Third major publisher dumps Amazon $9.99 e-books model

Editor’s Note: The following article is reprinted from the Today @ PC World blog at PCWorld.com.

The future of the $9.99 e-book is in danger. A third major publisher, Hachette, is going for Apple’s agency model in order to sell e-books for up to $14.99 apiece, the company revealed in a memo to agents.

Following Amazon’s public dispute over e-book prices with Macmillan early this week, Hachette is also seeking a shift to the agency model, which allows the publisher to set the price for the e-book, while the retailer keeps 30 percent of the sales.

Hachette follows a similar move by HarperCollins, whose owner Rupert Murdoch was quoted saying during an earnings call that “We don’t like the Amazon model of $9.99 . . . We think it really devalues books and hurts all the retailers of hardcover books . . .And now Amazon is willing to sit down with us again and renegotiate.”

In the memo to agents, Hachette claims that it is “not looking to the agency model as a way to make more money on e-books. In fact, we make less on each e-book sale under the new model; the author will continue to be fairly compensated and our e-book agents will make money on every digital sale.”

The $9.99 e-book price point is clearly the hot topic for this start of the year. Two out of five major publishers already denounce the Amazon model, and a third is pushing price renegotiations. Will the other two major publishers, Penguin and Simon & Schuster follow suit? Most probably.

What is this all about?

On January 27 Apple unveiled the iPad, a tablet-like computing device, which will come bundled with the iBookstore, the company’s response to the increasing popularity of e-books.

Unlike Amazon, which buys e-books from publishers at around $15 and subsidizes them to sell for $9.99, Apple said it will adopt the agency model, which allows the publisher to set the prices for e-books while Apple keeps 30 percent of the sales (as with its App Store).

Apple also announced deals with the five major publishers for the iBookstore, namely Penguin, HarperCollins, Simon & Schuster, Macmillan and Hachette. Just over a week after the announcement, three of the named publishers objected to Amazon’s model, claiming it devalues books, despite the agency model bringing them lower returns on e-books.

Amazon entered a public dispute with Macmillan, the first publisher get out go the wholesale model, and the retailer retaliated by removing Macmillan books from its inventory. Macmillan is now advertising its books as "Available at booksellers everywhere except Amazon."

Amazon is probably in a losing battle with the publishers, but at the end of the day this will mean more expensive e-books for consumers, who will have to shell out several extra bucks for e-books.

Yet the Internet retailer is not going anywhere. Amazon has acquired Touchco, a maker of flexible touchscreens, which will allow the company to produce Kindle models with multitouch capabilities. Also, an app store for the Kindle is in the works, which will offer simple apps to users.

Amazon’s earning have increased 40 percent in 2009, the company on Friday revealed.

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