The McMillan – Amazon War

There is an important battle being waged right now in the intellectual properties arena over ebooks. There’s a lot at stake here and while it revolves around money, it also deeply may affect the quality of the book you read … or may not get to read at all.

It all started when a quiet, private little battel erupted into a public one this weekend, as reported in the Huffington Post:

Amazon.com Pulls Macmillan Books From Site In E-Book Price Dispute

NEW YORK — New copies of Hilary Mantel’s “Wolf Hall,” Andrew Young’s “The Politician” and other books published by Macmillan were unavailable Saturday on Amazon.com, a drastic step in the ongoing dispute over e-book prices.

Macmillan CEO John Sargent said he was told Friday that its books would be removed from Amazon.com, as would e-books for Amazon’s Kindle e-reader. Books will be available on Amazon.com through private sellers and other third parties, Sargent said.

Sargent met with Amazon officials Thursday to discuss the publisher’s new pricing model for e-books. He wrote in a letter to Macmillan authors and literary agents Saturday that the plan would allow Amazon to make more money selling Macmillan books and that Macmillan would make less. He characterized the dispute as a disagreement over “the long-term viability and stability of the digital book market.”

Macmillan and other publishers have criticized Amazon for charging just $9.99 for best-selling e-books on its Kindle e-reader, a price publishers say is too low and could hurt hardcover sales, which generally carry a list price of more than $24.

Macmillan is one of the world’s largest English-language publishers. Its divisions include St. Martin’s Press, itself one of the largest publishers in the U.S.; Henry Holt & Co., one of the oldest publishers in America; Farrar, Straus & Giroux; and Tor, the leading science-fiction publisher.

Sargent credited Amazon in his letter, calling the company a “valuable customer” and a “great innovator in our industry.”

But, he wrote, the digital book industry needs to create a business model that provides equal opportunities for retailers. Under Macmillan’s model, to be put in place in March, e-books will be priced from $12.99 to $14.99 when first released and prices will change over time.

For its part, Amazon wants to keep a lid on prices as competitors line up to challenge its dominant position in a rapidly expanding market. The company did not immediately return messages seeking comment Saturday.

Then the Huffington Post reported that Amazon.com had just posted a notice saying that they, rather gruppily, were waving the white flag;

Dear Customers:

Macmillan, one of the “big six” publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.

We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. 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 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.

Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!

Thank you for being a customer.

And so round one goes to McMillan — and every Kindle-user on the planet should be grateful that McMillan won.

I know that sounds crazy on the face of it but the truth is that ebook pricing was threatening primarily the livelyhoods of authors like me. Since ebooks do not require warehousing or physical shipping (they’re just a file, how much space or maintainance does that take per title?) you would think that they should be less expensive to distribute. True enough.

But the value in a book doesn’t lie in whether it is made of leather, paper, glue or just digital code: the real value in the book is in the story, the ideas, the journey and the meaning that those words elicite from the reader. It doesn’t matter whether you’re drawn into those words through ink on a page or digits on a screen — the value is in the meaning of the message not the medium.

Ebooks are cheaper to warehouse and distribute but by cheapening the costs to recieve that experience the PERCEPTION has been that books across the board have been devalued as well.

Amazon wants to establish the Kindle as their own market monopoly … I can understand that.  They want to make their ebooks sell at bargain prices. I can understand that, too. But when their zeal to sell their Kindle product makes it impossible for my publisher — and by extention me — to make a living off our words and stories … then story itself suffers.

Like my local pizza chain says in their advertising: “You can buy a cheaper pizza … but then you have to eat it.”

11 thoughts on “The McMillan – Amazon War

  1. I found this a very interesting discussion. I guess that I find it hard to believe that the publishing expenses could be almost as high for digital versus paper. The book is in electronic form in most cases when it comes into a publisher in this electronic age. The publisher, once they have done the ground work, would still produce this as a hard cover. I would suggest the problem is in the timing of the ebook release. With DRM, I think that you don’t risk any more piracy than you risk without electronic releases. The risk to the author’s royalty should be controlled by when the ebook is released. I would suggest it would be better, if you would normally release a book in hard cover first, then in mass market paperback, then the publisher could wait to release the ebook when the mass market paperback is released. In addition, since the savings is still significant – shipping alone is a huge expense – the author should receive the same royalty percentage regardless of the medium of distribution. Actually, if I was a publisher, I would consider paying a higher percentage for ebook royalties, as my cost would be less, so I could keep less of the total and still have it be the same dollar return on investment. The cost of electronic distribution will decline steadily over the next 10 years, so the publisher who leads the way to insuring the return for its authors will become the publisher of choice for more and more authors based on the royalties they get paid.

