Sunday, January 31, 2010

Steve Jobs pulls his puppet strings but says too much

" The prices will be the same"
See my earlier story yesterday for details, as this is an update to that.

The picture above is from the moment in the video'd interview when Steve Jobs needed to let Journal's Walt Mossberg know that Jobs already was completely sure that, although his own pricing for best sellers might be $14.99 vs Amazon's $9.99, that "Well, that won't be the case" (soon) and when pressed said that "the prices will be the same."

  He didn't mean that Apple would reduce its prices to match Amazon's.
But many of course felt that this must have been what he meant.  Here again is a transcript of this part of the video.
' In the video below, listen carefully to the Jan 27 conversation between The Wall Street Journal’s Walt Mossberg and Steve Jobs.  At one point Mossberg asks Steve Jobs about the price advantage ($9.99 @ Amazon vs $14.99 @ Apple’s iBooks) Kindle owners enjoy for certain ebook offerings.  Jobs tactfully corrects Mossberg.

Mossberg: “[first part is inaudible] why should she buy a book for $14.99 on your device [iPad] when she can buy one for $9.99 at Amazon [inaudible]?”
Steve Jobs: “Well, that won’t be the case.”
Mossberg: “You mean you [iBooks] won’t be $14.99 or they [Amazon] won’t be $9.99?”
Steve Jobs: “The prices will be the same.” '
A glimmer of discomfort was seen in Job's mouth as he turned his face away from Mossberg while somehow driven to disclose with a smile that he knew Amazon would have to meet the higher price.  It was a brag.  More to the point, it was a clear indication of what some would perceive as collusion to set higher, fixed pricing.

 Jobs went on to say that
'"Publishers are actually withholding their books from Amazon, because they're not happy with it."
 Offering the publishers a better percentage, Jobs cleverly asked them to set higher e-book prices (reported Jan. 26), which would then raise Apple's portion and, if the entire scheme is successful, bring in the publishers under his own tent.   [At link given here, click on top WSJ search result at Google]

  What is lost here is the great number of e-books which then would NOT be sold by anyone.  The very customers who made the Kindle and other e-readers such an unexpected success so far have been very clear in forums everywhere, including those focusing on other topics, that they will not pay this price.

  Amazon has researched the best selling points and of course would rather sell e-books than not, and a strong step is to get the crowd eager to buy them.   The results are seen in Amazon's company reports in a weak economy.  They have made e-reading attractive when prophets like Steve Jobs said e-readers were not a target area for lack of consumer interest in reading.

  Authors might be happy that the active reading audience is demonstrably larger these days.

 Macmillan is on record as in fear of the effect of e-books on its hard-cover book margins in a business where the margin with hard covers is large.

  According to discussions I saw today, Macmillan has long been opposed to the effect of e-book sales and has proposed that e-books be delayed SEVEN months after the release of the hard cover.  As mentioned, John Sargent, CEO of Macmillan "explained" to his crew today in the full-page ad why he is insisting on the new "agency" model focused on a $15 e-book for best sellers.

  Book sellers would be required to sell at the publisher's price, acting only as 'agent' for the publisher.

That is certainly one way to make sure e-books have no effect, a result somewhat attractive to Sargent when the margins on $9.99 e-books are so much smaller for the publisher than for its hardcover editions.  Amazon is said to pay publishers about 50% of the list price no matter what selling price Amazon chooses for the books.

  But under Sargent's plan to delay e-books for 7 months from book-release, people will no longer be interested when there are lackluster reviews during that time or just due to the passage of time and the avalanche of other new, interesting books being discussed.

  Macmillan can then cite the low percentage of e-books sold.  Steve Job's dream that people don't read books anymore would be fulfilled based on few sales at the higher prices that he asked publishers to set.

The first reaction I see today from a larger online business site is a column by Henry Blodget at Business Insider's Silicon Alley Insider, titled "Hey, John Sargent, CEO of Macmillan Books, Screw You!"   The more memorable quotes in an intense, highly logical article are:
'... First, to clarify what is happening here, you are already getting your money: You are selling ebooks to Amazon at whatever price you set ($10-$15), and Amazon is turning around and selling them at a loss, sometimes for $9.99. We're not against your charging what you want to for your books. We're against your telling Amazon what it has to charge for them.
. . .
First, if Macmillan collapses, so be it. Someone else (Amazon?) will happily publish whatever good books Macmillan would have published. Macmillan's editors will find other employers, perhaps at Amazon.

Second, the world is doing just fine, thanks. Good books will always be published. Perhaps not in precisely the same form, but they'll be published. And, thanks to Amazon's new low-cost distribution model, more of them will eventually be published than ever. We don't need someone like Macmillain sitting between us and good books.
. . . [Do read the entire column at the link given.]

Did Steve Jobs seduce you with that temporary "charge-whatever-you-want" speech? Well, Steve has been known to seduce people from time to time. Just imagine what will happen once Steve has put the Kindle out of business and Steve owns the ebook platform instead of Jeff Bezos. That's right: You'll get held up even worse than Jeff's holding you up today. Just ask the music industry. Careful what you wish for.

So, bottom line, John, take your $15 ebooks and shove them. We're with Amazon on this one. '

If Amazon just gave in to this kind of pricing manipulation, every other publisher would see that they could do what Macmillan did.

