Amazon’s e-book dust-up draws industry ire
Web retailer’s tactics in pricing dispute with publisher Macmillan are seen as heavy handed and have likely damaged Amazon’s delicate relationship with publishers.

By Matthew Flamm
http://www.crainsnewyork.com/article/20100201/FREE/100209987

The fight that broke out on Friday between Amazon and Macmillan over e-book pricing appears to have been settled in the book publisher’s favor—and not just because the giant online retailer put out a statement saying it planned to give in to Macmillan’s terms.
Amazon, which pulled Macmillan’s titles from its site, came out of the fight with egg on its face. The publisher, meanwhile, won new fans.

“In terms of lurching from one position to another and in god-like fashion saying, ‘We’re going to strike these books from our catalogue’—that makes Amazon look very bad,” said Paul Levinson, a professor of media studies at Fordham University. “They have to do better than that.”

Amazon also lost the public relations battle with literary agents, a group that the giant retailer has been trying to woo in recent months. The Association of Authors’ Representatives, a sort of trade group for the agent community, put out a statement Monday applauding Macmillan’s e-book stance and criticizing Amazon’s tactics.

“Having access to our authors’ work used as a weapon in negotiation is an unacceptable turn of events that we roundly condemn,” the statement said. “We believe that Amazon’s punitive choice to stop selling print editions of work by all Macmillan authors was a blow to the industry and to authors.”

The fight between Macmillan and the Seattle-based e-tailer had been brewing pretty much since Amazon launched its Kindle e-reader store and priced most new e-books at $9.99—a considerable markdown from the typical $25 price for a hardcover.

All of the major publishers have been unhappy over Amazon’s pricing strategy, arguing that it lowers the value of a book in consumers’ eyes and threatens to undermine the publishing industry’s economic model.

The latest round in the battle started when Macmillan told Amazon that it was planning to switch in March to an “agency” model for selling e-books—in other words, it would use the same model that five of the six major publishers will be using with Apple, which is launching an iBooks store with its new iPad tablet.

Under this new model, the price of a new e-book rises to $12.99 to $14.99. Amazon, like Apple, would get to keep 30% of the price, with the rest going to the publisher.

According to reports, Amazon was told it could continue to sell Macmillan e-books using the wholesale model and the $9.99 price, but that the publisher would delay the electronic version for several months after hardcover publication.

Amazon has insisted that the $9.99 price was necessary to the growth of the budding e-book business. Since it still pays publishers roughly half the list price of each book, Amazon has actually been losing money on each $9.99 sale. The company does make money, however, on sales of its Kindle e-reader.

Amazon responded to Macmillan’s demands by going to war—removing the “Add to shopping cart” button next to print versions of the publisher’s titles, and removing the Kindle versions entirely. Print books from the publisher, whose best selling authors include Hilary Mantel and Thomas Friedman, were made available only through third parties, which usually involve used editions.

On Sunday, Amazon reversed itself, announcing on its Web site that “ultimately” it would “have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles.”

Despite the announcement, it is not clear when the giant bookseller will capitulate. Macmillan titles were still not offered for sale by Amazon as of Monday afternoon.

Neither Amazon nor Macmillan responded to requests for comment.

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