    As you stated, this is similar to the movie studios. Ebooks will probably not replace paper books in the near future, but the market for them will grow by large double digit percentages each year. I would encourage any publisher to look at the how they distribute ebooks and make sure they keep their top authors happy. I can tell you that I am an avid reader. I have hundreds of books at home that I have read over and over. I recently got my first ebook reader and I look forward to eventually replacing all of my paper copies with electronic copies. Not because I don’t like real books, but because I am incredibly busy and having my entire book collection in an ereader that allows me to have them with me all the time. This means that the authors will make a double royalty on these purchases.

    Lance

  2. I’m very glad I came across this conversation – it’s given me a great deal to think about.

    Upon the central point – that writers deserve to be paid fairly for their work – I do not disagree. The reason why I spoke up in the first place was that I see the internet and the ebook as an opportunity to ease the passage of young and first-time authors (like myself) into the publishing world. Yes, my position is at least partially selfish (but whose isn’t?)

    In no way was I trying to imply that electronic publishing eliminates the need for an editor. What I do see is the wider market, increased availability and yes, the lower cost of online publishing increasing (or allowing, in some cases) the chance of an author’s getting noticed and read. Believe me, I appreciate the distinction between ‘published’ and ‘read’. I still believe that the electronic market is a great opportunity for writers, and that the eventual effect will be increased quality of literature as a whole. (There’s an entire other conversation in there about the difference between quality and popularity. It’s off-topic though, so I’ll save it for another time.)

    Where I think I went wrong is naively believing that all this could be had without a cost. Someone, somewhere is going to have to pay for it. The price might be lower royalties for authors (which shouldn’t happen and is what the op is arguing against), reduced revenue for publishing houses or retailers, or the price might be paid in lost jobs among employees of those businesses – Darrin Kleyla, you touched on this briefly.

    I guess the bottom line is that right now the entire publishing industry is in transition. I don’t have the numbers to crunch in order to speak with any authority on this. I do know that it’s a complicated situation, and that very complexity makes me doubt that the only solution is to require ebook prices to mirror paper-book prices.

    • Responding to Sean Sero’s very well presented post:

      I guess the bottom line is that right now the entire publishing industry is in transition. I don’t have the numbers to crunch in order to speak with any authority on this. I do know that it’s a complicated situation, and that very complexity makes me doubt that the only solution is to require ebook prices to mirror paper-book prices.

      I absolutely agree with you here, Sean. As I mentioned in an earlier response, I believe that the situation today is highly analogous to the old ‘Studio System’ that existed in Hollywood from the 1920s until its abolition through anti-trust legislation in the 1950s. During this period of time, Movie Studios (like MGM, Paramount, Fox and the like) owned the entire production and distribution chain of films. They ‘owned’ contract players (much like professional athletes today) and would trade them like property. They also put directors under contract as well, insuring that they would only work for their ‘dream factory.’ Then, to top all this off, the studios also owned their own theater chains — controlling who distributed their movies. If you wanted to see Clarke Gable’s latest movie, then you could only find it at an MGM owned theater. Or, if you were an independent theater owner and you wanted the latest Clark Gable film (blockbuster) you were required to purchase an entire slate of lesser-quality MGM movies as well. When this secure channel of distribution was challenged, it seemed for a time as if movie studios were going the way of the dodo — but then studios wised up and realized that they weren’t in the business of making movies — they were in the entertainment business and that they needed to change with the times. The result is the current reality in Hollywood where studios provide financing and facilities services to independent production companies … and everyone is making money again. No studio owns Cameron’s Lightstorm production company — but both Cameron and the studio backing him made a killing on ‘Avatar.’

