Playing Hard to Get: Pricing with Apple and Amazon

by Adam on March 26, 2010

The New York Times came out with an article about a week ago, detailing some of the roadblocks that have come up over developing partnerships between publishers, Apple and Amazon. Full text of the article can be found here:

http://www.nytimes.com/2010/03/18/technology/internet/18amazon.html

For anyone who didn’t have a chance to read it, Amazon is threatening to stop selling the books (both print and digital) from publishers who don’t agree to a stricter set of rules regarding digital sales. Five out of the Big Six publishing houses are currently signed up to work with Apple via the iPad, which opens up the agency model and a much larger slice of the revenue pie to these publishers. Amazon has said it has no intention of switching to the agency model for its publishers and is trying to prevent some of the smaller houses from ever signing up with Apple. For both their parts, Amazon and Apple are putting publishers in a sticky situation by demanding the lowest competitive pricing on ebooks.

Welcome to the dysfunctional digital household, where Amazon and Apple are publishers’ unsettled parents and we run back and forth trying to appease both at the expense of our own sales.

In reality, this is truly a quagmire that can’t be worked out on an individual basis or overnight. It’s going to require a lot of turmoil for all involved (unless both companies come to some agreement, which seems unlikely). For smaller houses, especially those that rely on Amazon for so much of their in-print sales (which Amazon realizes and takes advantage of), going to Apple to try to negotiate these terms just won’t happen as long as Amazon is acting as gate-keeper.

The more obvious, and far less palatable, solution is to have publishers sign on with Apple and price their books at $9.99. Of course, they’d be getting a bigger slice of the pie at 70%, but that really isn’t the point here. The point is that all content is not worth $9.99 – some less, some more – and to assume that everything publishers produce from now to the end of time will be available at the same price point is not only foolish, it’s dangerous to the future of the business. Nobody has any real ideas about where convergence of price will lead us, but for consumers, retailers and distributors to think there’s one price point at which content can be sold is the beginning of a paradigm for publishing that is unlike anything we’ve ever seen.

So without giving in the pricing model to Apple, and without losing all the in-print sales that Amazon provides, what’s left for publishers to do? One somewhat radical solution would be to parse out distribution to each channel based on the unique advantages, such that Apple and Amazon have access to sets of books that the other doesn’t. While it does then limit the ability for publishers to expose their titles to the greatest number of channels, it allows them to play in the digital sandbox with Apple and find out what the iPad can offer them.

I’m not entirely sold on the thinking there, but it’s one way to proceed. Any other thoughts are indeed welcome.

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