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Macmillan Pens Open Letter to Authors and Agents

You can read the full text for free here but essentially it sounds like this dispute is not one that will end happily for readers. Macmillan wanted to sell the books via an agency model wherein the publisher sets the price and the retailer gets a cut. In an open letter to Authors, Illustrators, and Agents (not readers, because who cares about them), John Sargeant said:

I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles…Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.

Macmillan wants to be in control of the prices and will not allow discounting beyond a certain point. This is called retail price maintenance. It used to be illegal for years and years, but in 2007, the Supreme Court in Leegin said that RPM was okay. Many states are opposed to this and have sought Congressional help in overturning Leegin. It will be an evolving legal issue.

Amazon clearly wants to sell books for $9.99. It has created consumer expectation at this price point. Because Amazon won’t agree to Macmillan’s pricing, Macmillan won’t allow the sale of Kindle versions of its ebooks. In response to Macmillan’s desire to dictate minimum pricing, Amazon has removed the buy it now links for the paper books although all the books appear to be available from the secondary market on Amazon.

The reason for Macmillan’s position isn’t that they want to bring reasonably priced ebooks to the market. The reasoning is that $9.99 ebooks devalue the hardcover and move consumers away from being willing to pay a hardcover price (although very few people pay full retail for a hardcover). Teresa Nielsen Hayden (Tor publisher, division of Macmillan) puts it this way over at Boing Boing

I was just explaining over at Making Light, while a fixed $10 price point would undoubtedly be good for Amazon’s ebook business, it would take a shark-sized bite out of the market for hot new bestsellers, which is trade book publishing’s single most profitable area.

This certainly isn’t the end of the Macmillan and Amazon story. It is merely the beginning. As an avid ebook reader, I know I’m getting the shaft here by both Macmillan and Amazon. Amazon cares about creating market dominance. Macmillan cares about pricing ebooks as high as possible to preserve the exalted hardcover (and Macmillan’s business model).

Other publishers can follow suit although they can’t collude together to blackball Amazon. This would be clearly anticompetitive but there’s nothing improper about Macmillan signalling its intent to do something in hopes that all other publishers will follow suit. The more publishers that do what Macmillan is doing, the less power that Amazon has to create its own market price for ebooks.

In the meantime, what does a Kindle owner do in order to keep using the device but still avail themselves of the books out there? There is a fix that don’t involve stripping the DRM. One is to figure out what your Kindle PID is and use that to download Mobipockets at other stores. The second step is to fix the mobipocket so it can be read on the Kindle. This does not strip the DRM but rather merely replaces one code for another.

Of course, the best thing for the reader is to strip the DRM and there are many, many tools out there to do this.

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com

42 Comments

  1. Elizabeth Burton
    Jan 30, 2010 @ 18:26:48

    It should also be noted that all multi-format books at Fictionwise include a Kindle edition. Granted, that won’t help when one desires a MacMillan title, but it does open the door to discovering new and talented writers who are published outside the hallowed boundaries if NYC.

  2. Bonnie
    Jan 30, 2010 @ 18:27:12

    This is so depressing. Sigh….

    I hate these people.

  3. Karen Burns
    Jan 30, 2010 @ 18:29:08

    I’m also an avid Kindle user. Over half the books I’ve purchased are ones I’d never have bought in print. It’ll be interesting to see what happens with this. Hopefully, my Kindle won’t be wasted money down the road.

  4. A
    Jan 30, 2010 @ 18:31:29

    In an open letter to Authors, Illustrators, and Agents (not readers, because who cares about them),

    It would be counterproductive to compose open letters to illiterates. Obviously, the addressees are readers.

  5. Bonnie
    Jan 30, 2010 @ 18:33:27

    @A:

    Oh for fuck’s sake. Geez…

  6. Jessica G.
    Jan 30, 2010 @ 19:07:26

    These fools (Macmillan) don’t realize several things:
    1) Me, along with many other ebook users, didn’t buy hardcovers before we got our ebook devices. With the $10 price point, I will buy them. So what’s better? Me buying the ebook, or waiting to buy the pbook when it comes out or skip buying altogether and just going to the library?

    2) I have a budget for books. I spend a certain amount each month on books. I don’t spend less. If I get cheap or free ebooks, I JUST BUY MORE EBOOKS. Duh.

    3) NOTHING justifies selling an ebook for $14.99 when the mass market is only $7.99. Lisa Kleypas’ Tempt Me at Twilight” was a good example of this. If you read the letter, it’s clear this is the practice they want to continue.

    This really fires me up. If they continue to pull this sh*t, I will make it a point to not buy any of their books ever again, instead I’ll get them from the library, used, or pirate them (and I don’t condone piracy).