      Big publishers find themselves in a similar position, I believe, to that of movie studios in the 1950s. Their classic and time honored distribution system is being challenged by new media. The old models aren’t working any more. I believe that publishers will also have to change in much the same way as studios did in the 1950s and 1960s.

      To this end, Laura and I are establishing Scribe’s Forge. While we hope to teach what we have learned about the craft and art of Science-fiction and Fantasy writing, we are also hoping to develop it into an ebook/new media production house. Such places, I believe, will become filters for future readers in much the same way that traditional publishing filtered out the noise from the signal. I would like people to come to Scribe’s Forge looking for our latest published author (possibly like yourself) because we develop a reputation for publishing only quality works rather than anything that is just tossed up onto the internet. By becoming a focal point of quality, more readers will be drawn to our place first rather than random searching the web, and thus serving our authors with better revenues. At least that’s the model that I think the future holds for us all.

      New media? Yes, please, I’d like to be a part of that frontier!

  3. Response to Darrin Kleyla:
    The question is not whether electronic publishers will come into being: I intent on being an electronic publisher myself. I’ve also long embraced the ‘electronic age’ as I’ve been doing my own websites since the late 1980s.
    My point as I’ve made elsewhere, is that we NEED the hassle of a publisher and an editor. Writers who think their golden text does not need an editor should have their head examined at best — and their writing ignored. Every writer needs an editor … EVERY writer. When our writing is not challenged, questioned or shredded by publishers and editors, then it is stagnant.
    There WILL be electornic publishers — and I’m hoping to be among them. But if I ever publish one of your books electronically, you can bet that an editor will have made it bleed red before it is put before the public.
    I think it is safe to say that, much as the Studio System in Hollywood collapsed in the 1950s and was replaced by the new role of studios today … publishing will have to change.

  4. “the value is in the meaning of the message not the medium.”

    So when I pay $20 for a hardcover release of a book how much is content and how much is the necessary cost of the medium? What about when I can buy the same book paperback for $10 is the content suddenly worth less as well?

    Don’t get me wrong, I’m happy for writers to be paid to generate the entertaining works that they do, but when the costs of production/distribution drop by vast orders of magnitude I expect the cost of obtaining the content to drop as well.

    Are royalties affected by whether the sales were hardcover/paperback/digital? I understand that it isn’t in publishers/producers best interests to hurt tangible sales at this point because the digital market hasn’t fully matured yet, but that doesn’t mean that discounted digital saled are going to destroy hard/softcover as many people would still rather have a tangible asset instead of a bunch of 1s and 0s.

    • In response to ben:
      Royalties are affected based on the medium and this topic does remain a difficult one for Publishers to grasp. You should understand, however, that the actual difference in the distribution cost is, surprisingly, not that different. Yes, they are big blocks of paper but their actual per unit cost is realtively small.

  5. There’s no easy way to say “hi, I disagree with you” without feeling like a tool, but… Hi, I disagree with you. I’m an avid reader and aspiring author, and, like you, I believe that “the real value in the book is in the story”. Where I can’t quite follow you is the assertion that the lower pricing of ebooks affects the quality of the story. A great book is a great book whether I’m reading it on the screen or on the page.

    In fact, my belief is that the rise of the ebook and digital distribution can only help the overall quality of literature. Electronic publishing makes it far easier for a young author (like me) to get his work ‘out there’ and read by people. Ebooks broaden the market, meaning that book lovers (again like me) have the opportunity to explore the works of many authors who might not ever have been published otherwise. That, combined with the word-of-mouth advertising also made possible by the ‘net, means that talented authors will be discovered and lauded by book-lovers worldwide. The overall effect will be increased availability of higher-quality literature. Yes, there will be a lot of crap to wade through in order to find the good ebooks, but it’s not as if that’s not true in paper publishing now. (Have you tried reading Twilight? I have. It was unpleasant.)

    I acknowledge that the changing world is placing you and other successful authors in a difficult situation economically. But you have a major advantage in this – you have a fanbase. I don’t know what percentage of an ebook sale winds up in the author’s pocket – I don’t even know if your books are available as ebooks. But if they are, being the successful, popular author you are you could have Amazon and co. over the same barrel as McMillan now does. You have a monopoly over your titles, and as you say, producing, storing and distributing a file is not expensive. Authors deserve to be paid for thier work – of course I agree with you; I’m trying to become one! I don’t know if what I outline here could work, but surely you and other successful authors have options?

