Kindle MatchBook: Amazon has the power

Kindle MatchBook: Amazon has the power

Amazon recently announced an upcoming program called Kindle MatchBook. Customers will be able to get an e-book copy of a p-book (paperbook) they previously purchased from Amazon (back to 1995) for a reduced price…sometimes for free.

When I wrote about it, I looked to anticipate some complaints that people would have.

I underestimated one…I should know better than to think I’ve plumbed the depths of people’s ability to complain on the internet. 😉

I said people would say this:

“Why isn’t XYZ book part of the program?”

[My response]: It’s going to take a while to get this going…there are agreements to make, and features (like X-Ray, which gives you information about the book) to add.

Well, I read right away in the Kindle forums that people thought this wouldn’t include books from the Big 5 (Big 6 at the time of a lot of these purchases, before the recent merger of Penguin and Random House) USA trade publishers.

After all, those publishers commonly don’t enable lending for their books, and they are the ones that sometimes (but diminishingly, I think) block text-to-speech access.

Let’s start out with the fact that we already know Big 5 books will be part of the deal.

Amazon shows some titles on the Kindle MatchBook page linked above.

They include several books from HarperCollins, one of the Big 5.

So, the basic premise of the complaint is invalid…but hey, that’s never stopped anybody from complaining before. 🙂

I, however, also jumped to a mistaken conclusion…which I will correct now.

When I wrote about “agreements being made”, I was picturing Amazon getting publishers to choose to put their books into this program.

You know what? Amazon doesn’t need their permission.

This is a rare case where Amazon really does have the power. Typically, when Amazon goes up against the publishers, they lose…text-to-speech, the Agency Model (the latter needed the Department of Justice to intervene).

That’s not going to happen here.

There are no additional uses covered under copyright being proposed here.

It’s just a sale.

With the end of the Agency Model (and maybe Amazon waited to announce this until they had new agreements with Penguin and Random House), Amazon can discount all of the Big 5’s books.

That’s all this is: discounts.

Let’s say that a given e-book normally has a digital list price of $9.99, and Amazon normally sells it for $7.99. Amazon probably paid the traditional publisher something like $5 in that case (it might be $7, but let’s go with the traditional 50%).

Amazon could choose to sell that book to somebody for $2.99, and take a $2.01 loss on that sale.

Would they do that?

Sure, if they thought it would inspire other sales. That’s part of what the publishers were so mad about when Amazon made many New York Times bestsellers $9.99. Amazon was often losing money on each sale, even though the publisher got the same amount for the book as if Amazon had sold it for full price.

Amazon was  driving  down consumer price perceptions about what a book is worth. The publishers thought customers might start thinking $25 for a hardback was too high if you could buy an e-book for $9.99…and that low price was possible if Amazon was willing to lose money on that sale.

As a former brick-and-mortar bookstore manager, I can tell you that you have to think in terms of populations of sales, not individual transactions. We could lose money on a TV Guide sale, if it meant we made money on other books the customer bought at the same time.

Consumers often, reasonably, only think of it as one sale at a time…what am I, as the customer, paying?

Amazon could do the same thing here. They could offer every single book in Kindle MatchBook right now, no deals needed.

However, Amazon doesn’t want to lose money…despite what some investors may think. 😉

Ideally, they can make these Kindle MatchBook offerings and still make money on them…in addition to cementing customer relations like few programs before.

How could they do that?

If the publishers take less money for Kindle MatchBook sales.

Basically, the publisher would agree that the price of the e-book is less if the customer bought the p-book from Amazon, and their wholesale payment would be based on that.

Amazon doesn’t need that price-lowering to do this, but it’s better for the e-tailer if they get it.

So, my guess is that what is happening is that Amazon will not put traditional publishers’ books into the program unless the publishers agree to lower payments.

It’s Amazon’s choice whether a book is available for Kindle MatchBook, not the publishers.

HarperCollins tends to be pretty consumer forward in their policies (leaving out the weird thing they did with e-books for public libraries). They didn’t block text-to-speech access, for example. I’m not surprised they would have agreed to this earlier than some others who tend to be more drag-foot about these kinds of innovations.

Why can’t the publishers simply do this themselves, and maybe charge $3.99 instead of $2.99?

Simple…they don’t know which customers bought their books in paper.

When you buy a book from a retailer (online or in a brick-and-mortar), the publisher isn’t told that you, as an individual, bought it.

They don’t know who you are…but Amazon does.

Nobody would want to just offer this discount to everybody, regardless of whether or not they bought the p-book. That’s just lowering the price across the board, and not using a special discount to influence future shopping behavior (which is what makes discounting work).

Amazon has the data needed to make this program work. Amazon can discount the books without the publishers’ permission…they could even discount an e-book that is from a different publisher than the p-book (say, an Open Road e-book of a p-book published by Random House). However, they would rather have the publisher give them a better wholesale price when they do it.

My guess is that publishers generally want to be in this program. I think customers will make buying decisions on whether or not they get this…I also think it will draw people away from Barnes & Noble and Kobo. Those two would have a tough time matching it, especially if they lost money. Remember, Amazon can make money on “diapers and windshield wipers” (as like to say) when you are their customer. B&N and Kobo just aren’t diversified enough in their offerings to use that strategy.

