Peter Kafka

Recent Posts by Peter Kafka

Amazon Gives In to Macmillan and Apple, and E-Book Prices Will Go Up

That was fast.

Less than two days after pulling books published by Macmillan in a dispute over e-book pricing, Amazon has conceded.

The world’s dominant e-commerce company says it has agreed to Macmillan’s demands to sell its e-books at a higher price–and in doing so, has made a tacit admission that e-book prices will rise across the board.

That’s because most of the industry’s big players have embraced a similar plan, advanced by Apple (AAPL) to support its iPad launch, to sell e-books for $12.99 and $14.99 instead of the $9.99 Amazon (AMZN) had been pushing.

In an extraordinary statement published on Amazon’s site, the retailer says that it “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.”

No word yet from the other big publishers that have sided with Apple in the e-book pricing war–Pearson’s Penguin Group, News Corp.’s (NWS) HarperCollins, Hachette Book Group and CBS’s (CBS) Simon & Schuster. But keep in mind Steve Jobs’s all-knowing pronouncement about Amazon and Apple e-books: “The prices will be the same.”

Also bear in mind that publishers will actually make less money with the Apple pricing plan. Under the old plan, they sold books to Amazon for around $15 wholesale, and Amazon took a loss in order to retail them for $9.99. Under the new plan, the publishers will get closer to $10 per book.

But the publishers are so freaked out by the parable of the music labels, in which Apple replaced $15 CDs with $1 songs, that they are willing to take the hit in order to maintain some control of their digital pricing.

Odd as this sounds, there’s logic to it, since e-book sales will be small for some time and publishers think that this strategy will help keep the prices up when buyers really do embrace digital.

(Aside: The notion that digital pricing should be dirt cheap simply because it doesn’t cost publishers–or music labels, or Hollywood studios, or whatever–very much to distribute bits, is facile. If you don’t believe me, try ordering a vegetarian entree the next time you go out to dinner, and then tell your waiter you refuse to pay full price because you know that vegetables cost much less than meat. It may be dumb for publishers to try to keep digital prices high, but it’s equally stupid to demand that they lower them on principle.)

It will be interesting to see what Kindle buyers make of the impending price hike, particularly since so many of them are price-conscious consumers who prefer to pay nothing at all for their books.

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