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Friday Midday Links: Steve Jobs Claims Publishers to Punish Amazon

Steve Jobs was interviewed by Walt Mossberg after the iPad event. (I cringe everytime I have to write iPad. Maybe I’ll just call it iSlate). Jobs states that he believes the prices in the iBookstore will match other prices online and that publishers will be withholding books from Amazon, presumably because of Amazon’s $9.99 price point.

The ePub version that Apple will be using is Apple specific (or iPad specific) so don’t expect to buy from the iPad and be able to transfer it over to the Kindle.

Remember yesterday how I noted that the iBookstore looked similar to Classics? Apparently the original creator noticed how similar it looked as well. Maybe it’s because Apple has stolen all of the employees of the original creator? That sucks Apple. Really sucks.

"I guess it's not enough Apple has hired every employee who worked on Delicious Library, they also had to copy my product's look. Flattery?"

AT&T announced that in the fourth quarter of 2009, over 1 million ereaders were activated on its network. Kindle likely makes up the lion’s share of this as the nook was estimated to sell only about 60,000 units since its botched Christmas release and the Sony Daily Edition even less. Given these numbers and the fact that the Kindle has been on sale for almost two years, it’s probably safe to conclude that the Kindle readership is near two million.

Jeff Bezos makes the claim that there are millions of Kindle owners. In the same link, you can read how profitable Amazon was in the fourth quarter. “Net sales increased 42% to $9.52 billion in the fourth quarter, compared with $6.70 billion in fourth quarter 2008. “

International readers will be shut out of the iBookstore jolliness as it is reported that the iBookstore will be U.S. only at launch. But I guess publishers don’t care if people outside the U.S. buy the books. Pirates will fill that void, unfortunately.

Speaking of the nook, I forgot to include this link which describes some really polite, but awful customer service for one customer of the nook.

Other bad news for Barnes and Noble is the New York Attorney General has opened an investigation to determine whether membership account information from BN and other membership clubs have been sold to discount clubs who then charge those members fees disguised as discounts. BN has denied any wrongdoing.

But the worst news is for Borders who is laying off another 10% of its workforce. Remember that in November, Borders cut 1500 jobs just last November with the closing of over 300 Waldensbookstores.

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She self publishes NA and contemporaries (and publishes with Berkley and Montlake) and 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


  1. Ridley
    Jan 29, 2010 @ 11:19:05

    Apple is now what Microsoft was in the 90s.

  2. Maria E Schneider
    Jan 29, 2010 @ 11:25:36

    I found that statement about pricing pretty interesting. The problem is that it doesn’t just punish Amazon–it punishes readers…and when you are trying to attract readers, you’ve kind of created a problem there.

    Very interesting.

  3. Robin
    Jan 29, 2010 @ 12:10:34

    @Maria E Schneider: But that’s part of the whole problem here, that publishers view retailers as their customers instead of readers.

    And apparently, if this is true, that hasn’t changed one whit.

  4. Maria E Schneider
    Jan 29, 2010 @ 12:18:43

    @Robin: I agree, Robin. I guess what remains to be seen is whether or not the publishers can control the pricing. If the actual customer has moved away from that pricing structure and refuses to purchase, then it will have failed. BUT–how many customers will just give in and buy? If not enough buy, do the publishers just blame it on: “No market for ebooks?” or do they realize they missed the boat due to pricing?

    I think there is a new form, but many publishers don’t want to play. There’s hardback, paperback and ebook, and ebook has a demand price structure all its own.

    Again, as an indie author, I’m not really disappointed in the publisher’s stubbornness. I think their actions result in some people looking for bargains and taking a chance on new authors. It’s all a matter of how these things shake out–but one thing is for sure. Where there is demand, someone will fill it. Amazon was/is filling a price structure that people agree to pay. If that price goes away, it doesn’t mean demand for it will.

    As a reader…publisher’s pricing is disappointing. But I was never their target audience. Hardbacks were priced well out of my range anyway. In that structure, I was always a used buyer or a library user.

  5. CathyKJ
    Jan 29, 2010 @ 12:25:37

    Do we know if B&N is being abandoned the same way Amazon is?

    I’m dumbfounded by the publisher logic here. Seems like they’re cutting off their nose(s) to spite their face(s). Oh well, I’ve got a big TBR pile, both paper and Kindle, to tide me over, and this will be a good opportunity to try new authors with pubs that aren’t determined to spurn Amazon at any cost.

  6. Kalen Hughes
    Jan 29, 2010 @ 12:58:26

    I’m not sure that it’s fair to say publishers are “determined to spurn Amazon at any cost”. Amazon’s demanded price point for eBooks of current HB releases is a loss leader for them (designed to get you to buy a Kindle and become a loyal customer), but they’re not treating it like a loss leader, they want to pass the loss on to the publisher.

