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Author Topic: Amazon no longer carrying Tor books
fugu13
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I'm pretty certain Amazon is selling Kindles to offset their losses. What's more, I'm pretty certain that sales of other books to people who buy a Kindle because of the availability of reasonably priced bestsellers offset their losses, which is entirely sustainable, even if the price drops.

The reason for this is, I know Amazon is a company that is extremely data-driven. They're paying attention to what people actually do in response to prices, not wishful thinking.

What, you think all those companies selling the latest Harry Potter book at a loss were delusional?

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BryanP
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The thing I don't understand about all this is, how is $9.99 for an ebook too little? There's no printing, binding or shipping involved. I mean I don't know what the profit margin is with a traditional hardcover, but after all the expenses and the cut that goes to the retailer, is it more than $7? Cause under Amazon's preferred method, the publisher gets $7 and Amazon gets $3. Sounds pretty good to me, it's not like it costs a lot of money to ship an ebook to Amazon. So unless the profit made by the publisher on a regular book is greater than $7, I don't see why they'd complain about the price point. You concerned about devaluing books? Well guess what, an ebook just isn't as valuable. I don't see why I would pay $14.99 for an ebook when I can get the physical edition for, in the case of many popular books, only a couple of dollars more. Is Amazon being a bully about it? Maybe, but they've also found a business model that seems to be making them and publishers a lot of money.

It's sort of like the music industry complaining about Apple setting the price of a song at $0.99 while almost single-handedly getting people to actually pay for music, rather than steal it. But it's too little! No, it's actually just right and at this point you're lucky you're selling anything at all.

By the way, what is the relationship between Tor and Macmillan?

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TomDavidson
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quote:
The thing I don't understand about all this is, how is $9.99 for an ebook too little? There's no printing, binding or shipping involved.
For certain books that aren't expected to have legs, the printing is a small fraction of the development cost.
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NobleHunter
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The profit margins of the publishing industry are tiny. Right now, the costs of actually making a book are being borne by the print editions. So the revenue that pays editors, authors, agents, etc. comes from print books, often hardcover editions.

I think the publishers are concerned about what will happen when the market for print books collapses, which it will. If fiat pricing has made $10 the ceiling for book prices then they may not have the revenue to cover costs. Especially since it has been demonstrated that people will pay more for books. Baen offers ARCs at $15, which people are apparently buying.

Why should publishers accept unnecessarily low prices? Especially since all they're asking for is the ability to be flexible in the pricing, not that all books must sell for $15.

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TomDavidson
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quote:
Why should publishers accept unnecessarily low prices? Especially since all they're asking for is the ability to be flexible in the pricing...
Well, not necessarily. What they're asking for is for other people to be less flexible in the pricing.
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NobleHunter
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How so? Macmillan was asking for a greater range in prices of ebooks, doesn't that make them more flexible than Amazon, who was asking for a smaller range?
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TomDavidson
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I guess it depends which attribute you're actually testing for flexibility. Macmillian wants to restrict the ability of vendors to price books; Macmillian, however, would prefer that their books be priced with more variation than one prominent vendor would like. I don't know which is more flexible from your POV. [Smile]
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NobleHunter
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I'm inclined to think the producers should set the prices of the products. Since authors can't, (yet anyways, regardless of how this squabble turns out, traditional publishing is doomed) I think publishers are the next logical step in the chain.
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Hobbes
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quote:
I'm inclined to think the producers should set the prices of the products.
May I ask why? It doesn't really make a lot of sense to me to both sell a product to a middle man and demand they resell at a specific price. Why would it better to have the publisher retain control of the product after first sale?

Hobbes [Smile]

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NobleHunter
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Because without that control, the retailer can push for lower prices, perhaps beyond what the producer can afford. I'm pretty sure WalMart has done this, for an extreme example.

Also, the value of an object depends not only on the costs of creation, but also the price at which is it offered. If all books are offered at a price that does not cover costs, then their value may fall below the costs of creation. That's very bad for producers.