    I’m glad amazon is doing this. I know it hurts authors, but really, can anyone support this tomfoolery?

  7. KindleVixen
    Jan 30, 2010 @ 19:30:02

    Just want to mention that some ebook stores will not take the Kindle PID number…. fictionwise is one of them. You can however buy the multiformat at fictionwise. I am not sure about mobipocket, maybe someone else knows! I hope this changes now tho….

    You can however use the info linked above to get your Kindle PID and download library books to read on your kindle. Its is even easier than the links above if you have a Mac.

  8. anon
    Jan 30, 2010 @ 19:58:22

    “Of course, the best thing for the reader is to strip the DRM and there are many, many tools out there to do this.”

    I’m cute, gay and blond. The only stripping I know about is with my pants.

    I’d love to see a more in-depth piece on the technical aspects you just mentioned.

  9. Maria E. Schneider
    Jan 30, 2010 @ 20:11:15

    It has been pointed out elsewhere that this was a paid ad taken out as an “open letter.” In other words, this isn’t an email being reprinted by Publishers as a news item. (I point it out for clarity–some blogs are reporting it is a copy of an email.)

    The “windowing” in the “letter” is apparently a reference to the possibility that unless Amazon agrees to the price structure stipulated, Macmillan will “window” the ebook releases TO AMAZON–ie Amazon will not be offered the opportunity to sell the ebooks until 7 months after the ebook has been made available elsewhere.

    This interpretation is not mine; I’m only repeating what I read from other posters quoting ye old “industry insiders.”

    It’s interesting. It’s a mess.

  10. Amazon, Macmillan, Apple, and ebooks: Marx is freaking out | Bibliotrek
    Jan 30, 2010 @ 20:53:55

    [...] Author posts about a letter from Macmillan to authors and agents (but not readers!) Tags: Amazon, Apple, ebooks, Kindle, Macmillan Comments RSS [...]

  11. A Reader
    Jan 30, 2010 @ 21:07:17

    The vast majority of the books I buy come from Amazon (some epubs & store impulse buys make up the rest) and that’s not going to change. I’m not going to go out of my way to buy a Macmillan book even for a favorite author–it’s all about my convenience at a price I’m willing to pay. I’ll happily pirate any new releases I can’t pre-order on Amazon and don’t get to a store to buy or simply do without.

    Play your pricing games and withhold your ebooks to make your point if you want to but it won’t be at my expense that’s for sure. Companies aren’t the only ones that can have a “bottom line” mentality so don’t make it hard for me to buy your product or I can assure you I won’t.

  12. seressia
    Jan 30, 2010 @ 21:21:48

    I gotta say, deleting sample chapters people already downloaded is a shit move. Yet another reason to stick to my netbook. I can buy ebooks from where I want and I decide how much I’m willing to pay by the amount I actually spend.

    My take on the latter was that Macmillan would scale their ebook prices: one price when hardcover comes out, another (lower) price when the paperback is released, still another price for trade releases. Maybe I read that wrong though.

  13. Kindle Vixen
    Jan 30, 2010 @ 21:34:38

    I have a feeling the sample chapters are still property of the publisher…. and for all we know MacMillan demanded they be removed since they are never purchased. I doubt we will know unless Amazon makes a statement, but I imagine there are some legal issues regarding them.

  14. JulieB
    Jan 30, 2010 @ 21:52:21

    Here’s a blog post at Laptop Magazine about the e-book price war. It has some interesting statistics about what it costs a reputable publisher to produce an e-book and what cut Amazon is taking from publishers right now. (Hint: They’re taking a higher percentage than they do for print books.)

    I’ve read in a couple of different places that many of those titles are loss leaders for Amazon. It’s their business if they want to sell them at a loss, obviously.

    I also believe that the market will eventually find a proper, fair price for e-books – but only if the publishers and 500 pound gorillas of the content distribution world stop their pissing contest.

  15. Ridley
    Jan 30, 2010 @ 21:58:59

    Alternate thread titles include:

    Macmillan Says “Ready, Set, Go!” to Book Pirates

    Publishers Desperately Jamming Genie Back in Bottle. Genie Declares, “Ouch”

    In Soviet Russia, Prices Fix You

  16. Rebecca Herman
    Jan 30, 2010 @ 23:20:33

    I hate, hate, *HATE* ebooks. Pretty much can’t put into words how strongly I despise the things. I never read them. If Amazon is willing to mess with the availability of the print books *I* want to promote their precious Kindle monopoly, then they have just lost my business. I will go to B&N and Borders instead.