  7. Sunita
    Jan 29, 2010 @ 13:00:57

    Do we have any evidence that publishers are or will be withholding books from Amazon other than Jobs’ comments? Because while I guess it is possible, especially if the MaxiPod takes off, I don’t see why they would do this, given that they have plenty of non-Kindle-related reasons to remain on good terms with Amazon. And Jobs is the guy who said that Apple didn’t care about an ereader because “no one reads books” anymore, right? Remind me again why we should believe his predictions on Apple’s strategy and the behavior of the competition?

    I think it may be too early to talk about abandonment by publishers. At least let’s wait until the thing ships and we get some sense of how many people are using it for reading. iTunes was brilliant, and maybe the iBookstore will be as well. But it’s coming into a different environment than the iPod/iTunes did.

    ETA: If the interpretation is that publishers will avoid *some* simultaneous hardbackebook releases on Amazon because of the price point, then okay, that is definitely true since they’ve already done it. But to say that publishers are going to not offer Kindle versions but will offer Apple versions seems a stretch given the tiny amount of information we have so far.

  8. liz m
    Jan 29, 2010 @ 13:03:46

    I still maintain that there are half a dozen programs dating back many years that use a similar looking interface – in fact Shelfari is more visually similar than Classics. This dog isn’t hunting for me, no matter how many people take it for a walk.

    Now the DRM news is complete fail. While I’m not interested in the iPad due to eyestrain from computer screens and it’s low memory vs size in my handbag, I was completely interested in purchasing my books via an iBookstore. Yet another version of epub just makes me feel tired. I was hoping Apple was going to offer an e-reader less hoops to jump through instead of new ones.

  9. Becky
    Jan 29, 2010 @ 13:12:08

    Why is Amazon getting all the $9.99 price fuss? Isn’t Walmart doing it to the hardback books as well? I could be remembering wrong, but I thought they did if first, even. Why aren’t the publishers “punishing” Walmart, too?

  10. Robin
    Jan 29, 2010 @ 13:14:28

    @Sunita: Are you saying we shouldn’t buy into Jobs’s megalomania quite yet? Because it’s kinda cute how proud he is of himself. ;P

  11. mary beth
    Jan 29, 2010 @ 13:16:45

    I’ve never bought anything from the kindle store, so take this as thoughts from someone who really has no idea what she’s talking about and is home from school because of ice that is now completely melted but…when Susan ELizabeth Phillips hardback came out last year, I paid almost full retail for it in electronic format. I didn’t care that it probably cost the publisher less to produce that book. I just wanted it on release day. I was relatively new to eBooks (ebooks, e-Books, whatever) at the time, but they’d already changed my reading habits. Does Amazon have to get the book when it first releases? (serious question, I have no idea.) Can’t retailers–electronic and brick and mortar–who charge the price point set by publishers? I’m going to buy SEP, Jennifer Crusie and the new Plum books the day they come out. They’re the only ones I shell the money out for. Everyone else, I wait for paper. I’d be willing to do the same with my digital purchases.
    I want publishers to make big bucks. I want them to find new authors and pay them advances and awesome royalties. I want them to keep publishing midlist authors along with the SEP’s and Jennifer Crusies.
    In full disclosure, right now I’m not buying anything. I’ve rediscovered the library, and I love it! Hopefully my book budget will be back in place by this summer.

  12. Kalen Hughes
    Jan 29, 2010 @ 13:17:29

    Why aren't the publishers “punishing” Walmart, too?

    Because when WalMart makes a book a “loss leader” they absorb the loss. When Amazon does it, they’re passing the loss on to the publisher (aka they’re pricing it as a a loss leader, but refusing to accept the cost of doing so).

  13. Jane
    Jan 29, 2010 @ 13:33:53

    @Kalen Hughes: Why are you claiming this? Do you know this for a fact? What I know is that Amazon is afforded a discount much as any other reseller gets, negotiated somewhere between 40-60%. Then Amazon decides what to price it at. It has been widely reported that Amazon loses approximately $1-2 for each $9.99 sale. In sum, it works EXACTLY the same way as it does for Wal-Mart which is why it is called a loss leader. The loss is absorbed by the reseller, not the vendor.

  14. ~B
    Jan 29, 2010 @ 14:07:11

    @Kalen Hughes, BS

    Amazon pays the publisher a percentage based on list price. When Amazon sells a “bestseller” with say a $25 list price for $9.99 they are doing the same thing as any other retailer using items as loss leaders,. The publishers are still getting their percentage of list.