Yes, it’s possible that bundling costs publishers some money in the future. Will customers buy p-books as gifts, and that way get the e-books for themselves as a reduced price? Sure, that’s possible.

However, if it shifts that people don’t want to buy the books at all unless they get this bundle, being in the bundling business is almost necessary.

Looking at the future, I wouldn’t want to be the only Big 5 publisher not in this deal…authors might not want to go with me if I wasn’t part of it, customers might opt against my books even if they don’t know one publisher from another.

Well played, Amazon!  Leveraging your data to give you an advantage…and for once, having the power over the publishers.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

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9 Responses to “Kindle MatchBook: Amazon has the power”

  1. Phink Says:

    Hey Bufo, I wanted to inform you of something in case you did not know. There is a good chance you do know this but just in case here it is.

    I just watched a You Tube video where a guy paid $20 to get rid of the ads and after watching it for the first time ever I might want to pay the money when my new Paperwhite comes in. I like the ads but I do not like swiping the ad with my finger to get to my home page or book. As you know you wake the kindle paperwhite up, then swipe the screen and the ad disappears. I figured it would be the same in the non ads version except a picture there instead of an ad. Apparently, the swipe motion is no longer required if you have the ad free paperwhite. You simply touch the button that wakes it up (or I guess open a case if you have the right one), and immediately are taken where you last left off on the paperwhite. That to me is worth the one time fee of $20. I have a case that wakes it up but I still have to swipe. Just wanted to let you know since you want to know everything there is to know about the Kindle. Again, thanx for all you do. We really do appreciate it.

    • Bufo Calvin Says:

      Thanks for that info, Phink!

      It’s worth noting that the ad-supported versions have been the most popular, although of course, they are also lower priced.

      I like the ads, and I think many people do. Over time, they’ve evolved to become a lot more reader-friendly…more books, accessories, that sort of thing.

      Personally, I don’t mind seeing them…and it doesn’t seem to take along time for me to get to my book. Different for different people, though, I’m sure, and some will be happy to see what you have posted here.

      Thanks!

  2. John Says:

    This article from the web site The Motley Fool:

    Amazon’s “Kindle MatchBook” Will Accelerate E-Book Adoption,
    http://www.fool.com/investing/general/2013/09/03/how-amazons-kindle-matchbook-will-accelerate-the-e.aspx

    They provide a good perspective on how this helps Amazon.

    • Bufo Calvin Says:

      Thanks for writing, John!

      Motley Fool has generally seemed unduly negative to me on Amazon, but that’s me as a consumer, and they are addressing investors (where it hasn’t been as big a positive as a lot of people would have liked).

      Thanks for the heads-up!

      I think this is incredibly good for Amazon…and smart of them, for reasons I outlined in the post.

  3. Barbara Berry Says:

    I’ve read this comment before, but now, after five months of reading on a Paperwhite and seeing the ads, I find value in the ads. I’ve found info about books I’d like to read, a stylus I bought, etc. The comment above assumes I always want to go back to the place I left off when I was reading. While I often read only one book at a time, that is not always the case. At other times, I want to check on a new book that was just delivered, perhaps moving it to a collection. Sometimes, I’m just in the mood for a different novel. I also might want to check something I’ve uploaded to Kindle. In the final analysis, it’s a matter of taste. De gustibus. . . .

  4. Brian Says:

    Hurray for the consumer!

    • Bufo Calvin Says:

      Thanks for writing, Brian!

      Absolutely…I’m going to start using the line that I used in that post a lot, I think:

      “It’s a great time to be a reader!”

  5. Edward Boyhan Says:

    I was kind of tickled when I got the PR announcing Matchbook — it was only a few weeks ago that you had posted about bundling.

    I am particularly pleased that they are going all the way back (practically to Amazon’s beginning) to 1995, and that they will make it easy for customers to see what they’ve bought from Amazon back to then. Although this won’t help me much because even though I was doing business with Amazon even before 1995 almost all my purchases from them over the years have been for professional and technical books. I didn’t buy many mass market titles from them until I got my KDX — mostly I shopped in bookstores for mass market stuff. Still it will be interesting to see what if anything I bought from them (:grin).

    Related to your post here, many of these titles will predate eBooks — so my question is where will Amazon get the eBook master copy: from the publishers, or will Amazon just scan pBooks themselves?

    If the latter, then this could go part way to getting out of print backlist titles made available again. That is an advantage I hadn’t thought of. For me with over 10,000 pbooks on shelves in various locales, this could simplify the desire to reread something — no longer will I have to struggle to figure out where my pbook copy might be stashed away :-).

    • Bufo Calvin Says:

      Thanks for writing, Edward!

      Oh, I don’t think this will directly result in any new e-books. I would definitely not expect Amazon to scan the p-books, unless the publishers authorized them to do that…that’s really messy, rights-wise.

      On the other hand, that’s a potential new business for Amazon: having publishers authorize them to create e-book versions, with Amazon getting distribution rights. That would be huge! Amazon could certainly develop the technology, and those companies would get the sales. Hmm…that’s worth a post…thanks!

      It sounds like you are thinking that Amazon is saying this will be available for all books, and that’s not the case…it’s more like what they’ve done with music. There needs to be an e-book version at Amazon for the offer to be available to consumers.

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