Amazon and Macmillan fence over e-book pricing

Dan Moren
2 February, 2010
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Less than a week has passed since Apple unveiled the iPad and its new e-book reading software, but it seems that the device is already disrupting the publishing market. This past weekend, publishing house Macmillan and online retailer Amazon sparred over the price of e-books.

The dispute began in behind-the-scenes conversations between the two companies, then spilled over into the public on Friday evening when Amazon removed the ability to buy all of Macmillan’s titles—both electronic and paper versions—from its site. (Third-party vendors who operate through Amazon still had the titles for sale).

Macmillan CEO John Sargent penned an open letter to Macmillan authors and illustrators that appeared at trade publication Publishers’ Marketplace on Saturday. Sargent laid out the company’s plans, which would have involved more variable pricing than the $US10 ($A11) point that Amazon had previously set, with newer books likely going for higher prices of $US13 ($A15) to $US15 ($A17). Amazon would operate under an agency model, taking a 30 percent commission.

Sargent called the 30 percent scheme “the standard split today for many digital media businesses,” so it’s not hard to see how Apple fits into the equation; it takes 30 percent of iPhone app sales from the App Store, and it’s widely thought to get the same from music and video sales through iTunes. Macmillan was one of five publishers with whom Apple has struck a deal to provide titles for its forthcoming iBookstore.

By Sunday evening, Amazon had put out a statement agreeing to Macmillan’s terms, though it still called the publisher’s prices “needlessly high” and said it didn’t expect other publishers to follow Macmillan’s example.

While Amazon had already revised its royalty plan for the Kindle earlier this month, including giving publishers the lion’s share of a 70/30 split, some publishers were still uncomfortable with certain caveats in the contract, including Amazon’s limitations on what titles could cost.

The terms of Apple’s deal with publishers has not yet been spelled out, but in a conversation with Wall Street Journal tech columnist Walt Mossberg before this weekend’s dust-up, Apple CEO Steve Jobs said that publishers were unhappy with Amazon. Jobs also confirmed that the prices for e-books at Amazon and the iBookstore would be the same when the latter launches; Macmillan’s new price range jibes with the prices seen onscreen during the iPad launch.

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