“E-books are booming. Although they account for only an estimated three to five per cent of the market, their sales increased a hundred and seventy-seven per cent in 2009, and it was projected that they would eventually account for between twenty-five and fifty per cent of all books sold. But publishers were concerned that lower prices would decimate their profits. Amazon had been buying many e-books from publishers for about thirteen dollars and selling them for $9.99, taking a loss on each book in order to gain market share and encourage sales of its electronic reading device, the Kindle. By the end of last year, Amazon accounted for an estimated eighty per cent of all electronic-book sales, and $9.99 seemed to be established as the price of an e-book,” Ken Auletta reports for The New Yorker. “Publishers were panicked. David Young, the chairman and C.E.O. of Hachette Book Group USA, said, ‘The big concern—and it’s a massive concern—is the $9.99 pricing point. If it’s allowed to take hold in the consumer’s mind that a book is worth ten bucks, to my mind it’s game over for this business.’”
“At the Yerba Buena Center, it took a while for Jobs to mention books, and when he did he said that ‘Amazon has done a great job’ with its Kindle,” Auletta reports. “‘We’re going to stand on their shoulders and go a little bit farther.’ It would probably have been more accurate to say that Jobs planned to stand on Amazon’s neck and press down hard, with publishers applauding.”
Auletta reports, “An Apple insider said, ‘He thinks Amazon is stupid, and made a terrible mistake insisting that books should be priced at $9.99.’ …A close associate of Bezos puts it more starkly: ‘What Amazon really wanted to do was make the price of e-books so low that people would no longer buy hardcover books. Then the next shoe to drop would be to cut publishers out and go right to authors.’ …For the time being, Apple’s entrance into the book market has given publishers a reprieve. A close associate of Bezos said, ‘Amazon was thinking of direct publishing—until the Apple thing happened. For now, it was enough of a threat that Amazon was forced to negotiate with publishers.’”
“Most publishers mistrust Amazon and think it is unnecessarily secretive. It won’t tell them details about customer habits, or the number of Kindles sold, or what it costs to make a Kindle,” Auletta reports. “It won’t even disclose the percentage of revenues its book sales represent, saying only that “media”—movies, music, and books—accounted for fifty-two per cent of sales in 2009.”
“Publishers say that the negotiations with Apple were less contentious. There were arguments over the price of e-books, with publishers wanting the top price set at seventeen dollars and Apple insisting on fifteen,” Auletta reports. “‘Once Apple had determined that they were going to accept the agency model,’ a publisher said, ‘they were very tough: Take it or leave it.’ But the Apple people ‘had a much more agreeable feel than Amazon did. They said they would share some consumer data about buying e-books. We have no such data from Amazon.’”
Auletta reports, “‘Ultimately, Apple is in the device—not the content—business,’ the Apple insider said. ‘Steve Jobs wants to make sure content people are his partner. Steve is in the I win/you win school. Jeff Bezos is in the I win/you lose school.’ …Apple agreed to the agency model for just one year, and, as publishers are acutely aware, Jobs has a history, with music and television companies, of fighting to reduce prices. One publisher said, ‘Maybe Apple will want to come back in a year and bite our heads off.’”
Full, extensive article – highly recommended – here.
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