ETA: the value also depends on what people think they should be paying for it, which often has no connects to the cost of creating it. Cellphones are a perfect example of this.

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Orincoro
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quote:
Originally posted by NobleHunter:

The industry believes that discounting those few titles is to their benefit. Discounting all titles would be problematic for all aspects of the industry. Amazon is banking on selling Kindles to offset their losses now, and hoping the costs of production will come down as ebooks become the main distribution method.

Nobody would expect them not to do this. This is the way new platforms *have* to be launched. Nobody can expect to produce hardware or sell in a new market at anything but a loss for some time. That's why every gaming platform is sold at a loss, often for several years, as was the ipod at the beginning, as are most new product lines that bank on developing an emerging market. The idea is not to make a billion dollars this year, but to set yourself in a position where it will be possible to make 10 billion in ten years. You can sell everything at a loss at the beginning as long as you can bankroll the project for a number of years. Unfortunately, Amazon runs into the small problem of authors and publishers who are not themselves huge corporations, and who don't fit well into that long term plan- the writers have to make money *now*. The same money they've already been making, because they're the ones who gave up decades of their lives dedicating themselves to their craft, and may just now be seeing the light of day.
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Mucus
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quote:
Originally posted by Orincoro:
... This is the way new platforms *have* to be launched. Nobody can expect to produce hardware or sell in a new market at anything but a loss for some time. That's why every gaming platform is sold at a loss, often for several years ...

Here's somebody [Wink]

quote:
Nintendo President Satoru Iwata promised from the very beginning that the Wii console would generate a profit on day one. While Nintendo has not disclosed exactly how much it costs them to make the Wii console, a new report in the Financial Times cites Nikko Citigroup analyst Soichiro Fukuda who estimates that Nintendo's gross profit per console is 1,500 yen in Japan, 5,600 yen in the U.S. and 8,500 yen in Europe. That equates to about $13, $49 and $74, respectively.
link
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Sean Monahan
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quote:
Originally posted by NobleHunter:
I think the publishers are concerned about what will happen when the market for print books collapses, which it will.

I'm skeptical. The current publishing structure may collapse, but there will always be a market for ink and paper books.
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fugu13
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quote:
Because without that control, the retailer can push for lower prices, perhaps beyond what the producer can afford. I'm pretty sure WalMart has done this, for an extreme example.
Quite a strange complaint, given Amazon manifestly hasn't been doing this. They've been paying the stated prices. Also a strange complaint, because I don't see how the publisher setting the price would prevent Amazon, as a large retailer, exerting pressure to make the price lower.

Publishers want higher prices because their business models will be less and less profitable as time goes on. What they neglect to understand is two-fold:

1) trying to set price norms like this will not change that, and will quite possibly make profits decline faster.

2) the right answer is to change the business model more fundamentally, not try to fortify the existing one. This has played out in numerous other industries, repeatedly. Check out the history of disk drive manufacturing, sometime.

Heck, if authors do manage to make non-bundled ebook rights a contract norm (as advocated, somewhat strangely, by one of the big defenders of the publishers in this thread), then publishers will just have the rug taken out from under them entirely. Why on earth would an author let their first publishing house keep the ebook rights when that publisher is requiring a price point that will drastically reduce that titles' ebook sales?

This reminds me, I really should get around to starting that small publishing company I've planned out in the past.

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NobleHunter
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If people are willing to pay $15 for an ebook, and under some circumstances they are, setting the price ceiling below that could quite easily make profits decline faster.

Many readers are willing to pay a premium to get the books they want immediately. That's why hardcover editions have persisted, people are willing to pay more to get the book as soon as they can, even if they know that waiting will get them a better deal.

Of course the business model will need to change, but I prefer that change to be controlled by the producers, or those closest to them, rather than the retailer.

