Amazon Fights MacMillan eBook Price Hike

Recently, Amazon announced it will stop selling MacMillan books for their eReader; the Kindle, because MacMillan wants them to lift the price from $9.99 to $15.

In the Whatever blog, maintained and authored by John Scalzi, he (rants?) in line with my thinking that it is a free market and free markets should allow themselves to find the value with consumers.  Yet I disagree with his thinking (and most) that DRM is limiting and prevents a consumer from enjoying the value of an ebook. The same discussion can be held for music and DRM.  It is not only a probable “right of contractual entry” into this legacy market and partnerships, but I find it slightly Socialistic to expect a company, designed around revenue and profit, to not try and control distribution of product through DRM.  (I am talking about contractual line items and agreements, not the theory that a blackhat group in a basement with 200 connected Sony PS3’s can read any book they want.) Yes, I ‘get’ that there are people who actually like to buy books and hold them. and not use eReaders …

The market that Amazon is going after is not necessarily people who like physical books or expect the industry to remove DRM! It is for people who want access to books in a portable manner, and who are not going to be bothered by the technology limitations of physical books.  Personally, as I get older and watch generations of people get old and die, leaving stacks of their precious books behind, it still gives me goosebumps from a romantic point of view, but also makes me realize you can’t take it with you. Amazon is not going to go away in the near future. The DRM will not be lifted now, but COULD eventually release the DRM for a fee, just as Apple negotiated its way through DRM for music.

The entire Kindle product is based on a package deal with Amazon. It is an entire platform; a reader, free wireless service that is always available to buy more books and periodicals and give them more page views on their site.  Amazon has preset contracts with authors and publishing houses for digital distribution. They structured and monetized eBooks in a profitable way. They actually performed something very difficult in a market that was almost controlled and run by big publishing houses who stopped endless lines of authors from getting published. In fact it created a need in the market for Lulu.com . There are endless tales about first time authors and successful writers who were initially taken advantage of by publishers and agents. Apple iTunes, Lulu and Amazon’s ebook store offer a ‘better idea’ in a free market to help these thinkers and musicians to distribute their ideas without the monopolistic-like contracts that gave the recording industry and publishers HUNDREDS OF BILLIONS while giving very small returns to these writers in previous generations.

Pundits complain that platform developers like Amazon or Apple are interested in “controlling the Universe” and will not allow Publishers and iPhone Developers to distribute applications without a long approval process, or allow Adobe to run their flash software on their iPhone because Apple is ‘mean’ and ‘unrealistic’.

There has to be some trust on the part of the consumer that these platform creators are working in favor of a continued market. Amazon is working with older generation groups like MacMillan, and Apple with the RIAA. who are all used to forcing their old and cold hand on the market without care to the consumer or the future of the writer or the platform inventor. Apple threatened to walk away from music companies who wanted them to increase their per song fee 30%. NBC insisted on a 50% increase in fees for iTunes distributed TV shows after a short time, within the market that Apple created. Apple walked away from NBC.

Now, MacMillan is threatening to increase prices on Amazon. Amazon built this platform and market, and is willing to walk away to maintain their platform structure; development agreements, publishing agreements and keep their customers buying.

These follow up comments on the Whatever blog post are mostly without substance; based on opinions of those who have never run successful / profitable corporations, who have never been contractually responsible to partners, board members, share holders and consumers alike.  Building a platform that remains stable and reliable is a HUGE task, especially in a moving industry like technology.  It is not difficult for a company to fall off course as witnessed with Apple while Jobs was ousted from the company, nor expect success when he returned.

The Kindle is a vehicle for distribution.  Apple recognizes this and came up with something that is trying to compete.  Instead of insulting the name iPad, or the lack of Netbook features, it is probably a good idea to consider the market they are going after before claiming that it is so horrible.  The Kindle nor the iPad are not devices for geeks to code on, but an Internet toaster that has access to eBooks or iPhone apps that many have found entertaining and helpful.

Discussions about what Apple or Amazon should or should not do often forget about product market aspects…all of which are unrelated to the crying of those who criticize the product.  MacMillan is trying to force their hand on Amazon, and Amazon does not need to wreck their entire Kindle platform structure to help the gains of a falling publishing house.

I want to mention the comment from Stu Segal responding to the other comments, who said:

…I think this entire conversation misses the not-so-obvious crux of the matter. Who should (or who deserves) to make money from ebooks?
This is NOT the traditional publishing model, where the author basically required a publishing house to invest big bucks to layout and print a real book, to use it’s distribution system and its advertising and marketing dollars.
We ARE NOT cutting down trees or investing big bucks in producing ebooks. I believe authors have been bamboozled into signing away their ebook rights to publishers, when in fact, in todays world, there’s no reason that the authors themselves shouldn’t retain their ebook rights and sell ebook versions direct to consumers over the internet.
Had a model like this emerged 5 years ago we would see the party who has actually invested in an ebook (the author) being rewarded, and all the do-nothing-except-get-themselves-in-the-middlemen get what they deserve. But as the model emerged differently it would, unfortunately, take a revolution to get the publishers and distributors out of the position they now occupy, and feel they deserve.
Stop giving the publishers your erights. They’re being unjustly enriched.

…and comment from Joe who is trained in Economics:

…if you want to make the other argument, do enough research to actually show how publishers could make money at your suggested price point, and at what time your suggestion would become relevant.

Thanks for the great post, John Scalzi!

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One thought on “Amazon Fights MacMillan eBook Price Hike

  1. Frankly, I’m quite tired of being told that I’m a greedy bastard for wanting open books in a standardized format.

    I say in like-minded response: Those who support DRM are controlling freaks who are happy to lose money on sales *while* screwing over customers in order to feel a false sense of assurance that they can decide for their customers what devices will be used and how the book will be read.

    What is it to you what operating system or client I want to use? Why do you feel the need to tell me I have to use Adobe on Windows (replace whatever your stuff works with here)?

    The idea that this is even possible is wrong. I can understand how someone without technical knowledge would incorrectly believe DRM can be effective with high-definition movies, but the idea that it is effectively possible to DRM-protect books is nuts.

    All of this said, you’re ignoring the effect of copyright law as it regards this entire argument. If I sell corn, I can’t stop someone else from growing and selling corn and say that they should go market wheat instead (or I’ll sue). I can do that with a book. Your whole argument is based off the false premise that society should be quivering with delight every time an author deigns to release material which, in your mind, comes only from him and not the long history of older authors he’s copying ideas from.

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