  17. neva
    Jan 31, 2010 @ 00:46:33

    @Rebecca Herman: Bully for you but there are many people out there who do not want to buy print books – myself being one of them. I literally do not have the space to house the number of print books I would like to buy. It is absolutely ridiculous to price an ebook higher than a print book and it absolutely promotes piracy. Do you know what Macmillan’s stand will make me do? Buy a secondhand print copy that I will then share with as many people as possible. Or will throw out (which I hate). Screw Macmillan.

  18. Rebecca Herman
    Jan 31, 2010 @ 00:54:55

    @neva: and that’s good for you – if you don’t want to buy print books, I am not going to hold a gun to your head and force you to. But don’t expect those of us that only want print books to be pleased with a company that is refusing to sell us what we want to buy over a disagreement they had over a different product we don’t have any interest in.

  19. CC
    Jan 31, 2010 @ 01:14:20

    Ditto Rebecca.

    I’ve tried to download ebooks and failed over the years. From time to time I think if the price of Kindle comes down, well, I’ll get one. Then Amazon does a fair imitation of an alpha-chest-beating-hero and I’m over it again.

  20. neva
    Jan 31, 2010 @ 05:11:12

    @Rebecca Herman: The difference is that Macmillan is applying their price hike to ebooks across the board – not just amazon. So unlike you I DONT HAVE A CHOICE

  21. Karen Scott
    Jan 31, 2010 @ 06:24:47

    If Amazon is willing to mess with the availability of the print books *I* want to promote their precious Kindle monopoly, then they have just lost my business. I will go to B&N and Borders instead.

    @Rebecca I bet that your boycott lasts all of 20 seconds.

    If all the people who said they were gonna stop buying from Amazon actually did as they threatened, Amazon would probably listen to readers more.

    I think Macmillan are the wankers here though, their fear of digital books trumping their print stuff is making them act stupidly.

    Bah, saying that, I pretty much hate both parties at this point. They’re both money-grabbing amoral bastards, and I hope they take each other out.

  22. Rebecca Herman
    Jan 31, 2010 @ 06:33:13

    So one individual deciding to take their business to a store that will provide a better selection is now a boycott? *shrug* I don’t consider it a boycott since I’m not trying to get other people to not shop at Amazon. But right now Barnes and Noble and Borders are just a better choice for me – their prices are just as good for the types of books I buy, so I’d rather give my money to a retailer willing to sell me any book I want.

  23. brooksse
    Jan 31, 2010 @ 08:19:56

    @Rebecca Herman: It’s a business. Businesses have the right to offer whatever products they choose to offer. If they can’t come to an agreement with a particular vendor, they have the right to stop doing business with that vendor. Just as you have the right to stop doing business with a particular retailer if they don’t sell the products you want at prices you’re willing to pay for them. And in this case, you can still buy the product via Amazon’s marketplace vendors, so they haven’t completely cut off your access to the product.

    But from what I’ve read, the vendor in this particular case was not losing money in their previous agreement. Amazon was paying the same price for both the hardback and the ebook version: 50% of the hardback cover price. Now Macmillan and other publishers want to tell the retailers that they (the publishers) will set the retail price and not let the retailers sell below that price. Because they’re afraid the $9.99 retail price of ebooks will devalue hardback books.

    The problem for publishers is that they have already devalued hardback books themselves. By continually churning out hardbacks by their best-selling authors regardless of whether a particular book is worthy of the hardback price.

    I used to buy hardbacks written by a few of my favorite authors, because I didn’t want to wait for the paperback. That stopped after buying a couple books that weren’t worth the hardback price (even at a 25% to 40% discount). Yet the publishers still churn out hardback books by those authors, even though I can’t remember the last time any of them wrote a book worthy of the higher cost.

    IMO, hardback books will continue to be devalued as long as publishers think readers will pay higher prices for a favorite author even when a particular book by that author doesn’t justify the higher price.

  24. brooksse
    Jan 31, 2010 @ 08:29:09

    And it’s not just about ebooks. If they win here, what’s to step them from setting the retail prices that Walmart, Target and other discounters cannot sell below.

    But that’s not really a problem, right? Because if the discounters stop selling books by a favorite author of yours, you can always go to B&N or Borders and pay the higher price for your books.

  25. Statch
    Jan 31, 2010 @ 09:01:51

    You know, I have to assume that the publishers are doing what they think is in their economic best interests and acting rationally, but it’s just so hard to believe that when it seems so obvious to me that they’re trying to preserve a dinosaur — hardcover books — when there’s the brave new world of ebooks out there to conquer if they would just TRY to figure it out and make it profitable for them. I buy hundreds of novels a year, and not one is a print book any more, much less a hardcover. I know most people still prefer print books, and hopefully there is room in the market for both, but the publishers aren’t going to stop the digital revolution, no matter how many hissy fits they throw.

