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The battle over e-book prices hits authors and readers the worst

By Tim Conneally | Published February 1, 2010, 12:58 PM

Over the weekend, the e-book ecosystem shuddered a bit.

Major publisher Macmillan met with Amazon.com last Thursday to discuss terms of e-book distribution, and the two parties could not establish terms. Macmillan CEO John Sargent took an ad out in Saturday’s Publishers Lunch announcing that Amazon had pulled all of the publisher’s content, both printed and digital.

The publishing company wanted to introduce an “Agency Model,” where e-book retailers such as Amazon, Barnes & Noble, Sony, and Apple get a 30% commission on books sold and the publisher sets the price for each book.

“The price will be set the price for each book individually,” Sargent said. “Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E-books will almost always appear day-on-date with the physical edition. Pricing will be dynamic over time.”

Amazon felt those prices were “needlessly high,” but ultimately had no choice other than to concede to Macmillan’s terms, since the publisher has exclusive rights to sell and license its immense cluster of content.

The Kindle Team yesterday wrote, “We don’t believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.”

The emotional crux of the debate is the realization that when retailers and publishers battle, the authors and readers are the ones who suffer.

Sci-Fi and fantasy author Jay Lake, who is published by Macmillan, expressed outrage at Amazon over the weekend.

“If they’re going to choose to toss me overboard in a business dispute over which I have no influence, control or participation in, I can choose not to do business with them,” Lake wrote. “Even if Amazon rolls this back this morning, it doesn’t matter to me. They’ve proven they can’t be trusted to maintain even a neutral perspective on my interests as either a consumer or an author.”

But the real battle here is the same one that is killing the newspaper business, and which took a huge bite out of the music business: the established hard copy distribution methods versus non-standard digital distribution methods.

Scottish Sci-Fi author Charles Stross wrote, “From the point of view of the public, to whom they sell, Amazon is a bookstore. From the point of view of the publishers, from whom they buy, Amazon is a wholesaler. From the point of view of Jeff Bezos’ bank account, Amazon is the entire supply chain and should take that share of the cake that formerly went to both wholesalers and booksellers. They do this by buying wholesale and selling retail, taking up to a 70% discount from the publishers and selling for whatever they can get.

“Their stalking horse for this is the Kindle publishing platform;” Stross continued. “They’re trying to in-source the publisher by asserting contractual terms that mean the publisher isn’t merely selling them books wholesale, but is sublicencing the works to be republished via the Kindle publishing platform. Publishers sublicensing rights is SOP in the industry, but not normally handled this way — and it allows Amazon to grab another chunk of the supply chain if they get away with it, turning the traditional publishers into vestigial editing/marketing appendages.”

At this point, Amazon says hard copy books still outsell E-books by about 40%, so is the publishing industry already too late to try to regulate e-book pricing?

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