Amazon vs Macmillan

On Friday evening many buyers have found that books by US publishing giant, Macmillan, have vanished from Amazon's listing. Macmillan has title's such as the entire Wheel of Time series and US bestseller, The Gathering Storm under its wing. What would make Amazon take on a publisher like Macmillan who no doubt provides the online retailer with large volumes of book sales?

The New York Times has quoted an industry insider saying that Macmillan wanted to raise the price of all its Kindle books from $10 to $15. The $10 price tag is considered by Amazon to be the sweet spot for books sales, the perfect balance between profit and encouraging more people to buy books. Macmillian and Amazon have both refused to comment when contacted about the publishing giant's removal from the online store. The publisher will be hit hard by the removal especially since it's not only ebooks that have been removed but also physical copies of their publications.

It's All About Control...

The big question is surely why would a major publisher cross swords with one of their largest (electronic) distribution channels and lose plenty of sales in the process? One of the big reasons is most likely the issue of control over content....

The music industry found themselves in a similar position not too long ago. Itunes was unleahed upon and with it came its dominance in the digital music distribution arena. Both Universal Music and NBC Universal pulled their content from Itunes in an attempt to leverage their power and have greater control over the prices of their content instead of a position where Itunes dictates prices and the form of DRM (if any). NBC and Universal lost the fight with numerous failed attempts at Itunes-like stores and gave up in the end.

Publishers and Amazon may be heading for a similar confrontation except this time Amazon, unlike with Itunes, may be facing a considerable threat from the Apple's iBook service for the new iPad and in my opinion Amazon cannot afford to lose a large publisher such as Macmillan.

At the moment Amazon has forced publishers to sell their books at $10 as well as placing considerable amounts of DRM on the eBooks preventing buyers from reading the books on any device other than the Kindle. Apple on the other hand has gone on record saying publishers will be allowed to choose how much they will charge for their publications but confusingly enough Steve Jobs, CEO of Apple, has also said that ebooks on Apple's service will cost the same as on Kindle.

Should Macmillan and other publishers either completely jump ship or support both Apple and Amazon we could expect greater competition within the ebook industry something that can only be great news for consumers but not so good news for Amazon who seems to have gotten very comfortable with their dominant position. The threat from Apple could drive prices down and hopefully force Amazon to rid their ebooks of DRM allowing them to easily lure potential customers to the Kindle store and knowing Apple they will come up with an easy to use, highly competitive alternative.

UPDATE.....

John Sargent, Ceo of Macmillan publishing, has confirmed that Amazon has removed their titles due to a price conflict and a change in business model. Sargent has outlined what he calls an "agency model" that will go into effect in early March.  With the agency model Macmillan will give retailers a 30% commission and sets the price for each book individually. Most adult books will be priced between $5.99 and $14.99 while new releases will "almost always" hit ebook stores the same date as the physical hardcover release and be priced between $12.99 and $14.99 not exactly ideal for Amazon. Macmillan hopes their new model will promote competition between retailers and devices.

Amazon has also given in to Macmillan's demands and opted to give the consumers the right to decide whether or not the new prices are the best thing to do. Amazon issued the following press 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.

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