Macmillan vs. Amazon: The Online Retailer is Shooting Itself in the Foot with Authors and Its Rivals

Last Updated Feb 4, 2010 8:02 PM EST

Amazon (AMZN) may have "capitulated" to Macmillan earlier this week in the battle to control e-book pricing, but those buy buttons on the publisher's titles are still not live at the online retailer. The longer it takes to reach an agreement, the more Amazon alienates authors --and hands rivals a valuable opportunity. It's not the only place to buy books, but Amazon is well aware of its strength in the marketplace. Twisting the arms of big publishers is one thing, but preying on individual authors is downright bullyish. When Amazon suspends transactions, Macmillan author John Scalzi points out, it's the writers who are hurt when it's time to tally up royalties, and also when trying to sell subsequent books. It's worse for genre writers who build niche communities online and consequently sell a large percentage of their books there too -- through Amazon.

Macmillan is taking steps to take care of its authors. In a memo obtained from Publisher's Marketplace (no link because of their paywall), John Sargent, CEO of Macmillan, reasserted that the company would pursue the agency model/commission split structure with all its other partners, despite lower margins. (Incidentally, for those who think it's cheap to produce an e-book, consider the front end costs of publishing -- such as the author advance, editing, design, marketing, and so on -- that exist whether the material is in bits or on paper.)

Sargent writes:

a stable and rational market will ensure our intellectual property will be available digitally through many channels, at a price that is both fair to the consumer and that allows those who create and publish it to be fairly compensated.
He also indicates that the company is prepared to move to a higher royalty rate for digital books.

Meanwhile, it looks like Amazon CEO Jeff Bezos is fiddling while his stock price burns. Amazon's shares are down while its major online competitor, Barnes & Noble (BKS), reaps the monetary rewards.

B&N shares soared in spite of the beleaguered bookseller's recent stockholder drama and its potential devaluation due to increased competition. Nevertheless, B&N went about business as usual, most notably offering Macmillan's first enhanced eBook, Winter Garden, at $14.99 (lower than the publisher's list of $29.99) along with an explanation that the price reflected the e-book's special features.

And as for Bezos' assertion that "Kindle is a business for Amazon" -- well, of course it is. And that is precisely the reason to compromise its tight-fisted hold on the pricing structure of e-books, and stick to doing what retailers do best: encourage customer loyalty, create special promotions, and a whole host of other things to drive sales.

Previously on BNET: