Apple’s new world order: Pre-release, iPad has already begun to change digital publishing landscape

Apple’s “iPad has already started to change the landscape of digital publishing: After a few days of a public battle, Amazon was forced to capitulate to a new deal with Macmillan, one of the six largest publishers; on Friday, Hachette started to make noise too,” Andrea Belz reports for E-Commerce Times.

“An excellent summary on The New York Times describes how previously, Amazon set the prices — typically a default of US$9.99 for new releases and best sellers,” Belz reports. “Because the cost to Amazon is typically $12.50-$17.50, this scheme lost money for the e-tailer but promoted the sales of the Kindle reader.”

“In the new world order, the publisher will set the consumer price and the online retailer will simply be the agent, taking a 30 percent commission; online book sellers will move to acting as an intellectual’s eBay Books sold electronically will generally cost $12.99-$14.99,” Belz reports. “

“Unfortunately for Amazon, management discovered that you cannot simply take a page (so to speak) from the Apple playbook and apply it to any industry,” Belz reports. “Amazon basically copied the Apple iTunes model — a fixed, low item price for the content that promotes the sales of the hardware — and then discovered that Apple changed the rules. How did this happen?”

Unlike the musicians, “writers and their agents/publishers do not have an opportunity equivalent to the high-margin live performances; the entire margin has to be generated with the content sales,” Belz reports. “Since Apple’s deal lets publishers attempt to preserve content, it may be as simple as my grandmother’s saying: ‘To make money, you have to let other people make money.'”

Belz writes, “This is where the strategy gets interesting. Apple starts to exploit the ‘iEcosystem’ that it has already created to promote hardware and software. Then it takes out Amazon and other competitors to dominate e-book distribution. At that point, Apple can return to the publishers with a new deal.”

Full article here.

MacDailyNews Take: “Amazon’s Kindle hardware, which wasn’t much to speak of in the first place, is dead… If Jeff Bezos isn’t sweating…” MacDailyNews Take, during live coverage of Jobs’ iPad unveiling, January 26, 2010

32 Comments

  1. Kindle will only survive if the cost really comes down and it can be used for reference. An iPad is all well and good but flicking back and forth between a text book and pages (or whatever text app you may use) is going to become old fast. You need to be able to look at something whilst you type/write out stuff. e-ink has it’s advantages and if they can get the price for the hardware right they may have a market to supplement the iPad or indeed a laptop.

  2. iCal this line:
    Belz writes, “This is where the strategy gets interesting. Apple starts to exploit the ‘iEcosystem’ that it has already created to promote hardware and software. Then it takes out Amazon and other competitors to dominate e-book distribution. At that point, Apple can return to the publishers with a new deal.”

    mark my words oh my droogies, Apple doesn’t need to go back with a “new deal” (code for price increase), except perhaps to lower their margin, sweetening the deal for the content source even further.

  3. Belz’s analysis is totally wrong, which is understandable since he’s a tech journalist and knows nothing of book publishing. Amazon was not following Apple’s fixed music pricing with its $9.99 price, but was rather following the long tradition of the freedom a book store has to set the prices for its books. Publishers would never dare attempt to enforce prices on bookstores, which can establish whatever price it wants. I’ve worked in bookstores, and know that publishers typically sell books to bookstores for half to two-thirds the suggested retail price. From there a bookstore has the freedom to set its own actual price for a book, which is the reason it can have sales and the like.

    As a bookseller Amazon has been using the same model. It gets books from major publishers and can set whatever price it wants in the marketplace. The difference now is that the major publishers are trying to *force* Amazon to sell books at *their* own set pricing, which is something new to book publishing. The book publishers are trying, in effect, to take away Amazon’s right to set its own pricing on goods that it sells.

    This is the exact opposite of what tech journalists like Belz and MDN are trying to tell us: rather than Amazon “forcing” a $9.99 price on publishers, the exact opposite is happening now: the publishers are trying to force a bookseller–in this case Amazon–from setting its own prices in the marketplace. This is anti-competitive, and Amazon shouldn’t be forced to change its rightful practices in this way.

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