Blink and you could have missed it, but if you’re a novelist, a hardcore fan of certain writers or a tech-news junkie, this was as thrilling and divisive as any major political standoff. Stay with me here because ultimately. this does have an affect on movie lovers and home entertainment ehthusiasts.
Amazon, the world’s largest online media retailer, recently took the unprecedented route of pulling an entire company’s stock of books off of its “shelves”. You couldn’t buy a single copy of any Macmillan Publishing properties from Amazon.com that wasn’t from used, secondary sellers, meaning that if you wanted a book – for example, Priceless: The Myth of Fair Value (and How to Take Advantage of It) – Amazon wouldn’t sell it to you. Not on the Kindle, and not from its warehouse.
What many don’t realize is that what we witnessed this weekend was the very first Mexican standoff of the digital media age. On the surface, this looks like it is about books and trying to corner a market before competition takes them to task – but it is also the model by which we will see disputes handled by conglomerates in the future. Music, movies, software – anything that is transferred digitally can have this happen (and it WILL happen again, you can bet on it) and it can have far-reaching effects. This was a blip, a hiccup, but in the future such disputes could be far greater and much bloodier. Here’s how it all went down.
Amazon’s Argument: This was simple. Amazon’s big, somewhat new product is, of course, the e-book reader Kindle. Just this week, Steve Jobs walked out on stage and showed the world Apple’s answer to killing the Kindle. Not merely maiming it, but killing it. People have been referring to it as “The Kindle Killer.” Make no mistake, Apple is playing for keeps. Forget for a moment that the iPad is the single most mocked, parodied and criticized piece of hardware ever to be announced (and not yet released), and look at it from Amazon’s standpoint: They need a big win, and now. That big win was going to be their price point. Apple is anything but cheap (the company is reportedly pocketing $209 on every $499 iPad sold – even more on the 3G network-equipped models, a $15 upgrade they are charging a couple hundred extra dollars for), so Amazon figured it would control the market by making e-books affordable and setting a cap of $10 a book. That’s reasonable, right? After all, there’s ZERO production cost to an e-book. You simply provide a file that Amazon hosts, distributes and advertises. It’s not like a book that needs to be printed, transported and stored; thus $10 is a fair price. Amazon told everyone that, and almost everyone complied, but Macmillan stayed defiant. So Amazon took a lesson from the Wal-mart playbook and simply pulled the merchandise off the shelves – digital or otherwise.
Macmillan’s Argument: Screw Amazon. Their argument is that we live in a free market system and the price is dictated by the market, not the marketplace. Amazon, having a near monopoly on online retail, should not and cannot tell them what to charge for their product; that’s what consumers are for. WE should tell them what we think their product is worth. And as the previously ironically referenced book above (Priceless) states as its premise, the market is entirely based upon perceived value. If you can buy an e-book for $10, why would anyone ever buy a $25 hardcover? People will pay $15 for a new release bestselling e-book, so why not charge them that and then lower the price to $10 when sales have cooled?
The Problems: Digital rights (Music, Movies, Publishing) are a mess right now. Like many industries, publishing didn’t expect e-commerce to take off so soon and was thus woefully unprepared, never realizing that its previous contracts do not quite cover digital distribution. Making matters even muddier is the fact that the visually impaired have sued Amazon over the Kindle not being blind-friendly, forcing the addition of a read-aloud feature for the text, something covered differently under print contracts as “performance” of the work and considered a different, if not additional, amount of royalties. On top of that is the issue that Amazon wants to protect its downloads from piracy with DRM (digital rights management, or copy protection), but, as many customers also dislike that (because they can’t copy the work to other devices or, ahem, give their copy to friends or sell it to anyone else when they’re done with it), some publishers are willing to risk the piracy issue and go without to make the customer happy.
Why Amazon Blinked: Because Macmillan didn’t. Macmillan made a strong argument to its authors: that their pay was based upon a percentage cut and that x% of $15 is 50% more than x% of $10. So the company sent out its authors to rally the troops, some calling for a boycott of Amazon, others simply talking trash or claiming poverty (and not illegitimately so: Not everyone is Dean Koontz, and many writers make less than $10,000 a book.) Readers responded and their rhetoric was overwhelmingly “Screw Amazon.” Macmillan had won. Or so it seemed. Amazon, blinking, released this statement:
Dear Customers:
Macmillan, one of the “big six” publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.
We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books. Amazon customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. We don’t believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.
Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!
Thank you for being a customer.
In the end, two media giants accused each other of being a monopoly, gouging the consumer and screwing their business partner. And they both looked bad. Nobody really won this weekend. Macmillan could have publicly argued that Amazon merely needed to drop its cut of the profits while arranging to pay writers more for e-publishing rather than taking the “we’ll charge whatever we damn well please” argument; Amazon, meanwhile, made everyone painfully aware that it has become the Wal-mart of the Internet, painting a big target on its back and giving people a reason to support Apple and its already maligned product.
So … how does this play into movies? Well, Amazon also handles digital distribution of streaming films, and with Netflix’ recent decision to hold off renting Warner Bros. DVDs for the first month of release in exchange for a larger streaming catalogue, we’re going to see a number of the conglomerates butt heads over the next few years as all these new forms of media get hammered out. Today it is books; tomorrow it is music or movies. And this weekend’s staring contest is a model that we will no doubt see again.
