Macmillan CEO on Amazon deletepocalypse

John Sargent, Macmillan USA's CEO, has issued a statement on the Amazon deletion of an appreciable fraction of all of English literature from its store. He confirms that this is a strong-arm tactic in a pricing war. (via Making Light)

I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.

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musicman

there’s an errant %22 char at the end of the address cory posted.
Anonymous

Not mentioned: Everyone is shitting bricks about the iPad.
Ceronomus

MichaeltheG, in this case what is good about having the supplier supply the price? Such a move seems to stifle competition between retailers if they all have to sell at the same price AND, in this case, the supplier is trying to raise the price by up to 50%.

What am I missing here that makes McMillan’s stance the correct one in this matter? Frankly, I think Amazon’s actions are wholly appropriate. McMillan made an outlandish demand, Amazon isn’t going to bend and pushed back.

I think the pitchforks should be outside the McMillan offices….
Granger

Congratulations to the publishers for learning nothing from the music industry debacle. Consumers know that digital distribution is far less expensive than physical distribution, but rather than accommodate that the publishers want to set their own prices for digital distribution to match the cost of physical distribution. This idiotic stance will only drive consumers to piracy.
- jere7my
  
  Granger wrote, Consumers know that digital distribution is far less expensive than physical distribution
  
  No, consumers believe that. Read this article, which offers actual data on the cost of producing a book. Creating the physical book is only a couple of bucks of the hardcover price; shipping and storing it is another couple of bucks. Hardcovers and new release ebooks are expensive because every book starts out in a hole â€” it needs to earn back the money that’s already been spent on the author advance, the editors, the proofers, the layout folks, the cover design, marketing, etc. Ebooks should be a few dollars cheaper than the hardcover, because they are a little cheaper to produce, but there’s no reason for them to be less than half the price â€” all of the production costs are the same.
  
  After a book has been out for a while, and earned back some of that money, publishers can reduce the price, and release cheap MMPBs and $6 ebooks. This is exactly what Macmillan was proposing â€” increase the price of popular ebooks to $15 for a little while after hardcover release, to a) target the people who just can’t wait and b) not cannibalize hardcover sales, then drop it over time. To quote the release: “Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. [...] Pricing will be dynamic over time.”
silkox

I always try to use powells.com over Amazon anyway. BTW, shouldn’t there be a disclaimer somewhere that all book links I’ve seen on bb are to Amazon, presumably in exchange for revenue?
Volker

Regulating book prices is a valid concern if you don’t want Amazon to destroy all local book stores. Essentially it is a subsidy for local retailers, which otherwise cannot compete due to economies of scale.

However, I don’t see how I’m ever going to buy an ebook from a Mom&Pop store around the corner. There is no physical medium, end of debate. This is just a plot for profit maximization of one industry (publisher / IP) vs. another (distribution), an impersonal fight between corporate interests.

MichaeltheG | #3:
> the “mega-cetacean paradox”

Funny choice of terms, considering that most cetaceans are on the brink of extinction. It should be called the “human paradox” :-)
- Anonymous
  
  “Regulating book prices is a valid concern if you don’t want Amazon to destroy all local book stores. Essentially it is a subsidy for local retailers, which otherwise cannot compete due to economies of scale.”
  
  Subsidize the buggy whip manufacturers!
andygates

It’s not hard to imagine this disagreement going nuclear and Amazon threatening to pull the DRM’d books already out there with the Kindle Killswitch. That would be… entertaining.
agger

Maybe these heavyhanded tactics are a good opportunity to get a large fraction of the tech community behind a massive consumer boycot of Amazon until they drop DRM and all their own back doors to customers’ devices altogether. A consumer boycot is probably what it would take to make them behave.

I don’t buy a lot of books, but if everyone who doesn’t buy a lot of books makes a point of never bying from Amazon, they will lose a lot of millions. If we bsites stop endorsing them (like Boing Boing does), they will lose revenue. If people who do buy a lot of books join us, they will bleed and will probably end up seeing the light.
Teresa Nielsen Hayden

1. No, it’s nothing like the recording industry.

2. Er, did any of you notice that the publishers set the prices of all the other books sold on Amazon?

3. Amazon is (obviously) free to offer discount pricing on the books it sells. That’s not the point. What they want to do is set a ceiling on the prices the publishers charge: a very different thing.

4. What’s going on is more complicated than “Amazon wants to use its considerable clout to force publishers to let their books be used as loss leaders to help Amazon market its proprietary Kindle books program and the Kindle reader,” but that’s not a bad place to start.

