Monday, February 1, 2010

Amazon should give a $5 credit for $15 Macmillan bestseller books

One of the things noted yesterday in Amazon's white-flag statement yesterday was: "We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms ..."

I wrote:
'What happens between now and "ultimately" should be somewhat interesting... '
In an optimistic mood for a change, I suggested that if there was time for a compromise arrangement, there might be a workable solution and suggested one, and am adding another one today.

1.   The e-book pricing on a Macmillan NY Times bestseller could be $15 for the FIRST month of release and $9.99 after that.   Most would be happy enough to either wait or buy.

    The problem with that is that Macmillan has let it be known that they've wanted a SEVEN-month wait after hardcover release date before releasing an e-book.
    To me, that alienates an entire customer base (much of which is not only not interested in hard-cover books but very active online in fighting pricing above $10 for bestsellers).  I do get the impression Macmillan views e-book customers as very low-value unless they can get them to pay the same prices made for new bestsellers, always discounted heavily -- but in those cases there is a physical book without DRM restrictions and with the ability to loan or sell or even give away that book.

  Worse, Macmillan's John Sargent actually feels that if they delay the hardcover Kindle edition release, these people will go buy a hardcover one.

  Think again.  The one thing that Macmillan earns with that delay is an angry audience that had been eager to pay them, immediately, additional money while not interested at all in buying the mainstay hardcover books.

2.   Amazon, with each Macmillan best seller sold at the proposed $15  (which affects Amazon's marketing ads promising that NY Times bestsellers are, in general, $9.99 in the U.S., could give a $5 credit toward another Amazon best seller or toward a book priced at $15.  They could still, in effect, have a $10 price on those bestsellers.

  ABCNews reports:
' "We are in discussions with Amazon about how to resolve our differences," Macmillan CEO John Sargent told The Associated Press Sunday. He declined to comment further. '
Let's hope they have a solution geared to the customer.

  There really IS a problem for Amazon's marketing and global description of its NY Times best e-book sellers costing only $9.99 (+ $2 outside the U.S.) on the Kindle.  They have always carried a disclaimer along with the marketing blurb:
"New York Times® Best Sellers and New Releases are $9.99, unless marked otherwise" (U.S.)

Now they can awkwardly add "or published by Macmillan."

That's not even entirely a joke.  There are so many Macmillan books (including its imprints) that unless Amazon makes this clear
( via the sudden temporary removal of book-buying capability for a publisher that insists on a bookstore owner becoming only their 'agent' with NO control over how it chooses its own sell-price for its own customers )
on its own new way for the bookstore owner to operate), customers and periodicals would likely blame Amazon for the sudden flow of $15 bestsellers books despite Amazon's advertising of its most popular feature.

  In other words, Macmillan's insistence that Amazon act as an "Agent" for their books, rather than as an independent book store owner, creates a new situation that can hurt Amazon's entire Kindle premise.  With Steve Jobs so heavily involved as is documented, one can wonder if that isn't a main goal.  As we've seen, John Sargent is not e-book friendly.

Macmillan authors are out in force on the forums everywhere, as are people who don't understand the normal setting of prices at bookstores anywhere.

  Some authors think (or were helped in thinking) that their cut is based on a book store's sell-price for a book.
  No, it's based, as I said, on a mutually-agreed percentage of the LIST price set by the publisher when the agreements are made.   On a book with a list price of $25, Amazon is said to usually pay large publishers about 50% of that, or $12.50 (and from this the publisher pays the author).  Note that $12.50 is more than $9.99 of course, but what counts for the publisher/author is the list price.  They still get paid based on the $12.50 figure.

The correct but inappropriate mantra on forums today is

    "The publisher should have the right to set its own prices."

Well, Of course they should.  And the large publishing houses wanting to raise e-book prices do have that right and always have.

I follow publishing forums, and the information is consistent.
  Normally, the bookstore owner buys from the publisher, and the cost, to the bookstore owner, of that purchase is decided by a mutually-agreed percentage of the Publisher-set LIST price.  That is a given.

That is the price the publishing houses always get to set.  And have been setting here.   From that List price basis, set by the publisher, they pay the author also.

The difference:
Bookstore owners set the actual SELL-price for the customers, based on their knowledge of their audience.

 Price it too high and the bookstore has few sales and loses money.

  Price it too low and the bookstore can lose money with low or nil margins.

 The store, though, has the option to offer loss-leaders so they can make money from other items bought by customers attracted to the loss-leaders.  (Regular buyers will note that some stray bestsellers are priced higher but there but I haven't seen much about this on the forums discussions.

Today, I signed up for email copies of Macmillan notes in ONE forum thread and received 486 of them in a short period, deleted them, and cancelled it.

