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(Update, 1/31 8:35 pm): Amazon has capitulated to Macmillan's demands that it allow flexible pricing for its books, backing off from a ban of the house's list when the publisher demanded what it has now received.
"We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books," Amazon said in a Kindle forum. "Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay $14.99 for a bestselling e-book. We don't believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative."
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Henry Blodget has two words and three arguments for Macmillan, which apparently doesn't like Amazon losing its money on their books. We'll leave you to discover the two words for yourself, since we've had enough cursing in our posts for the last 24 hours, but here is the substance of how the publisher is wrong or, even worse, irrelevant.
In brief, the dispute is about pricing, specifically Amazon's $9.99 e-book price point over which Macmillan has no say but, armed with a new pal in Apple's iPad, wants the online retailer to address. The publisher still makes what it has always made, but in their view this devalues the idea of a "book" — the same argument Disney's Michael Eisner made about iTunes being bad for creative Hollywood. And what the music industry says about all single tracks being worth $0.99. You get the idea.
Amazon retaliated, per many reports, by pulling all Macmillan books from its virtual shelves (they are still available via Amazon through the third-party retailer marketplace).
Blodgett's argument comes down to this:
- It doesn't matter even if Macmillan goes out of business. Books that would otherwise have been published there will find a home elsewhere, as will at least the better editors. Maybe even at Amazon, for both.
- Macmillan (a stand in here for old-school book publishing in general) pretty much just adds cost.
- Good writers don't need "good" publishers. Again, nature finds a way ...
It's hard to see this latest eruption in disruption as anything particularly new. Bits cost more than bytes, so the latter should cost less. People who want bits should pay more, and are generally willing to pay more for the experience — if they value it. And many more still value the physical book form over the digital variety, to say the least.
But the economics are not difficult to understand. Bottled water from Coca Cola costs the same as Coca Cola itself not because the costs of production and distribution are the same, but because a lot of people will buy a refreshing beverage that happens not to have high fructose corn syrup and carmel coloring if it costs a lot less, and Coke sales will suffer unless it keeps the price of bottled water up. Before the advent of bottled water, there was no competition to show that pricing pressure would leave people just as satisfied with a product that didn't cost as much to make.
Important advances in technology always expose the things that we didn't value but were built into the price because there was no alternative — the big bank building, the fleet of trucks delivering newspapers, the marketing division that three kids who get social media can probably replace.
