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Amazon, Macmillan in public tussle over e-book prices

by Staff Writers
Washington (AFP) Feb 1, 2010
Kindle maker Amazon and US book publisher Macmillan are battling over electronic book prices in an unusually public spat with high stakes for the fledgling e-book industry.

Amazon temporarily pulled Macmillan titles -- both print and digital -- from its online bookstore over the weekend after the publisher told the Seattle-based online retail giant that it wanted to raise the prices charged for e-books.

Macmillan chief executive John Sargent fired back with a statement in which he said "Amazon and Macmillan both want a healthy and vibrant future for books" but "we clearly do not agree on how to get there."

Amazon has dominated the e-reader market since it came out with the first Kindle a little over two years ago, allowing it to dictate terms to publishers.

But the Kindle is now facing competition from Apple, which unveiled its iPad tablet computer last week, and US bookstore Barnes & Noble, which came out last year with an e-reader of its own, the Nook.

Sony also makes an e-reader, and a number of other companies, including South Korea's Samsung and Britain's Plastic Logic, have announced plans to make the increasingly popular devices.

Macmillan's Sargent said the publisher had informed Amazon it wanted to begin charging between 12.99 dollars and 14.99 dollars for e-book versions of most hardcover new releases and bestsellers.

Amazon currently charges 9.99 dollars for new releases and bestsellers in a move aimed at driving Kindle sales and spurring demand for digital books.

Amazon temporarily pulled Macmillan titles to protest the pricing plan from Macmillan, one of the six major US book publishers. But in a post on its Kindle discussion page, Amazon said it would eventually be forced to give in.

"We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles," Amazon said. "Ultimately, however, we will have to capitulate and accept Macmillan's terms."

Sargent said the publisher, whose units include Farrar, Straus and Giroux, Henry Holt, Scientific American, St. Martin's Press, Minotaur Books and others, will begin charging the higher prices for e-books from early March.

He said that in the future Macmillan would set the prices for e-books and retailers such as Amazon would take a 30 percent commission -- the same deal Apple has entered into with Macmillan and other major publishers.

In its statement, Amazon said "Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books.

"Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay 14.99 dollars for a bestselling e-book," Amazon said, adding that it did not expect other major publishers to follow Macmillan.

Paul Aiken, executive director of the Author's Guild, disagreed saying he expected other publishers would indeed follow Macmillan's lead.

"It's hard to imagine that there's a responsible publisher out there with adequate clout that won't be following suit," Aiken told AFP. "There are at least five other publishers who can get this deal from Amazon."

Aiken said the pricing model proposed by Macmillan will, for the time being, actually mean more money for Amazon and less for publishers.

Presently, Amazon pays a publisher half a print book's list price and then sells the digital version in the Kindle store for 9.99 dollars, resulting in a loss for Amazon on many hardcovers and new releases, which often cost over 20 dollars.

Taking into account a 30-percent commission to Amazon and e-book prices of between 12.99 dollars and 14.99 dollars, Macmillan's pricing plan would result in even less money for publishers in the short term, Aiken noted.

"But Sargent is definitely playing a long game here," he said. "Everyone knew that Amazon wasn't going to sell books at a loss forever.

"They've been willing to lose money on e-books to sell Kindles and to lock in a customer base," he said. "That game was going to end at some point. And when it ended was up to Amazon.

"Once Amazon decided that it had captured enough market share, that it had control of the industry then it could dictate terms to publishers," he said. "At some point we all knew the squeeze was coming."

Amazon shares lost 5.21 percent on Wall Street on Monday to close at 118.87 dollars.

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