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Amazon capitulates to Macmillan's e-book pricing demands

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As many of you know, the e-book pricing wars came to a head on Friday and Saturday, when Amazon stopped selling Macmillan titles (St. Martin’s, Holt, and Farrar, Straus and Giroux books), though customers could still purchase books on the site from other sellers. Macmillan CEO John Sargent issued an impassioned plea on Saturday night to explain his company’s position, and last night, Amazon gave in, posting a statement to customers on its Kindle page that said, in part, “We want you to know that ultimately, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books. Amazon customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. We don’t believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative. Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!”

As someone who has been following this drama, and reading all the comments on this and many other books blogs, I’m alarmed that so many people seem to see Macmillan as the villain here. It’s not that simple. The book business has never had high profit margins (I believe 3 percent is considered fairly healthy, which ought to give you some idea.) It costs an enormous amount of money to produce a book. The author is paid an advance; the book is edited and copy-edited and often put through a legal check; a jacket is designed; the publisher pays for marketing (ads!) and publicity (sending authors on tour, or, if they’re lucky, paying to bring them to New York so that they can appear on a national TV show). The printing, binding, and shipping of a title are not the real expenses involved in publication. The issue that Macmillan had with Amazon is a very real one: Given the punishing terms that Amazon insists upon (most e-book profits are going to Amazon, not to the publisher or author), publishers literally are often losing money on their e-book ventures with the company. What Macmillan wants to do is what it calls “agency pricing,” that is, offer the e-book for more money when it first comes out, and then decrease the price as time passes — much in the way that a book is first available in hardcover and then in paperback.

This is a gross oversimplification, but what it comes down to is this: Unless all publishers negotiate better e-book pricing deals with Amazon, the number of books being published will decline. You won’t see a book like The Help. It will never see the light of day, because companies just won’t be able to take a chance on unknown authors. And small literary novels and short-story collections will suffer the most. They are often money-losers anyway, subsidized by companies’ bigger commercial successes. As the percentage of e-book sales rises, publishers simply will not be able to continue putting them out unless Amazon agrees to different terms.

As of 8 a.m. today, the “buy” buttons at Amazon have not been reinstated on any Macmillan titles I checked.