Amazon Gives In; Higher e-Book Prices Expected

Amazon appears to have blinked first in its stand-off with publishing giant Macmillan over the pricing of Kindle books. The online retailer had even briefly stopped selling printed Macmillan books over the dispute.

The disagreement centered on Amazon's policy of charging a flat rate of $9.99 for the electronic edition of virtually all new titles it stocks. Macmillan demanded that it be able to set its own pricing, with most major books priced between $12.99 and $14.99.

Royalties Replace Fixed Fees

At the moment, Amazon pays publishers a fixed fee for each digital sale worth roughly half the list price of the book's hardback edition. In many cases, that meant Amazon wound up making a loss with the $9.99 fee, a price it considered worth paying to establish the market.

Macmillan joined other publishers in pushing an alternative system by which the publisher sets the digital price and the online retailer, such as Amazon, takes a 30% commission. Ironically, that means publishers wind up with slightly smaller profits on most books, while Amazon is guaranteed to make money for each sale. (Source: nytimes.com)

However, Amazon felt strongly that variable pricing would leave both sides worse off. Why? It believes $9.99 is a psychological price point above which sales will drop off rapidly. The firm appeared willing to switch to the royalty system but insisted prices remain as they were.

Amazon Gives In; Higher Prices Expected

At one point over the weekend, Amazon switched off the ability for users to buy either digital or print editions of major Macmillan titles. (The listings stayed in place and it was still possible to buy the books through the third-party seller Amazon Marketplace scheme.)

Now, Amazon has given up the fight. It appears that's largely down to the still-fresh hype over Apple's forthcoming iPad device and the confirmation that Apple will run its own electronic book store. That will likely have caused Amazon to realize that it can't afford to have any major publishers missing from its own service, even if that means compromising on terms.

Prices "Needlessly High for E-Books"

Although it has given in, Amazon certainly hasn't done so graciously. In a note to customers it said "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." (Source: amazon.com)