Once more, the publisher AND author are paid according to the publisher's SET LIST price,

The bookstore needs to keep a profitable business and decides what SELL price will work best for it.

I don't understand the narrow-mindset of a few large publishing houses.  All they're doing when delaying e-book releases is *losing* additional money that Kindle customers want to send on release day.

 Money is spent on the Kindle specifically to read weightless books in a personal library, and the e-book purchases are used to justify buying an e-reader in the first place.  The last thing wanted by that segment is a hard-cover book.

The world changes and the publishers should think more constructively about how they will deal with electronic/digital books instead of rushing to lose money for themelves and for the bookstore owner.  Never mind the (e-book) customer (which is the last thing on some publishers' minds these days.

"Why can't it be like the old days?" Time just doesn't stand still for anyone.

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  1. I think the $15 credit is a bad idea, mainly because I think the only effective way that readers have to send a message to Macmillan is by not buying their books.

    Here's a handy list of Macmillan-related publishers in the USA (posted in an Amazon thread)

    * Macmillan Publishers (United States) (formerly called Holtzbrinck Publishers)
    o Farrar, Straus and Giroux
    + Faber & Faber
    o Henry Holt and Company
    + Holt Paperbacks
    + Metropolitan Books
    + Times Books
    + Owl Books
    o Palgrave Macmillan
    o Picador
    o Roaring Brook Press
    + First Second Books
    o St. Martin's Press
    o Tom Doherty Associates
    + Tor Books
    + Forge Books
    o Bedford, Freeman and Worth Publishing Group
    + W.H. Freeman
    + Bedford/St. Martin's
    + Worth Publishers
    o Nature Publishing Group
    + Scientific American, Inc.

  2. A $5 credit on a $15 book towards another $15 book is actually an effective price of $12.50, not $10.00. I actually wrote an equally lengthy article today on the topic, but came up with a different opinion then you. This is quite the polarized topic, for sure.

  3. Scott,
    Yes, very polarizing. It's part of why I used the word 'Machiavellian' the other day.

    Somewhere sits the smiling puppeteer.

    You're right about the effective $12.50 but it's a looping $5 credit and a compromise.

    As for the theory in your post, this was exactly Macmillan's rationale as detailed in the WSJ article I linked to, which explained that Steve Jobs asked the publishers to raise their prices.

    A bigger point will be that a lower percentage on a book that sells at the right price beats easily a higher percentage on a book that does NOT sell.

    Macmillan does not want the e-book to sell under those circumstances.

    And that's the heart of the matter. Very shifty and effective trick by Macmillan.

  4. I agree with newwine: it's up to us to BOYCOTT any Macmillan product until they figure out that the time have changed, and they better change too or go the way of the music industry!

  5. Well written Andrys.

    I think the $5 credit is a good idea, as long as it didn't break Amazon's contract with Macmillan (and I'm sure they would have some sort of dispute over it if it was ONLY Macmillan books this was done for).

    I can see why the Macmillan authors are upset, but as you say, some of them either seem to have the facts wrong, or are unwilling to speak against their employer.

    What Macmillan are doing is wrong. As long as Amazon pays them an agreed price, they should be able to sell those books at whatever price they choose. I mean, do publishers complain when books are on a 3 for 2 offer in a bookstore? That 'devalues' books in the same way they are claiming a $9.99 price point would, as customers then expect they can get a free book, essentially (since these 3 for 2 are almost constantly on bestsellers, all year round).
    Macmillan are being very short sighted, and if they don't embrace the e-book world soon and see that an e-book is a different product, with completely different selling points than a hardback, therefore the pricing SHOULD be different, then they will lose out.

  6. Thanks, Gina

    I think the $5 could be legitimately applied only to a publisher who insists on that higher price for a bestseller It also would indicate that Amazon doesn't stand behind that 50% increase dictated by the publisher... while noting silently that this is Macmillan's price.

    I agree with everything else you say! Liked the 3 for 2 sales example.

  7. I think what the troglodyte's want is for ebooks to fail, Im glad to see RandomHouse supporting amazon, RH has had my respect for some time due to their quality audio books (i have a good number of them)

  8. I agree that the Big5 (minus RH)prefer that e-books fail, but I think it's important that RH stop disabling text to speech since it cannot compete with a real audio book and they're hurting mainly those who have vision problems.

  9. newwine,
    I forgot to reply to yours.

    I am continuing to buy Macmillan Kindle books IF they're no more than $9.99 ...

    The message should be that we'll buy their bestseller e-books if they're not more than $10.

    But I see your point on buying at $15 if we get an Amazon credit of $5 on another >$10 book.


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