Feb 1 2010
Here’s a recap if you don’t know what is going on. Macmillan’s contract with Amazon was up. Macmillan decided that it wanted one of two things:
1. Old pricing scheme in which it would sell to Amazon at list and Amazon would decide at what price point to resell to consumers but Macmillan would engage in “deep windowing” which means Amazon wouldn’t get the content for 6-7 months or maybe longer.
2. New pricing scheme wherein Macmillan sets the price and Amazon merely serves as the facilitator in the sale between Macmillan and the reader.
Amazon balked and expressed its disappointment by removing the buy it now button for all the Macmillan titles.
Scalzi believes that the fans of an author will abandon Amazon and that Amazon completely lost the optics of the weekend.
They feel somewhat connected to their favorite authors. So when their favorite authors kvetched on their blogs and Facebook pages and Twitter feeds about the screwing Amazon was giving them, what did many of these fans do? They also kvetched on their blogs and Facebook pages and Twitter feeds. So in pissing off a myriad of authors, Amazon also pissed off an exponential number of book readers, many of whom followed their favorite authors' leads in complaining about Amazon, and who themselves were read and followed by an exponential number of others.
If Scalzi and authors could convince their readers to buy en masse from a particular vendor, they have enough power to sell print and e direct.
Tobias Buckell accuses Amazon of price fixing which is sadly so incorrect given the price fixing requires collusion (in other words, Amazon can’t price fix by itself).
If Amazon were a smaller retailer, this probably wouldn't be a big deal. But Amazon pretty much, right now, has a monopoly on online bookselling. They're huge. As a result, this becomes nearly a form of de facto price fixing.
Indie author, April Hamilton, wonders why Macmillan authors are happy about the outcome:
Macmillan authors are rejoicing, and I'm shaking my head. Would musicians cheer a decision on the part of their labels to raise the price of their music on iTunes by 62%? I think not. Yet despite the fact that their books will cost 62% more than other Kindle bestsellers, and their royalty on those sales won't be even one cent higher, the Macmillan author "victory" dance continues apace on the interwebz.
Mike Shatzkin and Kassia Kroszer point out the authors in this situation are really losing out in the form of reduced royalties.
The proposed Agency Model will have publishers setting a price lower than the established retail they had before but higher than the deep discounts Amazon led retailers to sell at. The publisher intends to pay 30% of that established price to the retailer and 25% of either the full consumer price or of the 70% "net" (still to be determined) to the author. This means that the retailer will get a higher price from the consumer and a better margin than they realize now (even though a lower percentage of the "established" price). The author's cut per copy could actually be reduced!
So what does all this mean? I imagine the next huge debate will be between agents and publishers as the new model is mapped to real money for the people who write books. Other retailers will be demanding similar terms to Amazon (and perhaps breathing a sigh of relief). Consumers will be sniffing at the new pricing model and voting with their dollars (one doesn't have to read between the lines of Amazon's statement to know where the retailer hopes this ends). DRM will remain on the horizon.
Richard Curtis believes that ebook royalties must increase as a result of this:
If, as a result of negative publicity, Amazon relents on its rigid pricing formula, e-book revenues will increase and it will be so much harder – indeed, it will be intensely embarrassing – for publishers to continue parceling out the mingy royalty they now proffer.
This is a debate that has emotions running high. A thread concerning this at Amazon has 807 posts and counting.