Amazon may have created the market for online book sales and fueled the growth of e-books with its Kindle device. But to the publisher Macmillan, Amazon is just another retailer who wants to resell Macmillan's books.
The companies' squabbling over book pricing this past weekend was an annoyance to consumers and an affront to Macmillan's authors, who saw their books yanked from the Amazon store and sales grind to a halt. In the long run, however, Macmillan's success in bending Amazon to its will represents a tipping point in the book industry – a shift in power from online distributors to content owners, who after all, have an effective "monopoly" on every product in their catalogs.
This past weekend's hardball negotiations between Amazon and Macmillan came on the heels of Apple's announcement that its iPad device and iBook store would compete with Amazon's Kindle ecosystem. Apple's iBook store will likely be subject to the same control by Macmillan and other publishers.
Ironically, another Apple media store provided fuel for Macmillan's argument that it should be in charge of Amazon's e-book pricing. The Amazon/Macmillan dispute is eerily reminiscent of Apple's pricing battle with record labels, which eventually succeeded in forcing iTunes to end its flat 99-cent price by setting song prices at three different tiers — 69 cents, 99 cents, or $1.29. The overall result there was to shift power over how music is sold from Apple, which created the market for digital music, to the labels, because they have a monopoly on most popular music.
Amazon says it had no choice in the matter: It had to cede pricing control to Macmillan, even though that meant increasing its e-book prices (thereby decreasing the attractiveness of its Kindle hardware) because "Macmillan has a monopoly over their own titles." The record labels enjoy the same sort of monopoly, as do movie and television studios.
This weekend's spat between Amazon and a major book publisher is no mere blip on the radar, but rather part of a trend towards content owners dictating the terms of how their content is sold.
Last decade was all about tech companies eliminating brick-and-mortar middlemen. This decade could see content owners get the last laugh, leveraging creative monopolies to wrest control from Amazon, iTunes and other innovators.
From the success of Hulu, ESPN360 and (most likely) Vevo, to the record labels' control over pricing in the iTunes and Amazon MP3 music stores, to Macmillan's publishing business, to The New York Times' metered access, the companies with the copyrights have succeeded in grabbing control over distribution from tech startups who created the market for these digital goods.
On Silicon Alley Insider, Henry Blodget claims the world does not need Macmillan or any other publisher, now that Amazon (and soon Apple's iBook store) can distribute just about any book without worrying about how good it is, due to inexpensive digital distribution.
"Good books will always be published," writes Blodget. "Perhaps not in precisely the same form, but they'll be published. And, thanks to Amazon's new low-cost distribution model, more of them will eventually be published than ever. We don't need someone like Macmillan sitting between us and good books."
Regardless of whether we need book publishers, we'll get them anyway. Copyright holders in just about every content industry we can think of are taking advantage of the bulk-negotiating power that comes with owning a large catalog of works, in order to seize control of distribution and pricing.
Besides, who's going to pay royalty advances to authors so they can have time to write books? Amazon? We'll believe it when we see it.
Ultimately, the result of these land grabs is higher prices for consumers. To many of them — and apparently to Amazon founder Jeff Bezos, too — e-books should be cheaper than their physical counterparts, if only because they involve no duplication, inventory or shipping costs. However, because content owners hold all the cards, the pricing of digital goods increasingly fails to reflect those reduced costs.
Macmillan CEO John Sargent claims Amazon will make more money under the new deal, receiving 30 percent of the price of each book sold. If Macmillan is right, and people are willing to pay physical-book prices for digital books, both Macmillan and Amazon stand to make more money, by pocketing the digital-distribution surplus.
See Also:
- Amazon Don't Need Your Stinkin' Books (Updated; Actually, We Do)
- Can Apple's iPad Save the Media After All?
- Barnes & Noble's Shiny, Sharing-Friendly 'Nook' eBook Reader
- Top E-book iPhone Apps Unafraid as Amazon Steps into the Fray
- TuneCore, Amazon Set to Unveil On-Demand CD Sales
- Amazon Scoffs at Google's Offer to Share Book Search Sales
Photo courtesy Flickr/goXunuReviews
