Amazon Pulls First Second Books, Other Macmillan Titles

Due to a dispute over ebook pricing, Amazon.com has stopped selling all books from the publisher Macmillan from its site. However, Macmillan’s titles are still available from independent, third-party sellers.

Macmillan thinks ebooks should be priced closer to $15 than the current price point of $9.99. (Many potential customers, on the other hand, think $10 is still too high for a transaction with no physical object exchanged.) This is an opinion shared by other publishers, but as of now, Macmillan is the only one removed from Amazon, who is “expressing its strong disagreement by temporarily removing Macmillan books.” Details are not known, since both companies refused to comment. Ironically, this is the title being promoted on Macmillan’s home page right now, a book that states, “prices are a collective hallucination.”

Macmillan’s imprints include First Second Books, publisher of such titles as Drawing Words & Writing Pictures, Vampire Loves, The Color of Earth, The Professor’s Daughter, and many others, including The Photographer, Prince of Persia, and American Born Chinese.

Other Macmillan graphic novels come from the manga publisher Seven Seas and Hill & Wang, which releases graphic histories and biographies, including J. Edgar Hoover (by Rick Geary) and The 9/11 Report.

This dispute illustrates the danger of having such a powerful online bookstore as your enemy, especially one that wants to keep its Kindle successful in the face of new competition. On the other side, I’m guessing that publishers see what happened to the recording industry when they let Apple’s iTunes set a price point and want to avoid being trapped into the $9.99 value they see as much too low.

Update: Lots of discussion around the net on this:

  • Author John Scalzi (published by Tor, a Macmillan imprint) advocates free-market pricing and says he doesn’t want a Kindle due to Amazon’s behavior and its use of DRM. The comments cover lots of aspects of pricing from various perspectives and pluses and minuses of ebooks.
  • Some posters at the Amazon Kindle forum want to boycot the publisher for trying to raise prices.
  • Dear Author points out that driving customers to the secondary market, as Amazon has done, means no money for the publisher or author, while the retailer still gets their cut. The site also sums up Macmillan’s negative history with ebooks overall.

Update: The NY Times has updated its story to include this information about the proposed deal:

Macmillan offered Amazon the opportunity to buy Kindle editions on the same “agency” model as it will sell e-books to Apple for the iPad. Under this model, the publisher sets the consumer book price and takes 70 percent of each sale, leaving 30 percent to the retailer. Macmillan said Amazon could continue to buy e-books under its current wholesale model, paying the publisher 50 percent of the hardcover list price while pricing the e-book at any level Amazon chooses, but that Macmillan would delay those e-book editions by seven months after hardcover release.

Commenters have pointed out that Amazon may be damaging itself by removing Macmillan books, since they can no longer be considered the world’s most complete bookstore.

Update: (1/31/10) Here’s why you don’t pick fights with the literate. How’s this for a call to arms with plenty of classic allusions?

Last Update: Amazon gives in. I don’t see the pulled books back on the store, yet. Maybe tomorrow. Part of their statement says: “Amazon customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. We don’t believe that all of the major publishers will take the same route as Macmillan.”


31 Responses to “Amazon Pulls First Second Books, Other Macmillan Titles”

  1. Matt Blind Says:

    $9.99 isn’t bad for a backlist title that has already had an opportunity, with at least a year of decent sales, to re-coup initial production costs — and even excluding printing, which many seem focused on with e-books (as they aren’t ‘printed’ in a Gutenberg sense) there are still costs: author advances, editorial, fact checking, typesetting (digital formatting, even for books who still go to press), marketing, and other overhead.

    Publishers, for their part, could maybe look at cutting that ‘other overhead’

    Amazon, for it’s part, could share some a larger cut of the profits on a $9.99 e-book. I’m not sure of the percentage breakdown yet (I’ll research that) but I’d be willing to bet Amazon’s margin is the same or better on an e-book, while it’s the publisher who’s expected to make do with less.

  2. Johanna Says:

    I’m not sure Amazon’s cut is the same. I seem to remember reading — although not sure where — that some of these new online efforts are happening because they’re giving the owners the same cut they’d get otherwise and the online store is taking the loss in order to get the venue established. I wish I recalled more about that.

  3. Matt Blind Says:

    early research yields results:

    [quote]
    So, with the Kindle in the mix, the pie appears to be more like this:

    Author: 8%
    Publisher: 33%
    Printer: 0%
    Distributor: 0%
    Retailer: 0%
    Amazon: 59%
    [/quote]

    source: ReadWriteWeb
    http://www.readwriteweb.com/archives/bits_of_destruction_hit_book_publishing_part1.php

  4. Matt Blind Says:

    …wish I could go back and edit: should note those percentages are just estimates. Amazon isn’t saying, so we don’t know.