    What publishers are scared of is $9.99 becoming the defacto price for new ebooks instead of the same list as the hardcover release.

  15. Sunita
    Jan 29, 2010 @ 14:11:16

    @Robin: Well, his megalomania *has* gotten Apple where it is today! And there was a lot of skepticism that iTunes would succeed, which turned out to be spectacularly unfounded. I still think he has a pretty tin ear on books, but nonetheless, I hedge my bets, as you see. :-)

  16. Sunita
    Jan 29, 2010 @ 14:16:28

    @Jane: That’s my understanding as well. I was under the impression that the problem of the 9.99 book isn’t that the publishers are absorbing the loss, but that ebook readers will get so used to the price that they won’t accept anything higher for initial releases. So the hardback model will collapse. I imagine they’re just as afraid of Walmart (and as they have been of the discounted-bestseller strategies), but Walmart doesn’t have as big a share of the hardback market as Amazon does of the ebook market.

    Of course, since Amazon doesn’t release sales figures, we don’t actually know how much of the ebook market they control. But it seems pretty clear that the Kindle is the big kid on the e-block.

  17. Jane
    Jan 29, 2010 @ 14:24:13

    @Sunita: Yes, that is exactly right. Although I would add this.

    The discounters have been training readers for years to accept a certain price for books and publishers haven’t fought back because the discounters account for too much of the product. Discounting has been subsidizing the notions by publishers of the value of the book. In other words, publishers perceive the hardcover value of a book at $29.99 but consumers see the hardcover value of a book around $15-$17 because the majority of them buy at a discounter. Even the major chains discount to compete with the discounters.

    Further, publishers do hold the tools to reduce reader dependency on Amazon but don’t want to utilize them. For example, if publishers released books early but made them available only at their site, some readers would move away from Amazon.

    If publishers released their books at 40% off on their website, it would undercut Amazon and move more readers to buying direct. Publishers don’t want to do this because a) they don’t want to engage in discounting of their product and b) because to truly make this successful, the books would have to be DRM free.

  18. bettie
    Jan 29, 2010 @ 14:31:49

    Bummer about the DRM ePub format. I was excited at the prospect of being able to shop the ibookstore. I am not, however, excited about the iPad. So far, it is just a big disappointment, and not because I was expecting it to be carried out on stage at the Apple Event by the ghost of Charlton Heston riding a uniciorn. I just wanted a snazzy multifunction device at a reasonable price. *sigh*

  19. Kalen Hughes
    Jan 29, 2010 @ 14:32:16

    My understanding from having followed this issue this past holiday season is as follows:

    Walmart (and other mass marketers) chose to enter into to a price war with Amazon (and each other), resulting in their discounting hardbacks to as low as $8.99. This price was well below what was agreed upon between the WalMart and the publsihers. But the contracts already spelled out what the publishers had to be paid for sales, so the additional loss was eaten by Walmart. This is pretty much how a loss leader works.

    This is NOT what is happening with Amazon. Amazon has created their own artificial price for eBooks and are insisting that publishers go along with it. This price appears to me to be designed as a loss leader. Its purpose is certainly the same. At WalMart, loss leaders get you in the door and they make up the loss because you buy other stuff too. At Amazon they make it up by getting you to buy the Kindle (which then locks you in to their book buying system as a bonus). Amazon is not eating the loss on this artificially mandated price however, they are insisting the publishers accept it as the “true” price and that their cut of the sale be based upon it.

    You are free to disagree with my analogy, but I think my logic is perfectly clear and sound.

  20. Jane
    Jan 29, 2010 @ 14:37:39

    @Kalen Hughes: I’m sorry, but that just isn’t true. Amazon does eat the loss on the $9.99 books. Amazon wants publishers to lower the list price, but as far as I know, the major publishers have not agreed to this.

    It’s not a matter of agreeing with your analogy. It’s that your facts are wrong. Amazon has contracts with publishers. The contracts allow them to buy a book at list price less some discount. Unless that contract is renegotiated, Amazon cannot change the terms unilaterally.

    Amazon’s loss leader works exactly the same as Wal-marts. Come for the $9.99 books and buy the other ones at a price that earn a profit for Amazon.

    I have just had an email exchange with someone from a major publishing house who confirms this.