5. Quoting here from Charlie Stross’s Amazon, Macmillan: an outsider’s guide to the fight, which he posted over the weekend:

Just before Apple announced the iPad and the agency deal for ebooks, Amazon pre-empted by announcing an option for publishing ebooks in which they would graciously reduce their cut from 70% to 30%, “same as Apple”. From a distance this looks competitive, but the devil is in the small print; to get the 30% rate, you have to agree that Amazon is a publisher, license your rights to Amazon to publish through the Kindle platform, guarantee that you will not allow other ebook editions to sell for less than the Kindle price, and let Amazon set that price, with a ceiling of $9.99. In other words, Amazon choose how much to pay you, while using your books to undercut any possible rivals (including the paper editions you still sell). It shouldn’t surprise anyone that the major publishers don’t think very highly of this offer.

6. If you’re interested, here’s a selection of further readings from the dust-up.
- Blue
  
  1. Yes. It is like the recording industry.
  
  The publishers want to jack up the price to equal or higher than the physical equivalent on a digital copy that you do not actually own and cannot re-sell.
  
  I’d say that’s not nothing like the recording industry. I’d say, from the point of view of a ‘purchaser’ of books, that that’s pretty much the same.
  
  2, 3, 4, 5. Whatever.
  
  I’m not going to champion people who want to charge me over the odds for something with less value to me. The way Amazon was imposing unfairly upon the publishers or power-grabbing may well be unpleasant and not something I’d support. But, how can I support a bunch of greedy publishers who want to levarage their copyright monopoly to price-gouging me?
  
  Just because there are two groups of assholes, doesn’t mean I have to pick one of them to be my friend. False dichotomy and all that.
  - Teresa Nielsen Hayden
    
    Blue @26, I’m sure all that deathless defiance was fun to write, but you have no idea what you’re talking about.
    
    Just for starters, it’s the publishers that are fighting for their right to set their own product prices and release dates. Amazon is the one responsible for the “digital copy that you do not actually own.” Conflating them results in a nonsense argument.
    
    Trade book publishing is enormously different from the recording industry. I’d explain in more detail, but you’re such a careless reader that you’re not worth the trouble.
demidan

That some (or many) economists support Walmart in there control of pricing is troubling. I do not shop in Walhell, solely because their pricing has destroyed so many good companies and product lines. One example;I used to live near Karns audio in Grand Rapids a small small company that produced great speakers in house for a great price, and then came the big box stores where Walcrap is the King. Sure they have great prices but selection is crap, and they only stock the most popular items (yeah no money in hard to find low volume items). The end result is that when your local shop that carries those items that are hard to find or sell runs into Walfart, Walblart runs them out of business. Great if you like top 40 music or boxed wine but if you want Shostakovich and a Trappist ale you are screwed. Extrapolate a bit; what happens when the major venders of literature reduce selling books that only reach NYTimes best selling 100? There is just so much a mom and pop book store can do against a Walspoodge Amazon alliance.
- Chesterfield
  
  @demidan, you should check out this thing called the internet. It allows even the smallest of niches to be served. Want to buy some boutique speakers? Well guess what – there’s more available now than ever before. Interested in some obscure band or classical composers? You can probably start listening to them right now on Pandora and discover new related music.
  
  And secondly, I can get a ridiculously good audio system right now for under $5000. A few (10?) years ago, that same budget wouldn’t have gotten me anything near as good.
  
  I believe your extrapolation is 100% incorrect. If anything, markets are fragmenting more and more. Fortunately, the internet supports this fragmentation. Extrapolate out a few years and I could see books or music written for a very small audience indeed. Interested in a denim Sackboy (LittleBigPlanet), check out Etsy and you will either find one or find somebody who can make one for you for a great price.
  
  Lighten up. Things are getting better all the time.
http://gironamac.com/ Anonymous

Amazon just blinked
jerwin

In regards to the mega cetacean paradox:

Skull and buccal cavity allometry increase mass-specific engulfment capacity in fin whales.
http://rspb.royalsocietypublishing.org/content/early/2009/11/19/rspb.2009.1680
(It’s free to read.)

The extra energy theoretically obtained by a whale with a larger mouth is offset by the extra energy required to engulf the water.
Steiny

There appears to be a permalink for that entry now if there wasn’t one at the time of your original posting:

http://www.publishersmarketplace.com/lunch/macmillan_30jan10.html
boojum_uc

Well, or he confirms that MacMillan were demanding Amazon switch from a wholesale/retail model to an agency model. Which is a more fundamental difference than “pricing war”. It means that the control of the price points is set by the supply side and not the retailer. To call it a price war simplifies things a great deal.