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TomDavidson
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quote:
I prefer that change to be controlled by the producers, or those closest to them, rather than the retailer.
Why? The retailer has the closest relationship to the buyer, who is the party who should have the most power. The smart thing for a producer to do, in a world without distribution inefficiencies (i.e. the Internet), is to become a retailer -- for precisely this reason.
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rivka
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quote:
Originally posted by NobleHunter:
Many readers are willing to pay a premium to get the books they want immediately. That's why hardcover editions have persisted, people are willing to pay more to get the book as soon as they can, even if they know that waiting will get them a better deal.

That's only part of it. Some readers prefer hardcovers, and don't consider MMPs a "better deal" at all.
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Scott R
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quote:
if authors do manage to make non-bundled ebook rights a contract norm (as advocated, somewhat strangely, by one of the big defenders of the publishers in this thread
Er...no. Assuming you're talking about me, I'm pro-author, and I'm not a fan of Amazon. But where I've had questions about your analysis (and I still think you're wrong about AAR not understanding the issues), I've raised them.

That doesn't mean I'm pro-publisher. I said from the outset that the publishing industry is a bloated, flatulent dinosaur. I've implied it is trying to maintain the status quo in a way that is not healthy.

I think that Amazon is close to becoming THE E-publisher; and I think they will shortly make a convincing case for selling e-rights separately, or at least change the way that they're sold so that e-rights are more like foreign rights: a bigger slice of royalties for the author. As one individual on the previous page noted, Amazon is offering 70% royalties to authors for their e-books.

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Scott R
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quote:
The smart thing for a producer to do, in a world without distribution inefficiencies (i.e. the Internet), is to become a retailer -- for precisely this reason.
I don't disagree, but Ingram would pitch a fit.

And the publishers don't have the kind of money it would take to invest in this effort.

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fugu13
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quote:
If people are willing to pay $15 for an ebook, and under some circumstances they are, setting the price ceiling below that could quite easily make profits decline faster.
Amazon has no problem paying publishers the desired amount > $9.99, and has been. So publishers aren't taking the hit, amazon is, and they have the data to suggest it is worth it.

quote:
Of course the business model will need to change, but I prefer that change to be controlled by the producers, or those closest to them, rather than the retailer.
The idea that the change can be controlled by the producer is fallacious. Trying to act like they control it will only lead to a greater failure to adapt. Find and read a copy of The Innovator's Dilemma and you'll understand this better.

Of course, the change isn't going to be "controlled" by amazon, either. They've noticed people have limits on what they'll pay for ebooks, but that if you can get them buying ebooks at that price (even at a loss), they'll buy enough more to make up for it. That is reacting to a change that is already in progress, not controlling it.

[ February 01, 2010, 09:01 PM: Message edited by: fugu13 ]

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NobleHunter
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What I meant is that the process of adaptation could be controlled by the producers, though perhaps the suggested book will rule that out to.

And if ebooks are sold at a loss, how will buying more ebooks help? I seriously doubt sales of books from the backlist would cover those losses. Amazon is really trying to increase its market share so that when the shift to ebooks is complete they'll be in a position to set the prices to where ever they want.

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Scott R
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From what I understand from several others, that's exactly what seems to be motivating Amazon-- the idea that they'll take the losses now in order to have full control over the distribution channels later.

I'm not comfortable with that idea. It smacks of the problems of comics distributors (Diamond)-- a system in which the distributor all but dictates which comics are successful.

Then again, Macmillian was willing to go along with Amazon's monopoly, as long as they were willing to let the idea of flex pricing play.

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fugu13
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Most ebooks are not sold at a loss. The very newest books are, but most are not. Even the $0 ebooks generally pay for themselves through ad views when purchasing. That people buy the newest bestsellers at a loss seems to grease the wheels of ebook purchasing; I doubt there are many people who put just bestsellers and $0 books on their kindle, to the exclusion of others.

quote:
Amazon is really trying to increase its market share so that when the shift to ebooks is complete they'll be in a position to set the prices to where ever they want.
I seriously doubt it. While they'd certainly enjoy it, they pretty clearly aren't going to dominate the ebook reader market that completely. Also, as they've noted, people will choose not to pay more than a certain amount for an ebook, and that amount is, even for popular books, around $10. They won't be able to set prices significantly higher and survive. People will just buy different books and hard copy books if the prices go above that.

