| Macmillan's
current fight with Amazon over e-book business models is a
necessary one for the industry. The stakes are high, particularly
for Macmillan authors. In a squabble over e-books, Amazon
quickly and pre-emptively escalated matters by removing the
buy buttons from all Macmillan titles (with some exceptions
for scholarly and educational books), in all editions, including
all physical book editions. Thousands of authors and titles
are affected; hardest and most unfairly hit are authors with
new books published by Macmillan that are in their prime sales
period.
Yet if Macmillan prevails, the eventual payoff for its authors
(and all authors, if a successful result ripples through the
industry) is likely to be significant and lasting.
For those of you who may have missed it, here's the story
so far:
Last Thursday, Macmillan CEO John Sargent informed Amazon
that beginning in March, it would offer Amazon access to a
full range of e-book titles only if Amazon were willing to
sell books on an "agency" model that would pay Amazon
30% of e-book proceeds and allow Macmillan to set its own
retail price for e-books. (Currently, Amazon buys e-books
as a reseller at a discount of 50% off the retail list price
and sells at the price it chooses.) Macmillan's price under
its agency model, in many cases, would be higher than the
$9.99 ceiling that Amazon has been seeking to impose on the
industry.
If Amazon didn't find the agency model acceptable, Sargent
said Macmillan would expand its "windowing" of e-book
editions. "Windowing" is the practice of waiting
until a particular edition of a new book has been on the market
for a while before making cheaper editions available. Publishers
have for decades waited until the hardcover sales window has
closed before opening the sales window on paperback editions,
for example. This helps protect the sales channels for hardcover
books. Windowing e-books is similarly believed to help protect
a publisher's sales channels for physical books. The risk
with windowing is that some owners of e-book devices are angered
that low-priced e-book editions aren't available as soon as
books are released in hardcover form.
This was a bold move by Macmillan. Amazon has a well-deserved
reputation for playing hardball. When it doesn't get its way
with publishers, Amazon tends to start removing "buy
buttons" from the publisher's titles. It's a harsh tactic,
by which Amazon uses its dominance of online bookselling to
punish publishers who fail to fall in line with Amazon's business
plans. Collateral damage in these scuffles, of course, are
authors and readers. Authors lose their access to millions
of readers who shop at Amazon; readers find some of their
favorite authors' works unavailable. Generally, the ending
is not a good one for the publisher or its authors -- Amazon's
hold on the industry, controlling an estimated 75% of online
trade book print sales in the U.S., is too strong for a publisher
to withstand. The publisher caves, and yet more industry revenues
are diverted to Amazon. This isn't good for those who care
about books. Without a healthy ecosystem in publishing, one
in which authors and publishers are fairly compensated for
their work, the quality and variety of books available to
readers will inevitably suffer.
Macmillan's move is timely because, at the moment, the e-book
market is still far smaller than the physical book market,
but the e-book market is growing quickly. The longer Macmillan
waited, the more difficult the transition.
Amazon didn't wait for March, when Macmillan's new policy
is slated to go into effect; it decided to hit Macmillan immediately
and comprehensively, removing the buy buttons for nearly all
Macmillan titles, in all editions. This is a direct attempt
to use its clout in the physical book industry to enforce
its business model in the e-book industry. In some ways, it
was an unusual exercise of power for Amazon. The company has
used the tactic of turning off buy buttons on several occasions
before, but, with major publishers it's usually selective,
and doesn't turn out the lights on nearly all titles. That
treatment is reserved for smaller publishers. (Authors receive
no advance warning of Amazon's treatment of their titles,
nor can they do anything about it.)
Amazon, it appears, overreached. Macmillan was a bit too
big a foe, and Amazon's bullying tactics were a bit too blatant.
(For a flavor of media reaction, see this story in Fast Company.)
Sunday evening, Amazon announced that it would have to "capitulate"
to Macmillan, "because Macmillan has a monopoly over
its own titles." (By this definition, nearly every company
exercises a monopoly over its products.) We're all still waiting
for that capitulation: Macmillan's books still weren't available
on Amazon on Monday evening.
If Macmillan does indeed prevail, the economics of authorship
in the digital age are likely to improve considerably. We
may go through some rough stretches to get there, however.
You'll be hearing more from us on this matter soon.
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