MacMillan’s move isn’t only about Amazon. It’s also about the growing power of the retailer vs. the label/publisher in digital content.

I’d also gently like to remind readers that an agency retail model is perhaps not the best thing for consumers. What we’re really talking about here is resale price maintenance and that is a practice which is often about limiting competition. It may no longer be per se unlawful, but I really wouldn’t be rushing to embrace its introduction with open arms.

I would suggest we all adopt a wait and see attitude before brandishing the pitchforks.
Blue

So … just like the music cartels decided to ramp up the price on the cheaper-to-make and cheaper-to-sell digital music market, just as it was takeing off, the book publishers want to do the same.

More money for less value (since you don’t even own the ebooks they’re hawking).

I tell you what will be funny, though … when Apple’s e-book market completely fails to take off. I mean, people really want to read digital books on a non-e-ink display? I thought those displays were the sole reason e-books were about to become a viable market.
MichaeltheG

@ boojum_uc

At what point is it good in the long run for the marketplace to have the retailer set the price point? To whit, Wal-Mart did just that with many of it’s suppliers or simply refused to carry their products. Now, last I heard, Wal-Marts still doing quite well and consumers can buy cheap (both in price point and in quality) goods there. Unfortunately for Wal-Mart, many of their stores in certain manufacturing towns closed because there where no longer enough jobs to sustain the stores. I don’t think you will find any economists suggesting that Wal-marts business model is particularly healthy in the long term. In biology we refer to this as the “mega-cetacean paradox” Briefly, an organism so large and without natural predators will eat itself out of existence.

Of course nothing is stopping Macmillan from putting their Ebooks up under their own shingle so to speak but Amazon is THE ubiquitous online retailer (Full Disclosure: while I was writing this Amazon sent me an email to do a review on a recent purchase) How do you compete with that?

Hey Macmillan! Sell your stuff DRM-free!!! Yeah! Do it! C’mon!!!! C’moooooooooon!!
- Chesterfield
  
  @MichaeltheG: there are actually lots of economists supportive of Walmart and their effect on the economy, depending on how macro of a view they take.
  
  Walmart has “encouraged” massive gains in efficiency for producers. If you search for it, you can find the buying power increase Walmart that these efficiencies have generated for every family in America, even if they don’t shop at Walmart. It’s in the thousands of dollars.
  
  I’m not saying everything that happens because of Walmart is great, I’m just saying they aren’t universally condemned. They may even have a net positive contribution to the economy.
- Comatose51
  
  This is both scary and amazing. Wanting to know more about “mega-cetacean paradox”, I Googled it and your post was the first result. In 5 hours, Google had picked it up already.
  - Anonymous
    
    It gets better. Your post is now result #2.
- Anonymous
  
  The “mega-cetacean paradox” must not be too widely known since neither google nor myself has heard of it, and I’m an evolutionary biologist. I’d like to know more about this.
  
  Perhaps a better analogy would be to passenger pigeons. Incredibly numerous, but underwent dramatic decline due to predation and other factors and are now extinct.
MichaeltheG

Ah, and I see that the good Mr. Doctorow has already made this point and others which where much smarter. Sorry for talking above my paygrade. Hope I didn’t offend :)

To see his bit go to: http://www.boingboing.net/2010/01/29/amazon-and-macmillan.html
Anonymous

Confirming my observation, based on the leak to the NYT, that what this is really about is that Macmillan is demanding from Amazon a right that they don’t have when selling to other booksellers, the right to dictate to booksellers that they not discount the product to below Macmillan’s preferred price. In other words, it’s not enough for the big-three publishing firms to be a major cartel that controls 99% of what makes it into prints, this one (at least) further demands that they be allowed to become a PRICE FIXING cartel. Uh, yeah — NO.

Of course, Apple will cheerfully give this to them when the iPad ships, if it helps them screw Amazon, if it helps them break into the ebooks market with their last-to-market ebook reader. Did you notice, on the Gizmodo screenshots or elsewhere, that Apple’s iBookstore was charging $3 to $4 more per ebook than Amazon does for the same title? Now we know how Apple intends to compete at that price: by attempting to drive anybody who discounts below that out of business by working with the publisher to destroy discounters.