After all, Amazon is a major player in a number of markets, and they use that significant market power to offer lower prices to consumers. They've found that works rather well. The idea that they're out to raise prices as high as they can is the sort of reaction the publishers would have, and thinking it would be a good idea for the implementer (such as Macmillan wants to be) reveals a fundamental misunderstanding about internet sales and distribution.

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TomDavidson
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*nod* For my part, I suspect Amazon's real motivation is that they know people like me won't buy a Kindle unless we can get ebooks significantly cheaper than we can get paperbacks.
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BryanP
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quote:
Originally posted by TomDavidson:
quote:
The thing I don't understand about all this is, how is $9.99 for an ebook too little? There's no printing, binding or shipping involved.
For certain books that aren't expected to have legs, the printing is a small fraction of the development cost.
Okay, sure, the printing costs rise as a percentage of total costs the more books that are printed. But I'm still curious how the profit margins compare between ebooks and printed books. Because I suspect that publishers are either trying to unrealistically maximize profits (by overpricing ebooks) or attempt to prevent a devaluation of books whereby people think they can get a brand new (e)book for $9.99 so why would they pay for a $25 hardcover?

If the profit margin really is greater for printed books then I have an easier time understanding Macmillan's stance, even if I think it's doomed in the long run. I'm not saying I would never pay $15 for an ebook (I bought a Nook mainly cause I don't have room for lots of books with my current living situation), but I would certainly buy more books at $9.99.

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andi330
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I just noticed OSC's notice on the main page urging people not to buy from Amazon. All respect to you Mr. Card, but I believe that Amazon has the right to sell their books, all of their books, regardless of format, at whatever price they choose. Edit: I also believe that if Amazon believes that Macmillan is being unreasonable in their demands, they have the right to stop doing business with them. I'm not going to boycott them because your publisher wants to force them to change their prices for one specific format of books.

Thank you.

[ February 02, 2010, 12:38 AM: Message edited by: andi330 ]

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TomDavidson
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A lot of Tor authors are in the habit of obsessively checking their daily Amazon ranking. Being removed from Amazon may well have felt like having their livelihoods and favorite hobbies extracted from them with tweezers, without warning. I would expect them to be bitter for a while, whether or not it's particularly rational of them.
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andi330
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I can understand his being upset. Particularly as I can't tell that any of his books are even available for Kindle at all, so it probably seems to him that he was punished for something he isn't involved in. But Amazon is a retailer and retailers should get to price things however they want, as long as they pay the wholesaler, or in Amazon's case publisher, the price agreed on per book.

Then again, the Women of Mystery explain that publishers don't view the book business as retail.
quote:
But Macmillan doesn't see books as retail products. It's not clear how they do see them, but that's not their fault--it's the fault of the publishing industry as a whole, which has never conformed to the rules of retail and doesn't see why it should now. Rather than consider changing to a traditional retail model, Macmillan wants to go to yet another new model, the "agency" model, wherein they would be able to dictate the prices for ebooks (licensed? sold? it's unclear). And those prices would be--according to Sargent--$14.99 for the ebook when the hardcover comes out.
Which in my opinion is foolish, because regardless of how they want it to be, book sales are a retail business, and trying to treat it in some other way is what is going to be the downfall of the major publishing companies, much as it has been for the newspaper outlets, who have all lost a lot of money and circulation as the availability of news on the internet has become prominent.