  21. Sunita
    Jan 29, 2010 @ 14:56:11

    Here’s the relevant information from a column Daniel Gross (business writer for Slate & Newsweek wrote back in October 2009:

    As I understand it, Amazon pays the same wholesale price for Kindle books as it does for real books-‘generally 50 percent of the list price. For a typical hardback that retails for $26-‘say, E.L. Doctorow’s Homer & Langley-‘Amazon pays $13 and then sells it for $9.99 on the Kindle, taking a $3 loss on each sale. (The longer-term strategy, publishers fear, is that once the Kindle gains significant market share, Amazon will negotiate lower wholesale prices for digital versions.) In the short term, though, this means that Amazon is likely to lose more money on more expensive books sold on the Kindle. It would have to pay $17.50 per “copy” of the digital version of True Compass, and $14.50 per copy for Going Rogue, but would sell them for significantly less. I

    Just as Amazon can’t unilaterally renegotiate their contracts, publishers can’t force Amazon to sell the books at the price they want. I have interpreted Amazon’s strong-arming tactics (as they are described) as refusing to go along with publishers’ expectations that books wouldn’t be priced below the standard discounts that had evolved in the print market.

    It can’t be about the effective price of the book, either, because there hasn’t been much evidence of publisher uproar over Fictionwise’s 100% micropay rebates, which reduce the cost to the buyer to 0 (excluding the cost incurred when the buyer gets credit rather than the actual money back). It really does seem to be that the Kindle 9.99 price is not only lower than the discounted prices, but it’s a permanent (for now) price across all hardcovers.

  22. LVLM
    Jan 29, 2010 @ 14:56:31

    What I’m disappointed about is that for iTunes, Apple fought the record companies for a different way of selling music and at a fair, reasonable price even if DRM’d.

    I was hoping that Apple would do the same for the ebook industry. But it looks like in this case, Apple is bending over for publishers to keep their ebook pricing at outrageous prices. On top of that, yet another DRM format? Ugh.

    I agree with first poster- Apple is becoming the new Microsoft.

  23. Janet W
    Jan 29, 2010 @ 15:12:09

    And I agree with the first poster too … but I’m quoting my 22 year-old son. That’s how he sees it. I have three twenty-somethings and altho the youngest who have to have her iPod and her Apple computer pried out of her cold dead hands, she and her brothers want books. With covers and pages — that’s their preference.

    Now movies on line: they are a CAPTIVE audience!

  24. Sunita
    Jan 29, 2010 @ 15:20:54

    Well, I’m not quite willing to give Apple a halo for iTunes (even though I bought the first gen iPod the month it came out), since they pretty quickly refused to let artists sell full albums because they were determined to adhere to one and only one pricing strategy (one of the reasons some bands still aren’t on there). No to mention not being able to plug non-Apple stuff into iTunes. But you’re right, it was a huge leap forward, and once Amazon pushed them into a non-DRM world, we all became better off.

    But what they’re doing now is really a 180 degree move away from what they have historically been, in terms of software. Apple has traditionally been about using software to sell the hardware, and as a result we have all these great programs developed by brilliant individuals using Cocoa, etc. With the app store, Apple figured out how to monetize software for the iPhone/iPod, and now they’re extending the model to the iPad.

    An example of what this means: years ago, I bought WriteRoom from the wonderful Jesse at HogBay Software for 24.95. Fantastic program, and he got all the money. WriteRoom on the iPhone is 4.99, of which Apple takes 30%. Maybe that’s a price he would have set anyway, but now it’s not his choice; he has to fit it within the existing App Store environment. Plus he has to pay $99/year to be an App store developer. So we go from him getting 100% of the selling price to 70% of a lower price, minus the yearly fee. Frankly, I’d rather pay more money to an individual (who always answers his email from customers) than less money to Apple (which reserves the right to screen everything it puts up based on any number of criteria that I don’t agree with).

    And with the iPad, you are tied to the App store. No surfing the web to find shiny new programs.

    Don’t get me wrong, I love Apple products. I’m typing this comment on a hackintoshed HP Mini. But I don’t like the direction they are going.

    It may not be Microsoft of the ’90s yet, but it’s not the old Apple, either.

    ETA: And there was no way, given the App Store exclusivity, that we’d have ebooks without DRM. Apple wants to own its customers as much as Amazon/Kindle does. I just wonder what it means for Stanza and ereader. I assume they’ll stay on the iPhone, but will Apple let them into the iPad app store?

  25. dotty
    Jan 29, 2010 @ 16:30:52

    Just as a matter of interest regarding the design of the bookshelf being similar to the Delicious Library.

    Whatever Shipley says, one of the people who went to work for Apple in 2005 was Mike Mattas, co-founder of Delicious.
    Mattas was the person who “graphically orchestrated” the Deliciouse Library program. Shipley wrote it. So I think that Mattas has just as much right, if not more, to use the look of the Delicious Library

    Link shows article about the hiring of Mattas

  26. MaryK
    Jan 29, 2010 @ 16:49:06

    @Sunita: “And with the iPad, you are tied to the App store. No surfing the web to find shiny new programs.”

