As reported earlier (and widely), Macmillan books are currently not available directly from Amazon.
There’s been a lot of speculation about what exactly is happening with this, although it’s been speculated that it might be connected to e-book terms.
Publisher’s Lunch is an industry publication, and they’ve published a statement from John Sargent:
It’s a fascinating article, assuming it is accurate. This is a key point:
“Amazon and Macmillan both want a healthy and vibrant future for books. We clearly do not agree on how to get there.”
Um, yep. There appears like there might be a slight divergence of opinion…you know, like that held by Dr. Seuss’ East and West-going Zax, or Frank Gorshin and that other guy on Star Trek.
John Sargent, by the way, is presumably John Turner Sargent, Senior, who is the CEO of Macmillan. I can’t verify that this letter is authentic, but let’s accept that as a postulate.
If it is, it’s extraordinary. Sargent reports meeting with Amazon on Thursday, and giving them a “proposal”. I have to say, it reads more like an ultimatum. Either switch over to our new “agency” model, or there will be a serious “windowing” (I’m guessing this is meant to be winnowing, although it may be an industry term with which I am unfamiliar) of Macmillan titles for Amazon. EDIT: Thanks to reader iPhone2Droid (see comments) and a bit of research, it appears that “windowing” is what I usually refer to as a “staggered release” strategy. That’s the practice of releasing e-books significantly after their hardback editions.
So, either change the way you business with us, or lose out on our titles getting a simultaneous release in hardback and e-book.
When I say “change the way”, we aren’t just talking about a different wholesale rate. They are wanting, apparently, for Amazon to stop acting as a traditional retailer, and start acting as their “agent”. As an agent, thirty percent to Amazon would be generous…as a retailer, fifty percent would be more expected.
So, Amazon (according to the article), stopped direct sales of Macmillan books.
That’s not particularly good for anybody, of course, but the way this reads is that Macmillan was threatening Amazon, and Amazon made a pre-emptive strike.
The article isn’t exactly clear to me: it says Amazon would make more money under the agency plan, and Macmillan would make less. I’m guessing they might be saying that Amazon would make more money because they would force Amazon to sell the books at higher prices.
The article includes this:
“At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99.”
Let’s look at the math.
Amazon currently pays Macmillan fifty percent (presumably) of the digital list price. Let’s say that is $25. Amazon would pay $12.50 per download. That doesn’t mean Amazon makes $12.50 in direct money…they may set the sale price (which is the part they control) at $9.99.
Under the new plan, Macmillan sets the price at $14.99 for the same book (for example). Amazon would get thirty percent of that…it would be about $4.50 per download.
Yes, Amazon makes $4.50 versus losing a couple of bucks on a $9.99. So, Mr. Sargent’s set up on the money for Amazon seems to be true. Macmillan does make less under the new plan. They get $12.50 under the old plan (if the DLP is $25 at fifty percent) and $10.50 under the new plan.
However, Macmillan gets to set the sales price. That’s not the traditional method. Macmillan can standardize the price between Amazon and, oh, iBooks for example.
I think Amazon is right to not want this…why blow the competitive advantage? Under the current set-up, it looks like the Kindle store (which should be available on the iPad), would have books for significantly lower than the iBooks store.
Steve Jobs supposedly said that iBooks and the Kindle store would not have different prices. Check, for example, this article.
Jobs would be right if the choice is have the same prices or have no books.
I think competition is good. I suspect that the Department of Justice might agree with me, although I don’t claim to know the antitrust laws well enough.
Do I hate that the Macmillan books are out of the Amazon store? Yes. Options are good. There are good books from Macmillan. Importantly to me, Macmillan was not blocking text-to-speech, I believe.
However, I would hate it more if publishers set sale prices, and standardized them at all the stores. Yes, I’m a former book retailer (in a bookstore), so I may be prejudiced to side with the retailer on this.
What happens if this keeps going? Do more publishers get pulled out of the store? Or, do authors say, “I don’t want to be part of this game…I want people to read my books.” That’s the missing part in the equation for Macmillan, I think. Will Amazon still need them a year from now? Maybe, maybe…but it’s a big chance to take.
A lot of authors really like their publishers…but they may like having a clearcut way to reach readers more.
Very, very interesting stuff!
This post by Bufo Calvin originally appeared in the I Love My Kindle blog