Flash! Claimed inside story on the missing Macmillans

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:

Publishers Lunch article

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

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7 Responses to “Flash! Claimed inside story on the missing Macmillans”

  1. Shastastan Says:

    I’m really sorry to see and hear this. I’m all for the first amendment and although I recognize that this is not a “constitutional” issue, I hate to see the public being deprived of their books. I say just put all the books on all ebook retailer sites. If those sites want to discount below the hard book prices, that’s fine if they are willing to eat any losses below what the publishers want. Eventually the publishers will wake up and realize that some sales are better than no sales. The publishers will go to where the ebook retailers will pay the most. They will try to take Amazon’s selling strength with them. Yep, there are some bumps on the road ahead. In the meantime, it will be the readers who suffer. There will be lost sales to both the publishers and Amazon because some of us, at least, will try to buy a particular Kindle book, and it won’t be available. We will go on to something else and many of us will just forget about that we were ever interested in that particular book. As Bufo points out, there can be quite a publisher ownership chain. I think that both sides are acting a little petty and perhaps should start considering more mature behavior. The stakes are too large to do otherwise….just my 4 cents worth.

  2. Richard Askenase Says:

    Sargent’s statement is completely self-justifying anti-consumer baloney! He wants to raise prices (about 50%) in this terrible economy. He wants to get in bed with Steve Jobs (his saviour)!! Look what Jobs did to the music industry! How can Sargent be that stupid? Speak about getting in bed with the devil.

    It is simply shocking how dumb and out of touch these publishing dinosurs are. BUT, this is a fight that MUST be won by Amazon. We can NOT let the publishers set these ridiculous prices for ebooks. Look, ebooks are here to stay and the paper books will, over the next decade, probably end up at about 30% of the adult book market with ebooks 70%. It is going to happen. Same with newspapers.

    But, we must fight these publishers NOW, keep the ebook prices down to a reasonable amount,which, I believe, the $9.99 price is for new fiction. (Non-fiction research books like history and biography are NOT part of this equation.) The publishers are NOT to be believed that that price is non-sustainable. (Maybe it is to keep their exorbitant salaries and skyscrapers in Manhattan, but not in the real world.) AND, they must give an appropriate royalty share to their authors, which is NOT discussed in Sargent’e letter. So this must be fought.

    I smell a boycott- big time. Go Amazon!!

  3. iPhone2Droid Says:

    I believe “windowing” is an industry term– that is, the practice of staggering releases of hardback books vs Kindle ebooks. In other words, this century’s version of The New Coke.

    Read: give your customers what they do NOT want, watch it blow up in your face, then try to make nice later. By that time, your customers will likely have fallen in love with new and smaller publishers, or independent authors, who elected to embrace ebooks and their buyers, as opposed to bending over backwards to antagonize them/us.

  4. Dianne Says:

    Bufo, it looks to me as though the Publishers Lunch article will drop off the http://www.publishersmarketplace.com/lunch/free/ URL in a few days.

    The PermaLink is http://www.publishersmarketplace.com/lunch/macmillan_30jan10.html

    • bufocalvin Says:

      Dianne, thanks!

      Yes, I think it will drop off…if the PermaLink still works (and it won’t if they remove the article, I believe), I’ll switch it to that in the article…thanks!

  5. Round up #155: what is the future of coffee table books, B&N shuns S&S | I Love My Kindle Says:

    […] did something similar with Macmillan more than three years ago. I went back and looked: I wasn’t as negative about that as […]

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