    Furthermore if nothing else, embracing ebooks as a medium for distribution means that increased availability and lower cost allows authors to sell more copies to a wider market than they would have reached otherwise.

    So in conclusion, while I understand that this is a challenging and complex situation, I feel that yours is not necessarily the only position possible. I hope that I have presented an alternative perspective on the situation and I apologize if I have offended.

    • In response to Sean Sero:
      You need not be concerned — I love spirited discourse and believe that people SHOULD disagree with each other. Unless our ideas are challenged, how will we ever change or grow?
      I understand your argument and agree with you in many ways: a great book is a great book regardless of the medium of delivery. But would like to suggest some ideas of my own here that may help clarify my position and help you know where I am coming from on this issue.
      The lowering of the price of the book means that professional writers like myself cannot make a living at the craft of writing and storytelling that they have spent (literally) years perfecting. This means, simply and bluntly stated, that we cannot afford to continue to write — or at a minimum cannot spend the time to perfect the stories we write that we might have spent otherwise. This directly affects the quality of the book.
      Secondly, I must dissagree with your statement that ebook distribution helps the
      quality of overall literature. Electronic publishing does make it far easier for new authors to ‘get published’ but it does nothing to improve the quality of the work at all. The question has never been whether you ‘get published’ or not. Down through the ages there have always been ways of ‘getting published’ through vanity press. The question, as you touched on, actually isn’t whether you ‘get published’ but whether you writing is READ. Anyone today can put their words up on the internet or put them up for sale through Kindle at Amazon. Just having the ability to toss words in an ebook onto the internet does absolutely nothing to improve the writing or the craft of the writer forging them. In fact, I would go so far as to say that it HURTS asipiring authors because it does not challenge them to improve their writing at all. Availablity has nothing to do with quality. Ease of distribution has nothing to do with quality. It isn’t just a matter of wading through crap to find good ebooks — it’s a matter of wading through an order of magnitude of crap (because a professional editor hasn’t done that for you already) in order to find an ebook that has not been developed because it, too, didn’t have to be filtered and improved by an editor.
      Don’t get me started on ‘Twilight’ or Dan Brown’s new book … they only prove that even publishing can make mistakes.
      I do embrace ebooks as a medium of distribution. I just think that to publish words that are unchallenged by either marketplace or critique means that literiture is damned to be awash in a sea of mediocrity at best.
      If no one questioned what I wrote — I would have just BEEN instead of BECOMING.

      of overall literature.

  6. I concur with the point you say, but I’d like to emphasize a point that you missed. I live in India, in India Fantasy as a genre is in infancy, therefore most stores don’t keep it updated. Many customers like me can’t get the titles in their nearby bookstores, so they may have to resort to eBooks. Thus Books give you a wider reach which may offset the losses. But your pricing should be suited to markets that don’t have as much puchasing capacity as, say US.

    • In response to Sandeep:
      I absolutely agree with you. At the same time, while a global market can give you a greater return overall it then also becomes a finite market and the question becomes whether the global market enlarges the return enough to offset the losses elsewhere. I am not against ebooks per se (that would be very much like trying to ban television just because you happen to like live theater) but I also do not see any easy answers to this complex problem in a global marketplace. All that I DO know is that I want to keep writing stories that you want to read — and that we need to find a way where I can be reasonably compensated for my time and effort while you get to enjoy my stories at an equitable price.
      And is it not marvelous that you and I, on opposite sides of the world, can have this conversation!

  7. Good comments, Tracy. This is a really timely issue, one that I think all authors are going to be watching. E-piracy is already rough enough for authors here in the “digital age.” Having legitimate sellers add this new element just makes things more and more complicated – and concerning for those trying to make a living off this crazy writing thing!

    As an aside, I too am a published author, and you and Margaret are among my biggest inspirations. I read your books over and over growing up (and still do in my 30s – when I get time for any reading!). At signings, my readers often demand to know how I can kill off beloved characters and end on cliffhangers. I tell them I learned it from you. 🙂

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