- February 25, 2010
- Posted by: admin
- Categories: Blog, Business Dynamics
At first, it seemed Apple was currying favor from book publishers by letting them have their way when it comes to iBookstore e-book pricing. Now a report indicates that Apple has required publishers to lower an e-book’s price to below $10 if the title becomes a best-seller. Was it a communication breakdown or a brilliantly executed power play by Cupertino?
At first, it seemed Apple was currying favor from book publishers by letting them have their way when it comes to iBookstore e-book pricing. Now a report indicates that Apple has required publishers to lower an e-book’s price to below $10 if the title becomes a best-seller. Was it a communication breakdown or a brilliantly executed power play by Cupertino?
Apple’s role as the book publishing industry’s white knight may be over even before it has begun. Cupertino may not be willing to allow publishers as much leeway in setting their own e-book prices as previously thought, according to a New York Times report.
After unveiling the iPad Jan. 27, Apple shook the e-book world with its statement on e-book pricing. Several major publishers have agreed to provide content at the iPad’s iBookstore. That sparked a battle with Amazon.com (Nasdaq: AMZN), which capped e-book prices on its Kindle e-readers at US$9.99.
However, Apple’s contract reportedly contains a provision that required publishers to discount their prices on best-sellers.
That may leave Amazon twisting in the wind, as it recently agreed to let Macmillan match ebook Download Free eBook – The Edge of Success: 9 Building Blocks to Double
Your Sales prices on the iPad and give the publisher a bigger cut of the take.
Rust on the Armor
When he unveiled the iPad, Apple CEO Steve Jobs announced agreements with five major publishers — the Hachette Book Group; HarperCollins Publishers; Macmillan; the Penguin Group; and Simon & Schuster.
The terms of the agreements let the publishers set e-book prices and give them a 70 percent take of the selling price.
Publishers indicated they would charge between $12.99 and $14.99 for e-books, well above the $9.99 ceiling Amazon had imposed. Further, Amazon took a 50 percent cut of a book’s selling price.
Apparently, the agreements with Apple had provisions which required publishers to discount e-book prices on best-sellers. They also require publishers who offer hardcover editions of books at less than the industry-norm of $26 to peg e-book prices to the lower level.
What’s Behind the Change?
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.”
This may not be the first change the iPad has seen in its short life outside of seclusion in Apple’s laboratories; shortly after Apple unveiled the device, it hinted that it would cut prices if necessary.
There’s one more possibility — that this is part of a Machiavellian plan by Cupertino to leave the competition flat-footed. “The iTunes model was based on lower prices for music, and Apple ended up being the 900-pound gorilla in that space,” Enderle pointed out. “It never forgot that.”
The iPad’s advent and the unrest it stirred among publishers drove Amazon to consider the agency model and, now that Amazon’s committed to higher-priced books, Apple’s going back to the $9.99 level, Enderle said. “If this isn’t a screw-up, it’s got to be one of the most brilliant coups in Apple’s history.”
Fear and Loathing Among Publishers
Indications that publishers were less than thrilled about Apple’s pricing began appearing earlier this week, as media reports indicated Jobs’ courting of publishers to provide content for the iPad wasn’t going smoothly.
Some publishers were apparently concerned that the revenue model didn’t make sense for those who offered subscriptions. Others were afraid that Apple would do to the publishing industry what it did to the music business with iTunes — drive prices to rock-bottom.
Perhaps publishers might begin flocking back to the Kindle and to Barnes & Noble’s (NYSE: BKS) Nook.
Amazon.com did not respond to requests for comment by press time. Barnes & Noble spokesperson Mary Ellen Keating declined comment.
Article URL: http://www.technewsworld.com/story/69375.html
8 Comments
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who cares?
The iPad is just an expensive toy. It is unable to do more than one thing at a time. It will be the equivalent of the Sony BetaMax
I agree with the answers so far. I don’t like Apple products. Iphone, Ipod, Ipad, they can keep them and Ebook readers are too small and too expensive. I read 90% of what I read off the Internet on my laptop in colour! Give me an Ebook reader that will do that and read Ebooks and is lighter than my laptop and I may buy it. Apple are into too many scams.
Publishers are going all over the map on pricing. Amazon, B&N all seem to think they finally have this “nailed down” only to find out they don’t. In addition to price, there is variance on format, international release, features such as table of contents and foot notes. The list goes on.
The idea that book publishers will follow the same pattern as music publishers is naive. These are different businesses. Most music’s useful publishing life is measured in months. Many books measure their life in years, even decades. Books have also traditionally been sold as objects, nice paper, nice binding, quality photos and other elements that are more tangential to music publishing. So there is also this adjustment for the publishers. Finally, book publishers are much older firms, more entrenched in their ways, more poltically connected. The entire recorded music publishing industry is really not more than 60 years old (in any commercially meaningful way). The book publishing industry is at least 150 years old as an “Industry”.
Last and by no means least is the fact that the iPad will absolutely suck as an eReader. That LCD screen will not cut it for hard core readers. Ultimately it is a large iPhone and not an eReader.
I have seen books pulled back from sale, suddenly change price. Anyone who claims some kind of “order” in this business at this time is delusional.
The Technewsworld article is based on a New York Times story which said that “as more details come to light of the actual negotiations between Apple and publishers, it appears that Apple left room to sell some of the most popular books at a discount.”
The NYT article said nothing about this being a “change.”
Technewsworld says: “The terms of the agreements let the publishers set e-book prices and give them a 70 percent take of the selling price…. Apparently, the agreements with Apple had provisions which required publishers to discount e-book prices on best-sellers.”
Then, the author goes on to call this a “pricing change.” It’s nothing of the kind. The provision was in the original contract, according to the author’s own words. The only thing that’s changed, it seems to me, is the author’s understanding of the contract terms; it is not a “chaotic or cunning” “pricing flip,” it’s just that the author now knows more than he did before about what are private contracts between Apple and some publishers.
It’s also interesting to note that the New York Times article says Amazon loses money on each ebook sale for the Kindle, but “Under the agreements with Apple, both the publishers and Apple should make money on each book sale.” So I don’t think publishers have any reason to be up in arms about the Apple contract, which still gives them a bigger piece of the take than Amazon does.
This “flip” seems to be just another bit of iPad/Apple bashing, and it’s a little unseemly.
This is amazing news for the eBook industry!
The whole mess is ridiculous. E-readers are slow to market because the price of content is over-inflated. What made the original iPod so successful wasn’t the technology – it was the 99 cent song. There’s not a book in the world that is worth more than a buck as a digital copy.
When the publishing houses finally make their emotional break from this pricing stranglehold, then we can have real debate about the qualities of E-readers, not about the ploys of one of the only few manufacturers on the market.
Cunning, kick back and watch this one take off.