Macmillan Returns To Amazon, Publishers Win Readers Lose

Macmillan has returned to the banks of Amazon after a week long drought. Macmillan, like other major publishers, was renegotiating the pricing of eBooks with Amazon.

According to the new deal Macmillan will now decide the price of e-books. Most new titles will cost around $12.99 to $14.99. This is a major hike as compared to Amazon's fixed $9.99. That's not all. The publisher will also take a 70 per cent cut of sales. Till now, Amazon was giving around 50 of the list price and it was Amazon who used to decide the price.

The one week long Amazon-Macmillar hiatus started with the publisher demanding better control and pricing -- a deal similar to the one they have with Apple. They threatened to delay delivery of ebooks to Amazon. The online retailer responded removing the publishers' books from its site. It was a Mexican stand-off. None of the side was going to win. In the end Amazon had to bend and accept Macmillan's demands.

Arrival of Apple' iPad has brought every publisher's attention to the eBook market. A segment which was not taken much seriously earlier, despite Amazon's claims that Kindle had become the most sold item in December, 2009.

With the launch of the iPad, Apple signed some Kindle killing deals with major publishers. Apple offered more in return as compared to what publishers were getting from Amazon. Apple deal meant higher pricing of ebook. Result: readers end up paying more; publishers and Apple end up earning more. It was certain that these deals would encourage publishers to twist Amazon's arms and wring more profits.

Apple knows how to dictate the market. Look at their exclusive iPhone deal with AT&T despite customer's complaints. It's seldom when you read Apple doing any favor to its customers.

In addition to Apple's lucrative deal, most publishers have been wary of the possibility that Apple might try to replicate the iPhone model here. Apple is the one which dictates the iPhone environment, and not the telecom carriers.

The iPad presents similar threats. Publishers might have been concerned that Apple might try to take control of the content leaving less to them. Thus, they started pulling strings.

Macmillan CEO John Sargent wrote on his blog, "Over the last few years we have been deeply concerned about the pricing of electronic books. That pricing, combined with the traditional business model we were using, was creating a market that we believe was fundamentally unbalanced. In the last three weeks, from a standing start we have moved to a new business model. We will make less money on the sale of e books, but we will have a stable and rational market. To repeat myself from last Sunday's letter, we will now have a business model that will ensure our intellectual property will be available digitally through many channels, at a price that is both fair to the consumer and that allows those who create and publish it to be fairly compensated."

News Corp's Rupert Murdock had sent messages that he would like to put some chains around Amazon, the way he was trying to 'tame' Google. The publishing industry took it as a go ahead signal and Macmillan pulled out of Amazon to force the Kindle owner renegotiate the pricing and control over the content. 
 
According to media reports, Hachette Book Group and News Corp.’s HarperCollins are also planning to enter into similar negotiations with Amazon.

This is certainly a lose-lose case for customers who now have no say in the pricing; they never had any. The thumb rule is: charge What the traffic will bear.

This sounds like the dialogue from the movie, The Informant, where Matt Demon's character Mark Whitacre says, "Customers are our enemies, competitors are our friends."