Amazon Vs The Big Six

I found two very accurate posts this week that reflected my reaction to this mess.

Rats Reading: Miscellaneous thoughts on ebooks and Amazon/Macmillan

Capitalism does not mean you sell at the cost of production plus a fair markup. I read an ostensible economist assert that readers who say they should get books at a price they are willing to pay is not capitalism. No, that’s exactly what capitalism is, if you add in that the seller has to agree to the price too. Cost of production has an impact on whether the producer agrees to the price, but even then it’s not determinative. If I spent $10 to make something but can only get $5, I may sell it at $5 just because it’s better than not selling it and getting $0.

Pakman’s Blog: Disruption ~ Weighing in on Amazon/Macmillan Pricing Debate

So, why would publishers NOT want Amazon to find the optimal profit-maximizing price? Because, like many entrenched media companies, they have massive legacy cost structures that don’t support selling books at, say $6 wholesale. They offer many unreasonable arguments against this: books are “worth” more, authors won’t make enough money, it’s bad for the industry, etc. These are not economic arguments, but are meant to maintain the status quo economics as long as possible. And it’s ultimately bad for them. The music industry has held firm that music is “worth” $1 – $1.30 per song, regardless of the track. For 7 years, they would not experiment with pricing under $1. (eMusic just convinced Sony and Warner last year to try…and I understand the results are positive.) But is all music really worth $1 a song? No, it is not. We know hundreds of thousands of tracks have sold 10 or fewer units digitally. That is the market telling you something.

The thing is Amazon is way ahead of Apple and the Big Six in selling online. They have researched what price would look reasonable enough to the typical consumer to “want to buy” a eBook Reader and then buy eBooks. None of these other clowns has a clue what that even begins to mean. They still think eBooks should cost as much as a hardcover.

Apple might have done some research but remember they have chosen to stay out of the eBook market even though the technology on their website has been in place for a long time. I don’t think that jacking up prices is going to go unnoticed or without backlash no matter if Amazon capitulates and signs that “agency model” sales contract or not. The market does not care what the Big Six say a eBook is worth. The consumer sets the price not the company.

Amazon is also not going to simply forgive and forget. Oh no, they will now probably start promoting sales of anything but the Big Six and those authors who stick around to watch the mighty fall. You have just turned the biggest eBook sales researcher and promoter on the web against you and I am sorry but Apple is not going to make it all better by selling iPads that are not for sale yet or promising you predominate spots in the iBooks App that no customer has even seen yet or used.

Just because someone buys an iPad does not mean they will not hack the shit out of that thing to make it the type of eBook Reading Appliance they want. If the Stanza App or the Amazon Kindle App is not available then the typical iPad user will make it appear. Google the term “Jailbreak” sometime and watch the fun.

I think this move was horribly planned and done at a time that will ultimately only hurt authors who unfortunately are going to be treated as “lackeys” of these rogue publishers. That’s their choice because they now have adequate warning what the future has in store for those caught hanging around those “dead tree” publishers. Bye bye “buy button”, hello used book sales and library loaned eBooks.

The Big Six are not going to be able to sell their eBooks for anything but $9.99 eventually and I imagine Amazon as well as the eBook consumers and the ePublishers, who know an opportunity to expand their business when they see one, will work diligently to make that price the only game in town. They now know the breaking point of their competition.

If I was an ePublisher I would be saying sweet things in Amazon’s ear right about now and maybe working a better deal. Because it’s not just about potential markets, that will always change, but having a good standing with a proven eBook market is gold. The Big Six have their ass hanging in the breeze on this one. March and maybe April depending when Apple has the iPad for sale and iBooks online is still a ways off.