    That RWW article is six months old but well worth reading (or revisiting)

  5. Johanna Says:

    Oh, thanks for tracking that down!

  6. Ray Cornwall Says:

    Interestingly enough, before the pull, some of those First Second books had already been remaindered by Amazon (and others). Prince of Persia was a flop, I believe.

  7. David Oakes Says:

    How do those hypotheticals compare to a physical book?

  8. Matt Blind Says:

    @David: from the same source

    [quote]
    Courtesy of iReaderReview, we have created a very simplistic view of how the pie is currently divided:

    Author: 10% (This in fact ranges between 8% and 15%, depending on the author’s clout — e.g. Stephen King does better than most. If the author has an agent, the agent’s cut comes out of this. It is indeed tough for new authors.)
    Publisher: 30% (This ranges between 25% and 32%, again depending on the author’s clout — e.g. their percentage is less with Stephen King because the risk is lower too. Note: this is their net revenue, after deducting author royalties and printer fees.)
    Printer: 10%
    Distributor: 10%
    Retailer: 40%
    [/quote]

    Like I said, the whole article (both parts!) is worth a read.

  9. Jim Kosmicki Says:

    living in the middle of nowhere, where the local Waldenbooks(now closed) was our main source as a bookstore, I depended on Amazon for my First Second books (among others).

    But I say this as someone who is glad to see someone stand up to Amazon. their percentage of Kindle sales is horrible and pretty much indefensible. And to leverage the sale of physical books, with their historical and apparently non-disputed pricing schemes, against the terms of how to sell and how to price electronic books sounds like blackmail to me. Set your terms and let publishers decide whether or not to meet those terms.

    on a comics note, this reminds me a LOT of the dispute between Dave Sim and Diamond on whether Sim should sell Cerebus phonebooks through Diamond. Diamond punished Puma Blues, a creator-owned title that Sim also published. Sim’s solution was to stand firm against Diamond and stop publishing anybody but himself. Mega-corporations with Boards and stockholders like Macmillan don’t have quite the same options.

  10. Jim Kosmicki Says:

    And while I understand that publisher overhead still exists with digital versions, until I see proof that printing, shipping and warehousing is a small part of that overhead, their arguments don’t hold water.

    as long as corporations are most concerned with improving profits every 3 months for their quarterly dividends, you will never see significant change in their business models. They can’t afford to do things differently for fear of upsetting the shareholders. The notion that things might need to be weaker or less profitable for the short term in order to prepare for the long-term is not viable in the current economic/shareholder environment that is predicated entirely on the short term. Warren Buffet only invests for the long-term – compare his results with the rest of the market. But nobody ever learns that lesson from him, they just pretend to.

    but i digress

  11. Simon Jones Says:

    1. As a publisher who has seen the quote sheets of various printers, I can assure you that print costs are less than 10% of the price of the book. It’s often less, and for the big selling books, far less (then consider that some of the big publishers have their own printing facilities). In fact, they’re priced in such a way so that retailers can offer them at big discount to feed even more sales.

    The only ones who may see a substantial production cost benefit in e-books are those mid to small publishers whose books have sales under 5 figures.

    2. Some may argue, then, that best sellers should have lower prices, or that the publisher’s profit margin is too large. But the books business is like music; there are far more books that lose money than books that are profitable, so the profits from the winners subsidize the losers. It’s sort of like how insurance (is supposed to) work.

    3. What about warehousing and shipping costs? Yes, e-books would have none, but the cost of storage and shipping are bore by the distributors. As you see in the numbers above, Amazon is essentially taking the distributor and retailer share, so this makes no difference to the publisher.

    4. Instead of looking at all the cost components of print versus digital, what we should be evaluating is risk. Physical books often have returns of 50% or higher; that costs the publisher money because the “returned” books are often destroyed, or incur additional costs. This is figured into the cost of the book. Existing in virtual space, e-books would have no such drawbacks, so publishers should take this out of their calculations. However, e-books raises the specter of wide-scale online piracy. This is the big unknown, and no one knows how to calculate this in a way that is applicable to all books (it’s probably impossible). But on the other hand, online piracy will happen whether or not there is an e-book.

