Amazon’s Secret eBook Deal (and other headlines from the Pricing Wars)

Today only you can buy Michael Lewis’ Moneyball from Amazon for only $0.25 cents! This isn’t the Kindle Daily Deal, or even an official Amazon deal.

Actually, it’s Google’s “Play of the Day“. Since the launch last week of Google’s new service, Google Play, Amazon has been price matching this “Play of the Day” under the terms of their licensing agreement. Any book sold on Amazon cannot be sold for cheaper anywhere else. If it is, they price match, hence the super secret $0.25 cent Amazon deal.

These new deals come in the same week the justice department warned Apple and five publishing firms that it may sue them for price collusion. Under an agreement between the publishers and Apple, publishers would pay a flat 30% fee to Apple for each eBook sold in return for the ability to set their own prices. Additionally, books sold on Apple must be the same price as books sold in other venues, and other vendors must agree to the Apple price. Ostensibly the reason for this was to break an Amazon monopoly on eBooks.  According to Steve Pearlstein of the Washington Post:

“What looked to consumers like a great bargain at $9.99 a book looked to others in the industry suspiciously like predatory pricing, or selling below cost today in order to gain a monopoly and raise prices in the future.”

Amazon seems to love the $9.99 price point, and has been incentivizing authors who participate in Kindle Direct Publishing to publish to sell their books between $2.99 and $9.99 in return for a 70% royalty. Outside of this range the royalty is 35%, meaning an author would need to sell an eBook at $19.99 to make the same royalty as selling it for $9.99. But is this predatory pricing? How is Amazon’s “price-match guarantee” different from the Apple proposal?

The difference is pretty simple. Amazon does not want any other vendors to sell a book cheaper than they do and so they lower their price to match. Authors can set an upper bound on price (the digital list price), but the selling price is determined in real time by Amazon. Apple and the five publishers, on the other hand, want to establish an agreed upon list price, and not allow other vendors to sell the eBook for cheaper than that price.

Where this becomes a concern, as Pearstein writes, is in the “winner take all” environment of digital content. Consumers will tend to stay with who they started to build their media library with, especially since the costs in terms of new devices, or repurchasing media can be high. (In my view one way to remove this “winner take all” property is to remove DRM from the associated materials and to allow content from one seller to be read on a multitude of devices. Baen publishing takes this stance with its eBooks which are DRM free and provided in all major eReader formats. Amazon MP3 is another example of this in the digital music arena.)

Both sides are interested in making sure that neither side has an unfair advantage in attracting new customers, because those customers are likely to stay where they start.

For the moment, it seems like Apple’s tactics are considered price collusion, but their concerns about Amazon’s monopoly may be addressed on another front with Google’s revamp of Google Books as part of Google Play. Google is reportedly producing a tablet to compete with the Kindle Fire and the Nook Tablet.

What do you think is a fair price for eBooks and who should be determining it (Authors\Publishers\Vendors\Consumers)?

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1 Comment

Filed under Books + Publishing, Trube On Tech

One response to “Amazon’s Secret eBook Deal (and other headlines from the Pricing Wars)

  1. Pingback: Are eBooks and Hardbacks the same product? | Ben Trube

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