Self-published Allen Harkleroad states that he's tried changing the prices of his e-books to more than 9.99 in the past himself, it didn't improve his sales.
quote:
Electronic books are a ďfunnyĒ species. While they contain the same content as print counterparts, consumers are reluctant to spend the same amount as they would on a print edition. Iíve tested pricing on the Kindle versions of my books and have found that if I set pricing above $9.99 my sales suffer. If I set the pricing at $9.99 or less I tend to sell more books. FYI, Consumers end up setting the prices on eBooks, and quite frankly itís a stretch to convince consumers to fork over 15 bucks for a digital edition.
Frankly, I doubt most publishers really understand how to sell books. I doubt this because, for the most part, publishers don't sell books. Retailers sell books, and give publishers the numbers. They do that a variety of different ways, often by offering deep 30-40% discounts on new books. I can't remember the last time I paid the actual hardcover price for a book. Though I do remember that when I bought White Knight by Jim Butcher, I had to return the first copy and exchange it because it had a bad binding.

And as rivka pointed out in a response to Noble Hunter above, when I was still purchasing physical books, I bought mostly hardcover, not because I couldn't wait for the paperback though. I bought hardcover because the books I purchased, I fully expected to read many times, and paperbacks tend to fall apart over time. Hardcovers just last longer.

Oh, and Mr. Card, if you don't want readers to buy from Amazon, you need to remove the audible.com banner from your home page. After all, they're owned by Amazon.

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scifibum
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I think Card's probably justified in thinking Amazon overreacted. After all, Amazon caved pretty fast, so they probably decided the same thing.
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theamazeeaz
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The thing is, I wouldn't pay more than a mass-market paper-back price for an ebook.

I own a lot of books, but I would say that I don't buy enough books to recoup the cost of a Kindle, etc over two years.

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andi330
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quote:
Originally posted by scifibum:
I think Card's probably justified in thinking Amazon overreacted. After all, Amazon caved pretty fast, so they probably decided the same thing.

I don't know that they overreacted. In fact, I think that if they held out for longer they might have gotten somewhere. Maybe not. It's a moot point because they didn't. However, if you're referring to my comment regarding removing the audible.com banner from the front page, I stand by it. I don't support and won't support an Amazon boycott, for the reasons stated above. However, if this site and the owner of it is urging a boycott of Amazon, any advertisements for Amazon and its companies should be removed. Amazon owns and operates Audible.com, and if the site is going to urge a boycott of Amazon, the banner urging people to support the site by purchasing from Audible should be removed.
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kacard
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Memo from the Authors Guild for those interested in their perspective:

The Complete Authors Guild Memo

Subject: The Right Battle at the Right Time

Macmillan's current fight with Amazon over e-book business models is a necessary one for the industry. The stakes are high, particularly for Macmillan authors. In a squabble over e-books, Amazon quickly and pre-emptively escalated matters by removing the buy buttons from all Macmillan titles (with some exceptions for scholarly and educational books), in all editions, including all physical book editions. Thousands of authors and titles are affected; hardest and most unfairly hit are authors with new books published by Macmillan that are in their prime sales period.

Yet if Macmillan prevails, the eventual payoff for its authors (and all authors, if a successful result ripples through the industry) is likely to be significant and lasting.

For those of you who may have missed it, here's the story so far:

Last Thursday, Macmillan CEO John Sargent informed Amazon that beginning in March, it would offer Amazon access to a full range of e-book titles only if Amazon were willing to sell books on an "agency" model that would pay Amazon 30% of e-book proceeds and allow Macmillan to set its own retail price for e-books. (Currently, Amazon buys e-books as a reseller at a discount of 50% off the retail list price and sells at the price it chooses.) Macmillan's price under its agency model, in many cases, would be higher than the $9.99 ceiling that Amazon has been seeking to impose on the industry.

If Amazon didn't find the agency model acceptable, Sargent said Macmillan would expand its "windowing" of e-book editions. "Windowing" is the practice of waiting until a particular edition of a new book has been on the market for a while before making cheaper editions available. Publishers have for decades waited until the hardcover sales window has closed before opening the sales window on paperback editions, for example. This helps protect the sales channels for hardcover books. Windowing e-books is similarly believed to help protect a publisher's sales channels for physical books. The risk with windowing is that some owners of e-book devices are angered that low-priced e-book editions aren't available as soon as books are released in hardcover form.

