Among the aims of Apple’s iPad tablet is to reshape the e-book industry in the way iTunes reshaped the e-music industry. That means taking direct aim at industry leader Amazon and its e-reader, the Kindle. Apple reached its aim two months before selling a single book, as Amazon was forced to accede to higher pricing for Macmillan e-books. Amazon loses out, and so do consumers.
In the weeks leading up to the iPad unveiling last week, Apple made agreements with six major publishers to sell e-books at prices between $12.99 and $14.99. (Remember, the iPad doesn’t even go on sale until the end of March.) That was a shot across Amazon’s bow. The nation’s biggest retailer of books – print and electronic – had established a price of $9.99 for most e-books, which was lower than the industry wanted its wares priced. Because Amazon had first-mover advantage with the Kindle, the publishers went along with $9.99 pre-iPad, even after Barnes & Noble, Sony and other outfits rolled out well-regarded e-readers.
When, in the aftermath of the iPad unveiling, Macmillan visited Amazon on Thursday to revisit the issue of e-book pricing, Amazon retaliated on Friday by refusing to sell Macmillan books in either medium. By Sunday, Amazon had knuckled under, acknowledging, “Ultimately we have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own books.”
Amazon, which did more than any other retailer to institutionalize deep discounts on best-selling print books, has failed in its attempt to do the same for e-books. Ahead of the iPad announcement last week, Amazon posted a 71% increase in fourth-quarter earnings and a 42% increase in revenue, and announced that it’s selling six e-books for every 10 print books in titles it stocks in both formats. This morning, after the Macmillan climbdown, Amazon’s shares are down 9%.
Scorecard: Apple and the big book publishers win. Amazon and consumers – who just absorbed a 30% increase in e-book prices – lose.