Amazon.com started out selling books, and has become wildly successful. Not long ago, there were at least six major bookstores in and around Water Tower Place. Now there is one, the huge Borders on Michigan. Independent booksellers have been decimated. Just last year saw the closure of both the Prairie Avenue Bookshop and Powell's on Wabash. Book-selling is dominated by two major chains - Borders and Barnes & Noble, both so iffy profit-wise that a merger between the two has long been rumored.
Electronic books are the coming thing, and Amazon's Kindle has had a 60% market share.
Last week, Apple announced its iPad device, which, at price points not that far above the Kindle, offer not only books, but browsing, mail and access to 100,000+ iPhone apps. It has also struck deals with major publishers, including MacMillan, with more flexible price points than those offered by Amazon.
Amazon responded by yanking all of MacMillan's titles from Amazon.com. In a span of a few short years, it's gone from being the scrappy underdog, the bookbuyer's best friend, to a bullying monopolist on the model of Microsoft.
And if you have any doubts about the monopolist part, check out this post by author Charles Stross. Amazon is no longer content to sell publisher's books. It now demands that publishers wanted to offer Kindle editions must sign over their most basic rights and make Amazon the publisher of the electronic edition.
To customers, Amazon wants to be the only store in town; to publishers, they want to be the sole customer to sell to. As Stross explains, Amazon's business model collapses the supply chain, but they still want to double dip and get paid for the parts of the chain they've made unnecessary. The bricks and mortar supply chain:
author -> publisher -> wholesaler -> bookstore -> consumer.
has been collapsed to:
author -> publisher -> fixed-price distributor -> reader.
Amazon charges publishers as if the change never occured - 70%. Apple, recognizing the new business model, is asking only 30%.
After the iPad announced, Amazon dropped its demand to 30%, providing the publisher meet the draconian demands reported by Stross:
you have to agree that Amazon is a publisher, license your rights to Amazon to publish through the Kindle platform, guarantee that you will not allow other ebook editions to sell for less than the Kindle price, and let Amazon set that price, with a ceiling of $9.99. In other words, Amazon chooses how much to pay you, while using your books to undercut any possible rivals (including the paper editions you still sell). It shouldn't surprise anyone that the major publishers don't think very highly of this offer ..Another report, from the Los Angeles Times, here.
Monday morning postscript
The first skirmish is over, and Amazon blinked. It's agreed to variable pricing for MacMillan titles - which in this case means higher e-book prices from $12.99 to $14.99 - and restored them to their store.