As we reported the other day, Macmillan got Amazon to agree to a new pricing structure for its books sold via the Kindle. Of course this comes in the wake of the iBook announcement from Apple that will sell e-books on the forthcoming iPad, and in that deal, Apple agreed that publishers would be allowed to set their own pricing.
The Apple iPad was announced on Wednesday, Jan. 27th, and according to the ad Macmillan advertisement that ran in Publisher’s Lunch, by Thursday the 28th, they were in Seattle meeting with Amazon over the pricing structure of their books. Amazon pulled the publisher’s books on Friday the 29th while a new deal was sorted out, the end result was that by Sunday the 31st, Amazon had given in to the new pricing, and the writing was on the wall that this would not be the last publisher to want to change their deal now.
I said in the original report, “With one publisher having made Amazon blink, you can rest assured more will follow, raising the average price of e-books to a point where you might wonder why you don’t just go and buy the physical copy.” I just wasn’t sure how fast it would transpire.
Reuters is reporting that on Feb. 2nd, in a conference call with Rupert Murdoch of News Corp., which owns publisher HarperCollins, expressed his displeasure with the pricing of books on the Kindle. “They pay us the wholesale price of $14 or whatever we charge,” Mr. Murdoch said. “But I think it really devalues books and it hurts all the retailers of the hard cover books.” He went on to add that he felt the team at Amazon was “ready to sit down with us again,” meaning that now that one publisher got them to change their deal, others should be able to also.
While there is no word as of yet of other major publishers requesting to speak with Amazon about the pricing structure of the Kindle edition books, it will undoubtedly be only a matter of days at this point.
It is fairly obvious that Steve Jobs, CEO of Apple, knew he was backing Amazon into a corner with his announcement of publishers setting their own prices as he even mentioned in his iPad keynote speech that they were not satisfied with the pricing structure. By allowing them to set their own prices, Mr. Jobs was able to get the publishers on-board with his new device quickly, while also making sure he would have a more level playing field with Amazon’s Kindle as he knew full well this would make the publishers reconsider their current deals with Amazon. In turn, Amazon was faced with either raising its prices, or be left with no publishers, meaning Apple would pick up tremendous sales volume as they would have the books the Kindle didn’t.
It was a tried and trued attack plan of business, and it worked beautifully.
Coincidentally, the NPD Group released the results of a research study on Wednesday about how satisfied e-reader owners were with their devices. The study found that 93 percent of e-reader owners listed themselves as either “very satisfied” or “somewhat satisfied” with their device. I would be curious to see the same study conducted after all these e-book prices start rising.