    Here’s my own little hissy fit: I like Lisa Kleypas’s books. I want to buy them, and the books of many other MacMillan authors. If I don’t buy print books, and MacMillan is going to charge me $14.99 for a the digital version of a book I could buy for $7.99, I’m not going to buy it. Happy, MacMillan?

    I’m curious about something, though. I don’t buy ebooks at Amazon. I buy them at Fictionwise. I belong to their members’ club, and I wait for the frequent sales, so I often don’t pay more than a few dollars for the equivalent of a mass market paperback. How can Fictionwise afford to do that? Is it because the discount is in my Micropay account, and they’re holding it? But I assume there are some accounting rules that keep them from counting my Micropay dollar balance in their favor?

  26. roslynholcomb
    Jan 31, 2010 @ 10:23:13

    @Statch: I can’t speak for the NYC publishers, but Fictionwise only pays my publisher based on what they eventually sell the book for. So, if my book is $5.99 and they sell it for $2.00, then my publisher gets $1.00 and I get half of that.

  27. Angela James
    Jan 31, 2010 @ 10:46:07

    @roslynholcomb Ouch. It actually varies from publisher to publisher, and many publishers negotiate for payment on cover price, not discounted price.

  28. Elizabeth Burton
    Jan 31, 2010 @ 10:47:39

    And, as a corollary to Roslyn’s explanation, Amazon pays the full net amount regardless of how they discount on their end. In other words, if the book lists for $5, the publisher receives $5 minus the set discount, whether Amazon actually sells it for $5 or $1.

    So, if the publisher has a $15 price point on an ebook at Amazon, they receive the discounted sale price on that amount, even if Amazon sells the book for $9.99.

    As has already been said–this isn’t about the money. It’s about trying to close the barn door after the horse has not only been stolen but is now running wild. Amazon understood before they even launched the Kindle that people who read ebooks will not now or ever pay full print price for same. They did the research before they started.

    The mainstream publishers, having only awakened to the reality of ebooks after a rock was dropped on their heads, never did that kind of research.

  29. Marketing Madness & The Price War of 2010 » Quacking Alone
    Jan 31, 2010 @ 10:58:14

    [...] a “letter” to its authors/illustrators and the literary agent community.  As the blog Dear Author noted, the letter missed its most important audience — the readers. Macmillan wants to make money [...]

  30. Leslie
    Jan 31, 2010 @ 11:10:51

    A couple of points: I just turned the Whispernet on on my Kindle and did a sync & search. The one sample of a Macmillan book I have (Sarah’s Key) is still there, so I don’t know where this rumor got started that Amazon/Macmillan/someone else is taking samples off of individual Kindles. Although I am a n of 1, of the folks discussing this on KindleBoards, no one else has said they have had a sample removed. Macmillan titles are disappearing from Amazon wishlists and even though I have the sample of Sarah’s Key, I can’t buy the book, but…the sample is still there.
    -
    In terms of other sources for books for my Kindle: there are plenty. Just looking at the first two pages of my homepage on my Kindle, I have: 4 books from Amazon; 8 books from other sources; 4 samples; and 4 documents I emailed to myself. None of these required conversion and none of them required that I know the PID of my Kindle.

  31. KindleVixen
    Jan 31, 2010 @ 11:36:12

    @brooksse:

    The problem for publishers is that they have already devalued hardback books themselves. By continually churning out hardbacks by their best-selling authors regardless of whether a particular book is worthy of the hardback price.

    AGREED! Laurell Hamilton is a good example of that, her last book was absolutely atrocious. Seriously bad and I was very glad I paid ebook price for it (and had the option to return it w/ Amazon) instead of hardback.

  32. KindleVixen
    Jan 31, 2010 @ 11:39:58

    @roslynholcomb:

    I can't speak for the NYC publishers, but Fictionwise only pays my publisher based on what they eventually sell the book for. So, if my book is $5.99 and they sell it for $2.00, then my publisher gets $1.00 and I get half of that.

    Good to know! If books are similar priced I do tend to buy from amazon vs fictionwise because I knew Amazon bought at a set price no matter their price and therefore authors get the same commission no matter what. I wasn’t sure what Fictionwise did.

  33. brooksse
    Jan 31, 2010 @ 12:40:41

    @Elizabeth Burton:

    Amazon understood before they even launched the Kindle that people who read ebooks will not now or ever pay full print price for same. They did the research before they started.

    The mainstream publishers, having only awakened to the reality of ebooks after a rock was dropped on their heads, never did that kind of research.

