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    Monday
    Feb272012

    Amazon and Distributor Go Toe-To-Toe Over E-Books

    The 800 pound gorilla flexed its muscles last week.

    The New York Times reported Amazon Pulls Thousands of E-Books in Dispute

    Amazon.com, seeking to increase its relatively low profit margins while continuing to sell e-books at low prices, decided to change the terms of its contract with the Independent Publishers Group (IPG) when that company’s agreement came up for renewal.

    “They decided they wanted me to change my terms,” said Mark Suchomel, president of the Chicago-based I.P.G. “It wasn’t reasonable. There’s only so far we can go.”

    When the two parties were unable to agree, Amazon made all of IPG’s 4,443 e-books unavailable on its Kindle devices.

    What’s happening was predictable. (This blog ran a three part series Amazon: A Third Wave Rocks Publishers Leaky Boat in 2010 which explored Amazon’s pricing practices and their implications. To read that series click here for Part I, Part II and Part III.)

    To establish a market for its Kindle eBook reader Amazon set the price for all of the eBooks it would sell at $9.99. The price was set without consulting the publishers who would not have agreed to such a low price.

    Amazon tried to allay the fears of publishers by paying them the price they would have received for a printed book. In essence, Amazon made the decision to take a loss on the book to assure market dominance for its Kindle.

    The controversy with IPG demonstrates that Amazon is rethinking that decision.

    “Presumably, this is a move Amazon is planning to make with other distributors and publishers as their contracts come up for renewal,” said Lorraine Shanley, a publishing consultant.

    IPG CEO Curt Matthews offers a clear statement of the traditional publishers on the IPG website under the title What Should an E-Book Cost?

    Matthews explains, “A carefully kept secret in the book business is that even the best authors need editing…the cost of editing, designing, page makeup, and proofreading is high, higher in fact than the cost of printing the book.”

    “An e-book still needs all of the expensive editorial services noted above; and if it is going to sell, it has to be marketed, distributed, and publicized, just as a print edition must be. And the author royalty on an e-book sale is usually about the same as it is for a print book…”

    Onnesha Roychoudhuri in a November, 2010, Boston Review article, Books After Amazon warned, “Amazon’s handling of e-book pricing – and publishers’ response – will have perhaps the most far reaching effects on the industry,”

    More is at stake than the price of a book or which company profits from the publishing deal. Anyone who loves books has to ask whether Amazon’s market dominance will allow it to act in ways that will debase the quality of the very books it seeks to sell.

    What do you think? Let us know.

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