  12. Matt Blind Says:

    @Jim

    Printing & distribution [shipping and warehousing] are fixed, known costs — for a $25 hardcover, about $5 bucks.

    Subtracted from an e-book version, that means a $20 book, not a $5-10 book.

    Overhead–that can and should be eliminated–are things like the CEO and VP maze-cum-org-chart that most publishers (as part of major media conglomerates) are forced to tolerate and support.

    Overhead that can’t be eliminated include proofreading, fact-checking, and editorial support — and yes, most authors need an editor, and the editor does more than just proofread; at the very least an editor acts as a whetstone to sharpen an already taut script, and often an editor is also an active collaborator — and editorial duties require someone with a lot of education and experience, if it is to be done well.

    This editorial component is the aspect most often overlooked by casual commenters, and obviously discounted entirely by Amazon. A publisher (with it’s editorial staff) isn’t just a printer — there is a lot of work and a lot of payroll invested in bringing a manuscript to market.

    If one chooses to discount *all* quote-publishing-unquote costs as merely the printing & distribution, then it might be said that you know little to nothing of the publishing business, when it it done well.

  13. Richard Says:

    Well, a lower price for digital materials was always expected to be a given. If comics are supposed to adapt to $1.00 (or less) per issue, then books would need to go the same route. Not everything can be covered just by subscription rates (consider premiums, specials/annuals, etc…).
    If publishers really expect the world to transition to digital media, then they need to be ready for the cost of everything to go down to pennies.

    Of course, I think this is all hogwash. Digital can never replace print, but the two can help fill each other’s voids. I think this may be evident of how so many are being so fastly into the digital game, not realizing that the buckets of cash waiting to be picked up do not exist.

  14. David Oakes Says:

    So Amazon finds a business model that eliminates all the overhead, and instead of eliminating it, keeps it all for itself, *and* insists that Macmillan charge less per book? Yeah, I would be pissed too.

    My gut says that they will sell more than twice as many e-books at half the price – once the infrastructure is in place! – but I can see why everyone should have a problem with Amazon. If 20% of the pie is now unclaimed, let’s share it evenly. And here is the really radical thought, maybe a third of it with the Author!

    As for piracy, I can already download printed books. That’s not going to change with digital.

  15. Manga Xanadu » Blog Archive » And So It Begins Says:

    […] Draper Carlson posts about it at Comics Worth Reading.  Check out the comments for interesting information on the breakdown of […]

  16. Ray Cornwall Says:

    Simon- just a followup. It’s not 2004. Big media has been tracking piracy numbers for a while now. I just read an article about a tech publisher that compared its piracy numbers with actual sales, finding that the less DRM the books had, not only did piracy increase, but also sales. It’s not exact, but publishers do now seem to have an idea of how badly piracy affects them.

  17. JRB Says:

    I should point out here that this fight is not so much about the cost of the e-book to *Amazon*, as it is the cost of the e-book to *consumers*. Amazon is currently paying more to the publisher that it charges to consumers for Kindle editions of many new books that are available in hardcover:

    “Amazon.com […] pays publishers $12 to $13 for Kindle editions of books on the New York Times best-seller list, and typically sells them for $9.99″

    Amazon is taking a loss to do this, but the publishers are afraid that this pricing will cannabalize sales of the hardcover (the most profitable format) and lead to an overall expectation of lower book prices.

    Amazon wants e-books to be cheap, to promote Kindle sales. Publishers want e-books to be not-as-cheap, to recoup the cost of the print edition and preserve profits.

    Macmillian is currently offering Amazon a deal whereby they will get *more* for each sale than it currently does, and Macmillian will get *less*, but the cost to consumers will be higher, at least for new books. See their ad in Publishers Lunch:

    “Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.”

    (Link probably not permanent)

  18. Jer Says:

    As an aside, I have to say that when I see quotes like this:

    Author John Scalzi (published by Tor, a Macmillan imprint) advocates free-market pricing

    I’m tempted to say – “Let them have it!” Remove that pesky government granted monopoly known as ‘copyright protection’ and we’ll see just how much the ‘free market’ values the work in question. Making any kind of “free market” argument in any publishing industry – whether we’re talking books, music, television, movies, plays, anything – makes me want to hit the person in question over the head with a few of my old Econ textbooks and ask them to describe to me, exactly, how the market for Dan Brown’s latest potboiler resembles anything remotely like a “free market”.

