In Amazon Vs. Macmillan, Amazon Is The Winner
While I believe Amazon is sincere in its belief that $9.99 is a good price for books (especially for people who have spent $259 or more on a Kindle), Amazon is secretly pinching itself right now, because:
1. Amazon will now make money selling Macmillan e-books. Currently, Amazon eats a few dollars on most of the e-books it sells at $9.99. By capitulating to Macmillan (and any others that might jump on this bandwagon), Amazon will now make more money than before on each of these books, because they’ll get a whopping 30% of $14.99, or nearly $5 a book.
2. Publishers will ultimately be compelled to bring e-book prices down. If Macmillan is the only publisher to move to an agency model, its e-books will be at a disadvantage compared to other publishers in the Kindle store, which is a bad place to be when you’re trying to sell to the more than 5 million people who will own a Kindle by year-end 2010. But even if the other publishers move to the same model, they’ll suddenly realize that with great (pricing) power, comes great (pricing) responsibility, and some will start to lower prices, promotionally at first and then on a more lasting basis. Because there is always a publisher who is hungrier than the rest.
3. In that future, Amazon will make more money than it does now. At that point, even if prices come back down to $9.99, Amazon will be making $3.30 from each book sold. Amazon wins in the short run and the long run. And publishers will make less money than before on each book sold.