Firms fall out on e-book pricing

AS I WRITE THIS I am resting my keyboard on my lap on a book.

It is a copy of Truffaut on Hitchcock that my mum bought second-hand from a library, read, and then gave to me. I feel, therefore, that it is necessary to apologise to Mssr Truffaut not only for the scandalous misuse of the book - although I can advise him that it is a triumph of both form and function - but also for preventing his estate from making more money on it.

It has just cost me more to phone my mum to ask her how much she paid for it than the money she handed over in the first place. Which she tells me, was a scandalous 20p. I think that perhaps the library owes you an apology too, Monsieur artiste.

But, how people use books and how they move around will always be up for debate. Anyone who has ever travelled or tackled a short table leg will attest to this, but now we have a new debate. Who loses out when books go digital?

According to Macmillan, one of the six big publishing houses, we all do. Just days after Steve Jobs announced that Macmillan books would be available on the Ipad, Macmillan met with Amazon to discuss a new sales agreement. Apparently the meeting did not go very well at all.

John Sargent, the publisher's CEO wrote, "This past Thursday I met with Amazon in Seattle. I gave them our proposal for new terms of sale for e books under the agency model which will become effective in early March. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles. By the time I arrived back in New York late yesterday afternoon they informed me that they were taking all our books off the Kindle site, and off Amazon. The books will continue to be available on Amazon.com through third parties."

Explaining more about the agency model Sargent said, "Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30 [per cent] commission (the standard split today for many digital media businesses). The price will be set the price [sic] for each book individually. 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."

Finally, and perhaps most tellingly, he added, "The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market". And, presumably, its own bottom line as a publishing house.

Amazon hid its response, and its volte face, on its web site in a place so hard to find it can only have been the work of librarians. In it, the e-tailer suggests that the high prices that Macmillan is insisting on will, if anything, turn off readers. "Macmillan, one of the 'big six' publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases", the anonymous poster wrote.

It goes further, adding that Amazon doubts that other firms will pursue such high and controversial pricing strategies. "We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms because 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 for a bestselling e-book. 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."

Rumours abound that the reason that Amazon does not break out its Kindle sales figures, instead fudging the numbers by telling us how succesful it has been, is because it sells books at a loss, and makes money on the Kindle itself. If this is correct, then it goes some way to explain the Macmillan line, "The agency model would allow Amazon to make more money selling our books, not less." It may also explain some of Sargent's ire.

According to Groklaw, it is the business face of Amazon that is scaring booksellers, even more so than, for example, Google and its book digitalisation plans. Perhaps because of this publishers have already taken some action, though not as you might expect, in the interest of their authors. A link from Groklaw to the Authors Guild web site shows us what Random House, for example, has been up to.

The post starts thus, "On Friday, Random House CEO Markus Dohle sent a two-page letter to many literary agents regarding e-books. Much of the letter is devoted to Random House's efforts and investments to market traditional and electronic books.

On the second page, Mr Dohle gets to the point. After noting that most of Random House's backlist titles grant the publisher electronic book rights (we agree, since most backlist titles are from the past ten years, a period in which authors have generally licensed electronic rights in tandem with their print rights), he writes that "there have been some misunderstandings concerning ebook rights in older backlist titles." He then proceeds to argue that older contracts granting rights to publish "in book form" or "in all editions" grant electronic rights to Random House.

Later the post gets to the real nub of the problem, however, and yes, it is Amazon that is ruining everything for everyone.

"We are sympathetic with the difficult position the publishing industry is in at the moment. The recession has been tough on book publishing, as it has been on many industries. And everyone with knowledge of the dynamics of the industry properly fears that Amazon's dominance of the online markets for traditional and especially e-books will give it a chokehold on industry profits. Difficult times, however, do not justify this attempt at a retroactive rights grab."

Difficult times indeed. The Ipad, though not useful for much, could function well as an e book reader, and Jeff Bezos of Amazon has already revealed that the firm will soon release a version of Kindle for it, along with ones for the Mac and the Blackberry smartphone. With its release pending, and a growing interest in ebooks - Bezos claims to sell six digital books for every ten real ones, that path will only get more diffult and its roads more hazardous.

One author, and blogger John Scalzi could barely contain his contempt, and on his site wrote a stinging piece entitled 'All the many ways Amazon so very failed this weekend'.

Forgettng all the business about who makes what from books, Scalzi took his argument straight to the parking lot, or do we mean the playground? "Think about the disparity of corporate responses here," he wrote, "Macmillan issued a detailed statement from its CEO discussing the event and his company's reasons and rationales for acting as it did. Amazon issued an unsigned forum comment written by someone who is apparently a little shaky on Macmillan's relationship to its own product. Now, which of these two corporate responses seems most appropriate, given the gravity of the situation? Which of these responses appears to be the work of a company that understands what it's doing on a corporate level and why? Which of these responses, in short, appears to be the work of actual adults?"

Interestingly, point number seven of the list is this, "Because Of the Idiotic Events of This Weekend, People Will Just Want an iPad Even More". To which Scalzi adds, "Again, Amazon: Well played. Well played indeed."

This is interesting as it is rumoured that Ibooks, as we are already loathe to call them, for the Ipad are rumoured to cost between $13 and $15, which is pretty much what Macmillan wants to charge. Not to mention the fact that other reports claim that Jobs and company are unlikely to let publishers set their own prices.

Perhaps, rather than tango with Amazon, publishers will choose to align themselves with Apple and the Ipad, leaving Amazon to pick up the remaining pieces and smaller publishers with less lofty pricing ambitions. Whatever happens, we doubt that Amazon will react in this way again.

It is difficult enough to put a price on something that is commonly traded, handed over, shared, and used to prop up table legs, never mind protect the rights of its original author. So how do you value something that can't be shared, can't be resold, and is unsuitable for making improvised furniture adjustments?

$14.99 sounds like a lot of money for an e-book to us, so who wins when the publisher sets its prices high and the bookstores complain that this alienates readers?

It can't be the authors, the booksellers, the readers or the literary agents. So who does that leave?

Ah yes, the publishers. µ