It'll Be War!

By now most of you reading this blog probably know about the latest dust-up over ebook prices.  For those of you who haven’t been following the news, here’s a brief synopsis followed by some thoughts on the history of book pricing.

A couple of weeks ago officials at Macmillan, one of the largest global book publishing firms, decided to put the screws to Amazon.com.  For over two years now the retailer has insisted that $9.99 is the decisive threshold at which consumers will begin trading reading material composed of atoms for stuff made of bits.  Reportedly it’s managed to sell three million Kindles and who-knows-how-many e-books, but still Macmillan begs to differ on the matter of pricing.  Management there believes that a more flexible scale would be preferable to Amazon’s flat-rate, with new e-titles starting at $15 and older works listing for around $6.

Well, Amazon got so miffed by Macmillan’s proposal that it temporarily suspended sales of any new books published under its imprimatur, which includes such venerable labels as Farrar, Straus & Giroux; St. Martins Press; Henry Holt; Tor Books; and others.  Macmillan responded by calling Amazon’s bluff, knowing full-well that Amazon’s decision to de-list the publisher’s capacious catalog ultimately would hurt the retailer’s bottom line more than it would help its cause of ebook pricing.  With the door now open, other presses are jumping on the higher-priced ebook bandwagon.

This is a fraught issue, to be sure.  As a frequent book buyer, I’m grateful to Amazon for doing its part to keep ebook prices low for as long as it could.  The company clearly understands the psychology behind the pricing of digital goods.  Consumers intuitively grasp that the marginal costs of producing any given copy of an ebook is next to nil, and so we’re understandably reluctant to buy up e-titles and expensive hardware when paper books can be had for a comparable enough price.  On the other hand, I recognize that the promise of advances and royalties gives professional authors incentive to continue producing new work.  Accordingly, they have a compelling interest in maximizing their return through healthy (read: inflated) prices.

We could go around and around all day about who’s right and who’s wrong here.  As someone whose paycheck comes primarily from my work as a university professor and only secondarily from my publications, selfishly, I’m inclined to side with Amazon.com.  But really there are no clear-cut good guys and bad guys here.  The whole situation reminds me of a recent dispute between physicians at my local hospital and a major health care provider, each of whom accused the other of excessive greed and bullying.  In the end, the only party who suffered was the people who, for the duration of the quarrel, had to drive 50 miles to get the health care to which they were entitled.

Anyway, this may well be the first major conflict over the price tag for ebooks, but it’s surely not the first time the book industry has gone to war over book prices.  This has happened at least a couple of times before, first in the late 19th century and then again in the 1920s/30s.  In both instances, a bunch of young, brash publishers decided to slash their prices as a strategy to gain market share.  Older, more established firms responded by digging in their heels and waging a clever PR campaign designed to convince the public that it was in their best interest to pay more than they actually needed to for books.  (You can read more about this history in chapter 1 of The Late Age of Print and in volume III of John Tebbel’s magisterial A History of Book Publishing in the United States.)

What might these earlier price wars tell us about the present situation?  Anyone looking to establish themselves as leaders in digital publishing would do well to undersell their competitors by offering electronic editions at or below the $9.99 price-point.  The goal should be to sell as many copies as possible, by finding a price so attractive that no one can resist.  It’s funny: we hear all the time about how book reading is on the decline in the United States and elsewhere.  Could it be that the falloff is attributable not only to the usual scapegoats (electronic media, waning attention spans, etc.) but also and significantly to publishers’ greediness over book pricing, electronic or otherwise?

Indeed, if history teaches us anything, then it teaches us that publishers who’ve made their mark selling low can succeed in the long run.  Just ask Simon & Schuster and Farrar & Rinehart (yes, that’s the same Farrar of Macmillan’s Farrar, Strauss, & Giroux).  They were among the upstarts of the 1920s and 30s whose decision to sell books for a buck sent the old-timers into a tizzy.

Ringing any bells, Macmillan?

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3 comments

  1. […] This post was mentioned on Twitter by Ted Striphas, lmaruca. lmaruca said: Historical analysis on recent dust-up: RT @striphas: It’ll Be War! On the Amazon-Macmillan dispute over ebook prices http://bit.ly/aRgt6T […]

  2. Siva Vaidhyanathan says:

    Publishers know that books are not commodities. Amazon does not know this — or knows it and wants them to be commodities.

    There are two big issues here you left out:

    1) The potential of Amazon to lock up the ebooks standard and market and control books via devices that it alone can sell.

    2) The need that publishers have to let windfalls on popular books make up for losses on unpopular (i.e. your and my) books.

    As the music business has learned so painfully, once you create a standard price expectation, you can’t let hits pay for dogs. And more specific to the publishing world, big, expensive-to-edit books that don’t expect 10k sales will disappear forever if they can’t charge enough to recoup costs of production.

    So it’s not “greed.” It’s business.

  3. Ted Striphas says:

    Thanks for the comment, Siva. I’m not entirely sure I’d agree with your claim that publishers don’t believe books are commodities, but then again I suppose that depends on how you define “commodity.” I assume you mean it in the sense of a bulk good whose value is determined on or by an ostensibly open market?

    I agree wholeheartedly with the first main point that you raise. I’ve written extensively here about my misgivings about the Kindle, and indeed I hope I didn’t give the impression in this particular post that I’m a fan of Amazon or its tactics in trying to lock up the ebook market. (Hence, the health care analogy.)

    I’m less sure about the second point. My argument in this post concerns lower price possibly leading to higher sales volume, which, would not, perforce, entail a break from the type of subsidy system you’re describing. But then again, perhaps I put too much faith in “long tail” economics. I gather the emerging research isn’t entirely bearing out Anderson’s hypothesis, but we’ll see.

    Thanks very much for the thoughtful comment. And for whatever it’s worth, I’d hardly describe your books as “unpopular!”

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