    I agree. IMO, the NY pubs have been incredibly short-sighted in not doing a better job of incorporating ebooks into their business model.

    Instead of having the foresight to determine the best price and best timing for the ebook release (maybe sometime between the hardback and paperback releases), they just release the ebook at the hardback price when the hardback is released. Then they sell the exact same ebook at a reduced price (maybe) when the paperback is released. With no value added for buying the ebook at the time the hardback is released, beyond the timing of the release.

    If I’m going to pay extra for the “hardback” ebook release, even at $9.99, then I want some value added that justifies the higher cost. But in many cases, the ebook version has less value than the paperback version. I bought all of two “hardback” ebooks last year, they had no cover picture and no excerpt of the author’s next book. Nothing at all to add value over the “paperback” ebook release. Yet the publishers expect readers to pay hardback prices for those ebooks. Thanks to Fictionwise’s December sale, after micropay rebates I paid $0.00 for the one and $6.50 for the other. I wouldn’t have paid $9.99 for either of those ebooks. No way would I have paid the $22.00 and $26.00 “list” price.

  34. Estara
    Jan 31, 2010 @ 15:16:38

    Author Tobias Buckell has this to say on the subject at SFWA.org:
    http://www.sfwa.org/2010/01/why-my-books-are-no-longer-available-on-amazon-com/

    Whoever carries the most fault here, my emotions are with the authors who will see less sales through no fault in their writing.

  35. Jane
    Jan 31, 2010 @ 15:44:23

    @Estara Wow, there are so many things wrong with Buckell’s statement it makes my head hurt. Off the top of my head, Macmillan said last week that it would pursue action against downloaders just like the RIAA. Price fixing cannot be done without collusion. Amazon cannot price fix alone. Macmillan has shown no indication that it would lower prices as Buckell suggested. Instead ebook prices remain unnaturally high. Further, Macmillan has introduced super premium pricing initially.

    Macmillan would not sell a book without DRM. In fact, as Moriah Jovan pointed out at her site, selling direct to the consumer without DRM would actually embolden readers to move away from shopping at Amazon.

    The whole reason that publishers need the hardcover system is because of advances. Macmillan and agents tell Buckell – hey, in order to pay you this advance, we have to charge X per book.

    Author goes to reader and says: in order to keep writing, I need you to buy new, on the release date, and it can’t be for $9.99. If it is below $9.99 or enough of you don’t buy new, I can’t write for a living.

    Reader: guilt, guilt, guilt.

    The fact is that if there was no advance system, then a $9.99 price point is incredibly sustainable for publishing. Authors say: I don’t want to write without advances or I don’t want to sell direct to the consumer because it is too much hard work.

    That’s fine but there is no reason readers have to support this nor should they feel guilty about not wanting to support this.

  36. Estara
    Feb 01, 2010 @ 13:17:01

    @Jane: Fair enough on reading Macmillan’s attempts to influence authors to guilt readers into buying at their price, but actually I am a reader who wants authors to know when they can afford to write full-time (which means with advances) and do so. With no advances and writing on prospect of maybe eventually being successful, only the most adventurous (Moriah Jovan) will do so.

    From what I’ve seen on LJ, not many authors are that adventurous in real life ^^, and I don’t need them to be as long as they are in their fantasy life.

    Books are my personal premium content, so I’m willing to pay premium for them – there’s no author that could be replaced by another author seemlessly for me (just because they’re cheaper).

    My two cents.

  37. Tweets that mention Macmillan Pens Open Letter to Authors and Agents | Dear Author: Romance Novel Reviews, Industry News, and Commentary -- Topsy.com
    Feb 01, 2010 @ 15:08:22

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    Feb 02, 2010 @ 04:09:53

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  41. Connie Herrin Allen
    Jun 28, 2010 @ 11:34:32

    @brooksse:

    HI
    I am very new to this board, but I do have something to say.

    1. I don’t think AUTHORS will suffer or publishers, not financially I mean. The price of an Ebook is of course more affordable, therefore, MORE people will be able to buy them or more INCLINED to buy them… thus authors AND publishers will still be making money…maybe even MORE money. right?

    2. I’m having trouble deciding on which ebook reader to purchase. any suggestions? I read somewhere that there is possibility of losing books you purchase on a Kindle. is this true? and it also said something about ‘the lopsided terms of the amazon contract’. what’s that all about?

    thanks for any comments or suggestions..

    connie

  42. Jane
    Jun 28, 2010 @ 12:52:56

    I’ve posted a couple of articles on what ereader to buy. If you go to the front page of Dear Author, there should be a link to a nook v. Kindle discussion.

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