    If this sort of thing could be solved by an “easy” call to “free market economics” it wouldn’t be a problem. You don’t see corn producers struggling with this kind of stuff precisely because the market for corn can be reasonably approximated with a fairly textbook free market model (hell when I was taking my econ classes it WAS the textbook free market model. AFAIK it probably still is). The market for books, on the other hand, is much more complex. Mostly due to copyright laws created because we have this “strange” desire for people to get paid for their work, rather than just taking what the market would bear. The “free market” has spoken in this instance – the price of these books would be $0 in a truly “free” market model. And we knew this well before the current bout of “IP piracy” started scaring the pants off of publishers – the effects of “free market” pricing is the reason that copyright laws were created in the first place.

    This is not an easy question to answer. And the standard jump on a soapbox and scream about “free markets” response is not helpful. As much as I’m worried about Amazon becoming too dominant a player in the field, I am also worried that the publishers – who have a monopoly on their products – already have too much control over pricing anyway. Having iTunes has actually been really good for consumers because for the first time in a very long time there’s been someone with enough clout to force a decent deal for consumers onto the music industry. And it’s been good for the music industry whether they like it or not. The publishing industry could use a similar shake-up, and I think they’re going to get it. Because if they insist on overpricing their works people will just do what they did when the music industry was overpricing their works – ignore them and find the works for free somewhere else. That’s the true “free market” at work – it’s brutal and ugly, but that’s how it goes.

  19. linger Says:

    I have to side with Tor/Macmillan here. Amazon is just trying to be a WalMart-style monopoly and force all publishers to do things its way. Sometimes expensive is better than cheaper…forcing books to sell at a cheap price means only mainstream appealing stuff can get published, and more “long tail” niche appeal products are excluded. And I don’t want any Kindle DRM, either.

  20. Simon Jones Says:

    Ray Cornwall–>

    Do you really feel that anecdotal numbers for one particular publisher with no print products can be extrapolated to the greater print publishing industry?

    -Our print books have no DRM, obviously, and we’re getting our asses kicked by pirates.

    -In an ongoing experiment, we offered up both pay ebooks at extremely low prices ($0.50), then leaked the book through bittorrent, to see whether people would even pay two quarters when free alternative is available. Total download according to bittorrent tracker info (not including the number of scan sites that reposted it, after removing copyright info) versus paid downloads was roughly 30 to 1.

    Yes, it ain’t 2004, but these online models are still foreign to most big publishers. And you can’t predict the results or make broad claims because *audiences are different.* Younger readers may be more likely to pirate then older readers. People who work in a certain profession may be more willing to download books. Income brackets may have an effect. You’re simplifying an awfully complex question.

  21. Simon Jones Says:

    Oops again, that should read 300 to 1.

  22. Johanna Says:

    Audiences are very different, and everyone interprets results through their own lens. For example, if I was interested, I’d have pirated the book in the example you mention, because 50 cents is too low a value to go through the hassle of signing up for a payment system (with the inherent risks of putting credentials into yet another database). Maybe that’s just the way I think about things.

    I also wonder if porn is more susceptible to piracy because of the embarrassment factor, but you’d likely know more about that than I. It is very complex, although I hope we can all agree that declaring war on your customers (such as assuming they’re all thieves) is generally a bad strategy.

  23. Simon Jones Says:

    Thief!!!

    Ahem… yes, that particular affect of very low pricing was considered, so instead of offering it through our own system, we made it available through several established e-content sellers (some comics, some adult oriented. Some we openly advertise, some we do not, just to get the most conditions possible), most of whom supported popular payment gates like PayPal or Yahoo. Given the results, we simply decided to continue to offer the ebooks officially through our own site, for free.

    One of the most personally grating things in the experiment was that a staff reviewer on one of the seller sites actually commented how all of our print books were easily pirate-able over the internet. Yes, there is a perception problem particular to our genre…

  24. Johanna Says:

    Oh, yes, PayPal. I always forget about them. And that reviewer is just tacky!

  25. Jim Kosmicki Says:

    thanks for the insight – trust me, as a composition teacher, I understand the value of editorial staff (as long as they are actually allowed to be editors).

    Simon – thanks for your insight, but the real question isn’t how much more it’s pirated for free (that’s always going to be higher) but whether the additional sales made a difference. I may be the odd one, but I have pointedly re-purchased some items again when they’ve been made available digitally for a good price to support the publisher/artist using digital distribution. I do think that a certain amount of piracy is “testing” the product to see if it’s worth the cost. I also think that the “testing” argument is stretched and used to justify a lot of theft, but it can be a legitimate form of promotion if enough people like it to become purchasers/patrons.