That would be the immediate death of the $10 e-book. And Steve Jobs would continue smiling.

For him, it’s all a game.  His specialty is cornering the market when he’s interested.  He doesn’t care about customers who read.  watch his disdain for the meaningfulness of e-ink's 1-2 weeks of battery power vs the iPad’s 10 hours.  He impatiently explains that readers can just plug it in and charge it then.

  I see.   Sure, I'd rather carry my charger around than not. Below are ways to Share this post if you'd like others to see it.
-- The Send to Kindle button works well only on Firefox currently.

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  1. With real books, you can resell them and recoup some of your cost. With e-books, you can't. Nor can you lend e-books to friends. For me, the consumer, those differences explain why I'll pay $9.99 for an e-book...but no more.

  2. spot on coverage. thanks for the sanity check. i'm sorry reading (for those of us with modest incomes that choose not to go the piracy route) will suffer. steve jobs makes his prophecy come true: "no one reads anymore."

  3. Anonymous (one of the many :-)

    Your last sentence says it all. I think I called it the prophet's dream fulfilled, the prophet being Mr. Jobs.

  4. Sanity check? Really. Because all ebooks were 9.99$ on the Kindle up until this point? Last I checked Amazon let a lot of best sellers hike up their prices to get more money out of it.

    Look, Amazon is a big business. They're just as evil as any other big business. They don't care about you, the customer. They care about selling Kindles. They want Kindle books to be cheaper than iPad books.

    Macmillan's contract with Kindle was up for renewal and they asked to change stuff they didn't like. Duh, that happens all the time when contracts are up. Amazon throw a fit, took down the books to try and bully a fixed price point.

    And yes, AMAZON's is the fixed price point. Macmillan's is a dynamic one, reflecting the whole hardcover->paperback cycle that currently exist.

    Are they both acting fairly? probably not. But don't act like Amazon is Robin Hood. If you buy into that Bullshit, you must be very gullible, indeed.

    Don't like $9.99 e-books? No one put a gun to you head and forced you to buy them.

  5. Paul,
    I'm pretty old and not prone to thinking of businesses as do-gooders, not Amazon, not Macmillan. I think that forcing higher prices to be used by all stores with a threat of holding back its authors' e-books for 7 months while giving those to companies that comply with the fixed pricing is throwing a fit and making it legal :-)

    Macmillan in all its time at Fictionwise has not moved on its alleged "dynamic" pricing.
    Sargent is such a miser and so threatened by the idea someone might read an e-book for less than $15 that he won't allow e-books to be in public libraries.

    We agree on one thing. Both companies are out for themselves. In this case, authors are siding with the source of their revenue (frequently with too much animosity and even scorn as in this note toward the customers being addressed) and customers are siding with the company that will cost them less per bestseller. We are all basically selfish.

    Needing to pay a bit more money, one can see, but 50% in one fell swoop with no store Sale events allowed, that's going to be too much for most customers, especially in this economy.

    I haven't acted as if Amazon is Robin Hood - that's your fantasy. Customers act in their self-interest just as authors and publishers do. We all mouth off because it's somewhat important to us.

    Your last sentence is the typical Macmillan author's final forum-posting statement. It's as if you folks are following a script - one that's sure to lose you buying customers because it is so hostile to the audience you want money from for your work.

    Amazon customers are not nearly as gullible as you would love to think, though it may fit with your view of any customers who wouldn't want to pay that much for an e-book. It works the other way around, with publishers and their authors. It's a tough world.

    It WAS amazing to me as I read this that you actually wrote that last sentence. The Amazon forums have other authors there saying writing the same final sentence to other customers but there, in the thousands. Even then, I do get the sense it's a genuine sentiment. Good luck on future sales.

    But you're still exactly right on one thing. Most customers really won't be buying the e-books at those prices.

    Thanks for taking the time to write your point of view.

  6. I found this thanks to your link at jlake's blog, First, I do not agree with jay on this stuff.

    All this is going to do is promote piracy of ebooks, Look at music and movies, same problem....

    Also the assertion that an ebook isnt any cheaper to make/publish/distribute then a "dead tree" version is laughable at best, this whole situation smacks of the greed of troglodytes who lack a true understanding of the internet and how it works, as well as the kind of people that make up the target market for ebooks(i have yet to meet somebody who has and uses an ebook reader thats at least not a little bit of a tech geek)

    I really do feel this is going to come back to bite publishers in the arse......

    I dont buy hard cover books because they are just to dm big to carry around and read, Hell I have started using textaloud to make my own audio books because i can listen to them in situations where i really couldnt be reading :)

  7. AzureSky,
    The textaloud for non-eye-times is a good idea.

  8. Yeah, its not free, but IMHO its worth buying, if you want the best voices the realspeak ausi voices to me sound the best Lee sounds very close to human.
    You should be able to use your kindle to play files you make with textaloud (in mp3 format) as well, I use my sansa fuze with ogg vorbis, it saves space and sounds better at lower bitrate(smaller files)

    I would like to see a decent ebook reader come out that could use text to speach voices to read the book to you, but I think your best option for something like that is likely buying a internet tablet like the archos5 or 7 (they can run windows 7) and just use text aloud on it.

    I am an avid reader, I have had to force (FORCE) myself to not read in bed, because i endup not getting any sleep when i have a good book :P


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