Amazon, Macmillan, and the eBook Price War

In response to this battle Amazon announced recently that they would change the publisher/retailer split on eBooks from 50/50 to 70/30 in favor of the publisher. This was widely seen as a move brought on by the imminent announcement of the iPad and speculation surrounding eBooks on iTunes (which turned out to be iBook). But it’s more complex than that. With the large number of eReaders coming on the market, along with the iPad and other tablets, plus the growing number of places to easily buy eBooks that aren’t locked in to one device, Amazon’s challengers are numerous. The main weapon they’ve got is price.

The new revenue split is aimed at bringing down Kindle book prices and will “drag everyone else’s rates down” according to Lassen. “[This] will allow publishers to have lower prices across the board, while still being able to cover their investment and overhead.” However, it seems that Macmillan’s plans aren’t for downward prices. The letter in Publisher’s Lunch states that “At first release, concurrent with a hardcover, most [eBook] titles will be priced between $14.99 and $12.99.” Sargent did say that the overall range would be $14.99 to $5.99 and that “Pricing will be dynamic over time.”

Next: Where do authors and consumers fit in?

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  1. John Chu Says:

    The 70/30 split applies only if you use the Kindle Digital Text Platform. i.e., only if you publish via Amazon’s self-publishing arm.

  2. Michael Canfield Says:

    I’m really surprised the hear that print costs amount to only 1% of retail price point. It seems like I hear all the time that publishers now don’t want books longer that 125000 words (and lately I’m hearing 90 – 100K0 especially from newer writers, in order the keep the retail cost of (in particular) hardbacks low.

    Good post, K.T. Lots of thought-provoking information.

  3. Jim Henley Says:

    Dear KT Bradford: Every other source I’ve checked the last couple days indicates that printing costs are TEN TIMES what you quote your source claiming – 10% of cover price, not one percent. At face value, your source is saying it costs A QUARTER to print most new hardcover books. Did this pass your smell test? Did you attempt to verify the claim? Or is this an uncorrected typo?

  4. K. T. Bradford Says:

    I’ve gotten numbers from some other sources, too, and found a pretty wide range, but I updated the post to reflect the 8 – 10% average seen by most publishing houses.

  5. Jim Henley Says:

    Right. 10% of the retail price is a significant amount! That’s 20% of the publisher’s take on a trade book at standard wholesaler discounts. And if you’ve previously followed the book business, you’ll know that you can’t get through a season without publishers complaining of “rising printing costs” and their dire effect on pricing.

    The other thing none of your sources bring up is returns and never-sold stock. Together they average 40% of all copies printed. Together, manufacturing costs and returns reserve will run $6-9 dollars on a new hardcover, depending on where that book falls in the typical $25-30 price range. THAT is the size of the windfall when the business moves from paper to bits. What Macmillan and your friend Jeremy are implicitly saying is that NONE of that surplus value should go to readers; we should keep paying what we’ve been paying while the institutions upstream from us pocket the savings.

  6. David Fouch Says:

    Jim,

    Can you site your sources, I could actually use that information for a current paper I’m working on.

  7. David Stillwell Says:

    Retail price being different from sale price? There is no way that a 350 page hardcover book with it’s slick magazine cover can be produced for under two dollars. Even under four dollars sounds suspicious to me. paper, ink, binding and that slick cover. Even with cheap paper that yellows in six months it would have to cost four dollars. Then there are the other costs mentioned by previous posters.

    The publishers could always sell the electronic books on their own Web sites in PDF form. $4.99 would be very profitable for them done that way. If people want the books at that price in that form then word will spread. If I were Amazon that is what I would be worried about, that Amazon would just become an advertiser to drive buyers to the publishers Web site for the E-book.

  8. speedball Says:

    not completely true
    there ARE costs to converting a real book to an ebook
    so that it will be readable and usable in that medium

    ebooks also have unique costs that real books do not

    one big factor that is overlooked is all the middlemen with their
    hands out wanting a percentage. if i gave a percentage to everybody
    who asked then i would be paying 120% or more for the privilege of
    publishing my books.

    i pay fixed charges based on value. then i can guarantee a profit
    so that i can afford to keep creating books, and authors will want
    to keep writing them.

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