Have we seen the end of the $9.99 eBook?
At the roll out of the iPad, our old friend Walt Mossberg of the Wall Street Journal chatted up Steve, and when asking about the pricing of buying books from the iBookstore, Walt was told that the price would be the same as Amazon. Amazon currently charges $9.99 for most books, which, according to AppleInsider, means that Amazon is losing $4.50 per book to keep its leadership position in the eBook market and keep Kindles selling. This strategy is similar to the loss-leader marketing popularized by Gillette who sold razors at a loss in the hopes of more than making up for it in the sales of blades.
Apple proposes prices that would actually be profitable, wanting to position best sellers between $12.99 and $14.99. AppleInsider notes that Apple's plan is a similar one to the App Store where the publisher takes 70% and Apple takes a 30% cut. Under the Amazon plan, including the $4.50 Amazon subsidy, book publishers are currently being paid $14.50 while under Apple's model, the publisher of a bestseller would only make $10.49 per copy.
The idea of Amazon subsidizing books is unsustainable in any competitive market and with more than one big razor in town, or at least one showing up soon, the market will inevitably settle on one method or the other.
[via AppleInsider and WSJ]
The first shot over the bow was reported in the Wall Street Journal today when Amazon conceded defeat of its $9.99 pricing policy to publisher Macmillan, who proposed charging between $12.99 and $14.99 for eBooks of hardcover bestsellers. This is exactly the same pricing suggested by Apple. The day after the introduction of the iPad, Macmillan CEO John Sargent met with Amazon to discuss new pricing arrangements, and a day after that, Amazon pulled all Macmillan titles from their online store. Now, just a few days later, Amazon has announced that it will give in and accept Macmillan's terms, stating that Macmillan has a monopoly on its own titles and that they will offer Macmillan titles that, according to Amazon, are priced needlessly high.
It seems to me that the days of $9.99 eBooks are coming to an end and that the market will stabilize at something close to, if not exactly, the Apple 70/30 split, raising the price of eBooks to the consumer. What do you think? Will the threat of the iPad to Kindle sales change the market even before the iPad comes to market? Is there an argument that can be made for keeping eBooks under ten dollars? And just how scared is Amazon to make them do a total 180 degree about-face in under 100 hours?