  26. Simon Jones Says:

    Jim–>

    The problem with the testing theory is that it’s not the way it has worked for the music industry, and the print industry shares a similar internal conflict of interest.

    Sales of MP3s have grown meteorically, but overall music industry sales is down 50%. Whatever new profit digital music sales are adding, they are not replenishing the number of sales lost. There’s a multitude of factors certainly, but it would be naive at best and bold-faced denial at worst to say that piracy did not play some part in the current numbers.

    Thus, print publishers have to consider the same questions… How will legal access to ebooks affect piracy? Will we see positive or negative gains from digital sales? Will pricing ebooks at 9.99 hurt sales of the hardcovers, which have a higher profit margin? Finally, how will rampant piracy affect long-term perception of inherent value for the generation that grows up in a culture of piracy? Just look at this discussion… many here are complaining that ebooks *should* cost less, a perception based on the format, but not on actual costs involved. Or, going back to my own line of work, adult-oriented manga, an embarrassment of riches is freely, illicitly available to online readers, who have either no understanding of how they are created, or simply do not care.

    There’s money to be made, for sure. In fact, many are doing it already. But the ones profiting are *service providers* – internet access, websites, community sites – but very few of them actually contribute to the creation of the material. And let’s not even get into how profits can be shared equitably between the rights holders, the individual creators. Publishers are merely working with a license, after all.

  27. Jim Kosmicki Says:

    I really like this discussion – first of all, it’s civilized!!

    Music sales are down, but is that really all music sales or just music sales by the big 5 companies tracked through traditional retail sales locations? I buy most of my digital music from eMusic and Amie Street (both legal and supposedly paying creators/distributors), but are those sales tracked by Nielsen/etc? and most of that is smaller labels that don’t post their overall sales in quarterly reports. Those sales would have been through record stores and distributors once upon a time to be tabulated in some way. Now, I’m not so sure. and that doesn’t take into account the number of CDs and DVDs that I buy directly from the artist, knowing that more of the profits go to them. When and where are those tabulated in the official sales numbers for the music industry?

    I tried to show in the previous response that the “testing” argument was a cover for many people to justify their theft. But it is also true for other people, including myself.

    and right or wrong, I do think that digital media with no physical component should be priced less – it’s a visceral thing. I can’t hold it – it doesn’t seem as permanent or real. I understand paying 40some cents to mail a physical letter, but don’t try to charge me a fee to send an email. and so on. I’m not saying it’s logical, I’m just saying it’s the normal perception of value for most folks.

    and don’t get me started on DRM. If you’re going to RENT me the media – if I don’t actually own it to do what I wish with it, then there’s long-standing traditions that indicate that you will charge me less for that product. Maybe that’s part of it – maybe people, no matter what, just don’t see digital media as being permanent and thus think of “purchase” as more “rental.” Companies forcing DRM and re-purchasing when systems or OS’s change certainly reinforces that mentality.

    Book publishers are in interesting times, but they are also trying to maintain older, traditional price structures and concepts in a different delivery mode. I applaud your experiments with something different, and I wish they’d worked out better for you. But you aren’t going to just give up, I don’t think. I’ve read your blog enough to know that you’re willing to try other different things. But then again, you aren’t a corporation answering to stockholders every quarter, either.

  28. Comics A.M. | The comics Internet in two minutes | Robot 6 @ Comic Book Resources – Covering Comic Book News and Entertainment Says:

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  29. THE BEAT » Blog Archive » So e-publishing is going to be as stupid and petty as regular publishing Says:

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  30. Torsten Adair Says:

    Hmm… that last post, about visceral things costing more than something on a screen… Hasn’t television blazed this trail thirty years ago? TV has: ad supported content (1940s), taxpayer and donation supported content (1960s), unlimited subscriber funded content both by channel and by tiers (1970s), pay per view (1990s).
    The Supreme Court ruled that home taping is legal, with limits. Networks imposed DRM (scramblers) on their satellite feeds in the 1980s to discourage dish owners from watching the raw feed, and then negotiated with DISH TV years later to carry local programming. Cable stations had to blackout syndicated shows available in local markets. Professional sports leagues force networks to blackout local games so as not to hurt ticket sales. AND… as new markets are created, unions and other interested parties argue over who gets a share and how big.

    I’d say that ebooks are still in the “other media” stage. Just as early television was mostly radio shows and vaudeville, eventually becoming something unique, thus are ebooks still stuck in a paper model.

  31. Digital Horror Stories LinkBlogging » Comics Worth Reading Says:

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