Amazon won't be undersold on book pricing

The New York Times's Nick Bilton confirms what many of us suspected: that Amazon would not have agreed to a fixed pricing that allowed Apple, Barnes & Noble, or any other bookstore to offer a lower pricing than Amazon's despite Macmillan's insistence on higher pricing while Apple has negotiated a $9.99 pricing for bestsellers.

There were several news stories that asked if Apple might have 'burned' or 'undercut' Amazon by suggesting that publishers raise e-book prices, with four publishers then pressuring Amazon to go along with this because they'd have Apple to rely on based on Apple's recommendation of those higher prices.

MacNewsWorld, in an article Feb. 18, titled "Apple's E-Book Pricing Flip: Chaotic or Cunning?," wrote:

'Apple's reasons for the pricing change, if the report is correct, remain murky.  They could be evidence that Apple's gaming the market.  "Apple's trying to play both sides of the fence," Andrew Eisner, director of content at Retrevo, told MacNewsWorld.  "On the one hand, it's trying to appear friendlier to book publishers with its willingness to let them charge higher prices; on the other, they know they're going to be out there doing battle with the likes of Amazon and Wal-Mart (NYSE: WMT), who already skirmished in a book price war late last year."

Or, Apple could be wracked by internal dissension. "It sounds like there could be several different people working on this, and I wonder if Steve Jobs was involved at all," Rob Enderle, principal analyst at the Enderle Group, told MacNewsWorld. "It does seem like the change is kind of fast, and it's scaring all the publishers." '

  After the ensuing brouhaha with Macmillan's John Sargent insisting on his $15 new e-book pricing, the NY Times found that Apple had inserted language into their "Agency" agreements that the publishers, whom they'd encouraged to raise their pricing, would have to allow Apple to sell e-books for $9.99 once they hit the bestsellers list.

  What?  Yes.   They'd be allowed to do what has been Amazon's policy all along.  Note all the Amazon Kindle marketing about NY Times bestseller books for $9.99 since the birth of the Kindle.

  So, we're to think that the publishers had no idea of the $9.99 bestseller-provisions going into their 'Agency' agreement with Apple?  If they weren't aware, then Apple inserted these in a later version.

At any rate, I'd opined in the comments-area here that Amazon's lawyers would have added language to ensure that Amazon would not be undercut by any other book-selling entity   (if any new changeover to the Apple-style "Agency" agreement effective March 2010 had been signed or finalized with Macmillan so soon after the iPad launch and corresponding Macmillan deal with Apple's Steve Jobs).

 In fact, the NY Times wrote at the time that there was "likely" some kind of language to protect Amazon plus a bit more:

' So what did Amazon hold out for?  The company would not comment, but it is likely that Amazon demanded that no other e-book vendors, such as Apple, get preferential access to new titles, or any kind of pricing advantages.
  Amazon may also have negotiated terms into its agreement with the publisher that would allow users of Kindles or Kindle software to lend e-books to each other. '

Today's NY Times article by Bilton makes it clear that Amazon hasn't been standing still in this area:

' Amazon...is determined not to be out-priced by Apple or any other rival.

Since December [before the iPad launch], Amazon has been pushing publishers to sign a new round of legal agreements that would guarantee that the Kindle price for their content is always the same or lower than the price on other electronic reading devices, such as the iPad or the Sony Reader.  The clause, a variation of a legal concept known as “most favored nation,” would guarantee that Amazon’s customers would always get the best price for electronic versions of magazines, newspapers and books. '

What I didn't know was that "many e-publishing contracts with Amazon are still in a month-to-month cycle as the publishers negotiate to try to gain more revenue or more control over their content."  For some reason I had just (wrongly) assumed they were yearly or at least quarterly (which Macmillan's appears to be).

The article also notes Amazon's more complex negotiations with newspapers and magazines, which has to do with the "tiny slice" of revenue (typically 30%) for the publishers.   I've written earlier that insiders have been quoted as saying that Amazon shares the rest of the revenue with the wireless providers, who deliver the subscription content on a daily (or more frequent) basis.

  Despite subscription-publisher discontent with the Amazon contracts, some are considering signing the new Amazon contract while offering for the iPad a free, limited application for their content, as they'd rather not lose their current subscribers on the Kindle.  Also, the publishers have not been ecstatic about their current negotiations with Apple.

When the Kindle can display richer types of media (probably near the end of this year), subscription publishers could then, Bilton writes, release a paid product that looks and works the same across multiple devices. Below are ways to Share this post if you'd like others to see it.
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