    That’s my problem with the iPad. I don’t mind it for the iTouch because it’s cheaper and smaller and I don’t expect to use it for anything I couldn’t find an app for. If I bought an iPad, it’d have to replace a netbook because of the price point, and I doubt the app store would be sufficient. I’ll be watching to see what actual customers/users think of it.

  27. ~B
    Jan 29, 2010 @ 17:41:54

    @Kalen Hughes, I don’t know why you think Amazon is doing this, but your facts are simply…wrong.

  28. Kindle Vixen
    Jan 29, 2010 @ 17:51:43

    If publishers released their books at 40% off on their website, it would undercut Amazon and move more readers to buying direct. Publishers don't want to do this because a) they don't want to engage in discounting of their product and b) because to truly make this successful, the books would have to be DRM free.

    Absolutely! I would happily buy books I could read on my kindle directly from publishers if they would be willing to cut out the middle man and discount them directly on their own site. But right now, Amazon is cheapest and easiest.

  29. ~B
    Jan 29, 2010 @ 18:46:36

    Simon & Schuster used to be good about ebooks at a discount. They used to be the cheapest place to buy S&S titles from most times. Unfortunately they’ve now gone the full list price route that most publishers use. Imagine if they’d gone the other way and put out releases a week or two earlier than it was offered through retailers and kept the discount. Harlequin’s done the early release thing (a month early) for some of their lines and it seems to work well for them. Even if they don’t always have the best price they do keep pricing competitive with retailers.

    My dream would be for all publishers to follow Baen’s model, especially when it comes to DRM and multiple formats. Samhain’s done it, more or less, with MBaM and so now I only buy their titles directly from them.

  30. Castiron
    Jan 29, 2010 @ 18:47:10

    @Jane: c. many publishers don’t know how to set up an ebook store (though for a big NY publisher, this really isn’t an excuse; they’ve got enough resources to figure this out if they really want to) (and if I were going to do it for my employer, I’d email someone at Baen and say “hey, how did you do this?”, because they’ve got a system that works)

    d. knowing Amazon, if the publishers started selling ebooks at 40% off through their sites, Amazon would start selling the Kindle edition at 50% off, and people would end up buying from Amazon anyway (unless the publishers sold DRM-free editions, which as you noted, they’re leery of doing)

  31. Keishon
    Jan 29, 2010 @ 19:21:21

    Simon & Schuster used to be good about ebooks at a discount. They used to be the cheapest place to buy S&S titles from most times

    YES! I remember this. I used to buy from them all the time but since they started increasing the price, I’ve stopped buying from them. If worst comes to worst where ebook prices start to go up, I’ll just quit buying books and force myself to read the hundreds upon hundreds of books that I already own and oh, shop at the used bookstore if I must have a print title.

  32. roslynholcomb
    Jan 29, 2010 @ 19:48:30

    @LVLM: The difference is in the case of iTunes Apple essentially had that playing field all to themselves, there was for all intents and purposes no one else doing what they were doing. In this case, they’re coming late to the party and if they want to win they’ve got to slaughter the competition. Presumably, the only way to do that, at least at present is get in bed with the publishers. The publishers are already angry at Amazon over pricing, so Apple can’t come on board and do the same thing. What would be the publisher’s incentive to contract with them?

    Personally, I think the Apple/Amazon/Wal-Mart battle will eventually turn out good for customers. In general, competition usually benefits consumers, and I can’t imagine that this will be any different. I’ve said this before and I still believe it, in less than five years hardbacks are going to cease to exist and thus the crux of the problem will go away anyway. There will special edition/collector’s editions, but for the most part, popular fiction will come in ebooks and paperbacks.

  33. DS
    Jan 29, 2010 @ 21:17:24

    Bezos said that the Kindle app will be available for the iPad. Interesting to see how this will play out.

    I’m pretty sure for me it will come down to the price of books. I don’t anticipate hard covers disappearing, but I can see them being more a collectors item.

    I just discovered Pandora Radio. What a great site.

  34. SAO
    Jan 30, 2010 @ 01:54:46

    There are millions of Americans living outside the US in countries where English books are expensive and the selection extremely poor.

    There are also easy to find methods for the average avid reader who is not particularly computer savvy to disguise their place of origin. Needless to say, I’m sure the pirates know them.

    All this handicapping of expats does is drive us to pirate versions. I’ve given up buying legitimate DVDs because I’m too sick of having a DVD not play because of region encoding.

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