How to Hit a Curveball Gets Thrown a Curve

Friday, April 2nd, 2010

Imagine writing a book over the last two years, getting ready for its official sale, and finding out the morning of its launch that Amazon has picked a fight with your publisher by removing the purchase button from the Kindle version of your book. Well, that’s what happened to me… Yesterday!

While Amazon has not officially responded to Apple’s iPad, its response to Apple’s iBookstore looks like a series of brush back pitches thrown at book publishers. Apple is offering book publishers an agency arrangement in which the publisher retains the right to price its e-books for the iPad, while Apple receives a percentage of those sales.

The agency model is defined as projects funded as a fee-for-service by clients, who either use or re-sell the content. Apple uses the “agency model” now with the App Store, taking a 30 percent cut of whatever the developer charges for an app.

—The Apple Core, ZDNet.com, Apple pitching its agency model to book publishers

Amazon, on the other hand, has been pursuing a wholesale model for its Kindle bookstore.

The wholesale model, on the other hand, is when the publisher “sells” the book to an intermediary (i.e. Amazon, Borders, B&N) based on the publisher’s established retail price and a discount schedule, typically around 50 percent. Then the purchaser resells that e-book at whatever price they like.

—Apple Core, ZDNet.com, Apple pitching its agency model to book publishers

Publishers believe that selling their books through Apple’s iBookstore for a commission will be more profitable than selling them through Amazon at a discount. And their response to this new arrangement with Apple has been to push Amazon to do something similar. This curveball thrown at Amazon’s business model led it to react.

Amazon first hit back at Macmillan when the publisher asked Amazon to raise its e-book prices from the $9.99 discount price on much of the products in the Kindle store. In January, Amazon temporarily removed Macmillan books from sale on its site, although it allowed them to continue to be sold by third parties.

—NYTimes.com, Amazon Pulls Macmillan Books Over Pricing Rift

After about a month Amazon backed down.

“We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles,” Amazon said in a statement. “We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books.”

—BayNewser, MediaBistro.com, Amazon Standoff with Macmillan Over; Amazon Blinks

But now, on the eve of the iPad’s debut, Amazon has responded similarly after not being able to come to an agreement with Penguin on the pricing of e-books (yes, How to Hit a Curveball is published by Portfolio, a Penguin imprint). Penguin sent out an email to agents and authors explaining the situation.

“Your newly released eBook is currently not available on Amazon, but all of your eBooks released prior to April 1st are still for sale on their site. We want to also assure you that all of your books are available through other e-tailers and at bricks and mortar stores everywhere–from the large chains to the clubs to the independents and on their respective websites…. In recent weeks we have been in discussion with our retail partners who sell eBooks, including Amazon, to discuss our new terms of sale for eBooks in the U.S. At the moment, we have reached an agreement with many of them, but unfortunately not Amazon—of course, we hope to in the future.

—GalleyCat, MediaBistro.com, Breaking: Penguin Has Not Reached eBook Agreement with Amazon

While the ultimate outcome of this latest development isn’t yet known, it is obvious that even a firm as cutting edge and visionary as Amazon reacts to curveballs not all that dissimilar to the way many of the rest of us do: by resisting change and not stepping up to the plate.

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How Will Amazon Respond to the iCurveball?

Friday, March 5th, 2010

Amazon certainly knew that Apple would release a tablet computer that would likely compete directly with its own Kindle electronic book reader. But apparently, Apple’s coming out with plans to offer a version of the product for as low as $499 was a curveball, not just to Amazon, but to most industry observers. It seems that the ability to come in at a lower than expected price is a result of Apple using its own chips rather buying them from another manufacturer.

How will Amazon respond? Will it continue to position the Kindle as a dedicated eBook reader different than the iPad’s multi-role positioning? Or will it try to make the next generation of Kindles more like the iPad?

There are many hints Amazon will choose the latter option. Some bloggers are even predicting an Amazon/Microsoft alliance.

Imagine a Windows 7 Phone Series device scaled up to a 10.1 inch screen, with Wireless-N networking, Microsoft’s Zune/Amazon MP3 music service, Kindle’s e-book store and Microsoft’s developer base behind it. A synthesis of the world’s largest Internet retailer, ebook reseller and the world’s largest software company.

—Tech Broiler, ZDNet.com, Does Amazon’s Tablet Future Lie With Microsoft?

I don’t know if that’s the path Amazon will take. But following how various players in this business respond to the curveballs they’re thrown by each of their competitors will make for fascinating reading on whatever device you use.

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