton of people to say "Holy *****! The iPad is $250 and iPod Touch is $99!"

I'm just thinking it's a good strategy...

No, because there is now way to ensure that those people with a cheap iPad would actually buy the apps. The jailbraking community especially would salivate at the prospect..

 

[je_wallace]

Who's the monopoly

Amazon's upset because their own eBook monopoly has (or is quickly) going away with Apple moving into this space.

Saying that Macmillan has a monopoly over its own product is like saying Guinness's has a monopoly over their own beers....well, yeah. But the market determines the price in the end.

 

[gnasher729]

PLUS Apple will be putting their DRM on books purchased from them, so even if the base file format is a standard, don't expect to read it anywhere else.

What makes you think that? What interest would Apple have in putting DRM on ebooks? Apple wants to sell millions and millions of iPads starting at $499. And they sell more iPads if they are easier to use, and that means no DRM.

Exactly..... Apple promised publishers a better price in order to butt into the business. Thanks Apple!

One would think that competition will lower the price for consumers but in this case I guess it won't

The iPad is competition for Amazon. However, the "customer" in this case are the book publishers. Amazon had in practice a monopoly for the sale of eBooks, which lead to horrible prices for their customers using their eBook publishing service - the customers being the book publishers. Amazon offered them a deal where Amazon sets the price, and Amazon takes a cut of 70%. That means _you_ got a book for $10, Amazon gets $7, and the book publisher gets $3. The publishers had to take it because there was no other deal.

Now you see the effect of _breaking_ a monopoly: Even the _threat_ of the iPad forced Amazon to change the deal to 30% for Amazon plus a bandwidth charge payable by the publishers. Apple's deal for the publisher is better: Apple allows the publisher to set the price, and the publisher gets 70% with no deductions. So the publisher can now sell the same book for $14.99 and get $10.50 out of the deal instead of $3. And that $10.50 is what the author gets his money from. And without authors being paid, there will be no new books. So you can see how bad monopolies are.

You know... I was thinking...

Since Apple pretty much gets a *bleep*load of cash from iPhone apps... Couldn't they sell the iPod (and soon the iPad) at VERY low prices? I mean, it would get a ton of people to say "Holy *****! The iPad is $250 and iPod Touch is $99!"

I'm just thinking it's a good strategy...

$250 instead of $499 is $249 less profit (well, there will be no profit. It would be a massive loss). Apple would have to make $249 profit from books or apps. Apple gets 30% of the revenue. $249 is 30% of $830. So if that whole 30% were profit (which it is not; the credit card companies make more profit from each sale than Apple), and _every single iPad customer_ bought $830 worth of applications, which they won't, that would be just the break even point.

Are you on drugs? Can I have what you're on?

For me, eBooks don't take up shelf space (even a tiny 60 GB hard drive can hold 30,000 books), they don't take up weight in my suitcase (see above) and Spotlight can index them. That makes them much more valuable to me than "real" books.

 

[Azathoth]

Just like the music industry - where huge amounts are spent promoting a small niche of radio-friendly BS (Taylor Swift, Beyonce et al) and providing them with up-front money for hookers and blow (so to speak). In the end most of the musicians get shafted with a measily 1usd / CD royalty and all the time the record industry is claiming they are vital to artists.

I buy CDs and books because I like to own things that I deem are 'worth it'. Ebooks *should* be cheaper than normal books - they have significantly lower production & distribution costs.

Apple doesn't care about the consumer - many people buy e-readers and only afterwards realise the extortionate pricing and DRM hell (e.g. my well-educated parents, with a Sony reader, turns out the Dutch publishers of E-books charge 30usd for reading books)

 

[mrklaw]

McMillan,like other publishers adopted the price structure of Amazon because at that time Amazon was the major seller of eBooks. Now Apple has told publishers they will sell books for what the publishers want to sell them at and take a 30% cut.

This scared Amazon so they got ticked off at McMillan and pulled their titles.

McMillan called their bluff.

Amazon caved.

end of story.

and this is good why?

Previously, there would have been a few major e-tailers of ebooks. Amazon, now Apple, local stores like Waterstones in the UK. Setting their own retail prices based on publisher wholesale prices. Allowing for competition via promotions/margin cutting by the retailer.

Now, it doesn't matter where you get the book, they'll all cost the same - the price being set by the publisher.

I have no idea why that is a good idea. It doesn't match how the physical goods are sold.

 

[mrklaw]

not making excuses for Amazon's higher cut previously, but there is a cost associated in the free wireless access via whispernet. Whereas for the ipad you the consumer pay for the data access so they don't need to cover that cost in their cut.

Effectively even with the same revenue split, Apple will now make more money on each sale than Amazon will.

 

[BigHonkingDeal]

The bottom line is that I as a customer will pay more for Ebooks now that Apple entered the business....

The iPad is competition for Amazon. However, the "customer" in this case are the book publishers. Amazon had in practice a monopoly for the sale of eBooks, which lead to horrible prices for their customers using their eBook publishing service.

 

[Shuttleworth]

Many prolific readers used to imagine having a huge library in their own in a dream home. Now they can imagine having all their books accessible via an easily carried portable device and a nice comfortable chair. This could save a lot of marriages and have a big impact on home design and furniture sales. The size of the home office has been going down as people embrace digital records and portable computers, now the size of living room/office/kitchen/bedrooms may also be downsized as the content goes digital and are no longer cluttered with bookcases and shelving.

This is very true, my AppleTV has allowed me to box up the DVD's and chuck them in the attic. We bought new lounge furniture, but saved a fortune not having to buy DVD storage units as well. The Apple TV cost considerably less than matching DVD cabinets.