This was a bold move by Macmillan. Amazon has a well-deserved reputation for playing hardball. When it doesn't get its way with publishers, Amazon tends to start removing "buy buttons" from the publisher's titles. It's a harsh tactic, by which Amazon uses its dominance of online bookselling to punish publishers who fail to fall in line with Amazon's business plans. Collateral damage in these scuffles, of course, are authors and readers. Authors lose their access to millions of readers who shop at Amazon; readers find some of their favorite authors' works unavailable. Generally, the ending is not a good one for the publisher or its authors -- Amazon's hold on the industry, controlling an estimated 75% of online trade book print sales in the U.S., is too strong for a publisher to withstand. The publisher caves, and yet more industry revenues are diverted to Amazon. This isn't good for those who care about books. Without a healthy ecosystem in publishing, one in which authors and publishers are fairly compensated for their work, the quality and variety of books available to readers will inevitably suffer.

Macmillan's move is timely because, at the moment, the e-book market is still far smaller than the physical book market, but the e-book market is growing quickly. The longer Macmillan waited, the more difficult the transition.

Amazon didn't wait for March, when Macmillan's new policy is slated to go into effect; it decided to hit Macmillan immediately and comprehensively, removing the buy buttons for nearly all Macmillan titles, in all editions. This is a direct attempt to use its clout in the physical book industry to enforce its business model in the e-book industry. In some ways, it was an unusual exercise of power for Amazon. The company has used the tactic of turning off buy buttons on several occasions before, but, with major publishers it's usually selective, and doesn't turn out the lights on nearly all titles. That treatment is reserved for smaller publishers. (Authors receive no advance warning of Amazon's treatment of their titles, nor can they do anything about it.)

Amazon, it appears, overreached. Macmillan was a bit too big a foe, and Amazon's bullying tactics were a bit too blatant. (For a flavor of media reaction, see this story in Fast Company.)

Sunday evening, Amazon announced that it would have to "capitulate" to Macmillan, "because Macmillan has a monopoly over its own titles." (By this definition, nearly every company exercises a monopoly over its products.) We're all still waiting for that capitulation: Macmillan's books still weren't available on Amazon on Monday evening.

If Macmillan does indeed prevail, the economics of authorship in the digital age are likely to improve considerably. We may go through some rough stretches to get there, however.

You'll be hearing more from us on this matter soon.

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andi330
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I appreciate this opinion, and, this will likely be my last post in this thread for a while because the conversation seems to have hit a brick wall (unless of course something changes). One last thought though, is this.

Publishers and authors seem to be selectively ignoring a simple fact. Or maybe two. Or maybe, despite all the posts in this thread, I'm still, as a consumer just not understanding their viewpoint. Regardless, here are the two things I think are being ignored or forgotten.

The first is that the overwhelming majority of e-book readers already find 9.99 to be too much to pay for an e-book. Requiring Amazon and other e-book retailers to up their prices to the equivalent to hard cover books when they are first released (and $14.99 is about the price of a new bestseller hard cover with the discounts offered by all the major retailers these days) is not going to improve sales. It will certainly worsen them in the beginning, because many readers will refuse to purchase e-books at the higher price. Some of the readers will wait and purchase the book later when the price drops. Some may purchase a hard cover instead. But some will read the book at their local library and decide they don't like it, losing the sale forever. Others will download pirated copies of the books and stop paying for them all together.

Second, Amazon and other retailers are not an "agency" at all, and they are certainly not seen that way by the public. To the public, Amazon and other e-book retailers are just that, retailers, and the public understands retail to be something very specific. That a retailer purchases a product from a distributer at a set price. The retailer then can decide what price they want to set, and if they choose to take a loss, then that is their choice. In a post on the first page of this thread I used some math to show that the publishers are actually going to make less money on best-selling hard covers than they make under the current model. How the publishers can argue that making less money is good for their business and their authors is beyond me. Less money to the publisher means, as far as I can tell, less money to the author so I don't see the improvement for "everyone."

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