Amazon announced today that they are caving to publisher Macmillan‘s demands to set their own prices for e-books. Amazon had been pressing to keep the price of all the e-books they sell at $9.99, which is undoubtedly part of their business strategy surrounding the Kindle. Macmillan threatened to deny Amazon the right to sell any of their books, electronic or otherwise, and Amazon responded with a brief boycott. But in the end, Amazon opted to let consumers decide if they are willing to pay Macmillan’s prices. Both sides, however, seem to be ignoring the reality of why consumers are turning to e-book readers in the first place.
There are various reasons why bibliophiles make the switch. Of course, portability, more open shelf space and the ability to immediately get the latest must-have novel all play a role, but price is most definitely a major factor. Buying the hardware for reading e-books is a big investment, so the calculus of how much money you save becomes important.
A quick look through Macmillan’s online store shows that they are pricing a lot of their e-books at the same price as the hard copy and in some cases, they were more expensive! It’s hard to imagine something less likely to alienate their e-book customers. After all, part of what you pay for when you buy a hard copy is the costs associated with printing, packaging and distribution. If you are buying an e-book, why should you have to pay the same amount? Macmillan seems to think that customers should pay the same price to get access to their content regardless of the format and that they can just pocket the money saved on e-book editions.
As for Amazon, while their position that e-books should cheaper is sympathetic, their strong-arm tactics and use of proprietary software for e-books is not. The Kindle is a pretty slick machine, but if you choose a different e-book reader, you’re out of luck at Amazon. They aren’t selling e-books in any of the more flexible file formats like pdfs, eReader, or ePub.
Basically, both companies are pursuing a similar strategy: take away a customer’s ability to choose. Amazon wants you to stay with the Kindle because it’s the only device that reads your purchases and Macmillan wants you to pay the same price for their content regardless of where and how you buy it.
It’s a strategy that is bound to fail. Consumers do not like being boxed in, particularly when they don’t know if they are going to like what they are buying. Publishers and book seller are going to have to find a way to compete with the availability of free content online at sites like Project Gutenberg and Google Books and the common practice of pirating and file sharing. Many libraries are also offering patrons the choice of checking out books in digital format. As record companies have been learning, if you have nothing to offer but the same content at a higher price and with more restrictions, you are going to suffer.
Consumers want more choice and with a rash of new e-book readers coming out, they are going to find a way to get it, regardless of what Amazon and Macmillan want. Instead of trying to set the price for content, publishers and online stores should be thing about what they can offer customers that will drive them to their sites and keep them coming back. For instance, publishers could cut out the middle man and sell e-book directly from their websites at reduced rates and then offer buys discounts on their other titles. They could also bundle the e-book with other digital content that isn’t available in other places, like interviews with the author, excerpts from upcoming books, games, etc. It might also be viable to sell advertising on their online stores or use customer data on customer preferences to market related titles.
There are any number of options, but one thing is for sure: readers aren’t going to pay full price or even $9.99 for an e-book if they can get the exact same thing elsewhere for less. And you can just bet someone out there is willing to give it to them.