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People all over the blogosphere have been piling on Amazon about them going nuclear in response to Macmillan telling them that it (Macmillan) wants to set prices for Macmillan titles sold as ebooks. They call Amazon a bully, and take Macmillan's side, "of course Macmillan has a monopoly on their content", blah, blah, blah.
I heartily disagree, and that's putting it mildly.
First, some basics.
Producers make stuff, and sell it wholesale to retailers. Retailers buy stuff at wholesale and sell stuff to end use customers. That's a gross oversimplification, because in the real world some producers are also retailers, and some retailers are also producers of a few items. (Not to mention I left out intermediate wholesalers.)
Now, producers sell the stuff they make for whatever they can get for it. That is, they set a price, and the retailer either pays it, makes a counter offer, or goes elsewhere. Once it is sold, they have no right to set the subsequent price it's sold for. None whatsoever - they no longer own it. It doesn't matter whether it is food, software, furniture or automobiles. That is determined by the new owners. The "value" (what it can be sold for) is determined by the market. (Note: under US law the producer does retain some liability for quality on certain types of goods.)
If the subsequent "owner" can't sell or trade the item, then it is not an actual sale, it is a rental. This has been a big issue in the software industry for a long time, and is finally being sorted out by the courts.
Retailers buy stuff from wholesalers (assuming they don't make it in-house) at whatever best price they can negotiate, and then sell it to the customer for whatever the customer will pay. Sometimes they lose money on the deal.
Grocery stores and even bookstores (among others) often have items that are called "loss leaders" because they bring people into the store to shop, and people seldom buy just the thing that is on sale. So retailers selling things at a loss in order to co-sell other things is not a new tactic.
What if some producers don't like their items being loss leaders? Suppose they try to unilaterally change the terms, tell the retailer that they will set the prices from now on, that the retailer will just be their agent, giving them shelf space, advertising, stocking, etc? What do you think your grocery store would do? The ones I frequent wouldn't carry that brand anymore, period. (IIRC, this is why restaurants are either Coke or Pepsi - because the beverage producers were able to do this little game and the restaurants didn't have the market clout to stop them.) But, who is the bully? The grocery store, for saying "Get lost, we're not going to be pushed around"?
Now lets go back to Amazon and Macmillan.
Macmillan is a primarily producer of books. Not just dead tree books, either - ebooks, audiobooks, etc. They are also a wholesaler (seller to third parties - intermediaries) and a retailer. You can go to the US Macmillan website and buy their print books. But you can't buy their ebooks there. Why? They don't publish them in an open format usable on any reader, only in a DRM laden form for the Kindle (and soon theiTampon iPad - still a closed format.)
Amazon is primarily a retailer. Their first, core, market is books. They also own a device manufacturer that produces the Kindle. They do not sell (wholesale) Kindles to intermediaries. They also act as a consignment store for third party retailers, under specific terms. While they are fairly flexible, they set their business model from within the company, and you either do business on their terms, or go elsewhere. They will negotiate prices that they will pay for what they buy from you, like any other retailer.
Now, previously the relationship between Macmillan and Amazon was producer (wholesaler) and retailer. Macmillan wanted to change it to retailer and passive agent, unilaterally, on its terms, and still wanted Amazon to do all the heavy lifting. They wanted to dictate pricing, but have Amazon take the publicity hit with its customers for raising prices. They wanted to be the tell the "grocery store" that it was unilaterally changing its terms. The store, Amazon, pulled the brand.
Now, if Macmillan wants to sell through Amazon, it can sell as a third party seller. They can even get a fulfillment deal going - like all of those other "fulfilled by Amazon" items you see. But they can't set prices and have Amazon be the seller. Also, when a wholesaler dictates to retailers (like Amazon and Apple) the final price for items it sells, and the retailers go along with it, that becomes price fixing IIRC. That could get the DoJ involved.
So, if you want a Macmillan title, order it from Macmillan. You won't get a Macmillan ebook in an open format anywhere, regardless - they are apparently one of the publishers that demanded that Amazon use DRM on its Kindle. Originally Amazon had intended not to bother with DRM at all, but the publishers refused to sell their books in electronic format to Amazon unless they were encumbered with DRM. In order to sell ebooks at all, Amazon had to cave to crippled ebooks.
It is not, however, obligatory for everyone who publishes ebooks for the Kindle to put DRM on it. In fact, Amazon just (Jan 2010) made it easier for small self-publishers to decline to do so. See Amazon adds optional DRM for Kindle publishers and Amazon Allows Some Publishers and Authors to Opt Out of E-Book DRM
The Kindle format itself (.azw) is a variant of .mobi. If you have an unprotected .azw file, you can rename it as a .mobi and read it on your PC using MobiReader. Coupled with a hopeful move away from DRM as publishers see the handwriting on the wall, and cross platform ebooks will be real.
So, again, who is the bully? Amazon, for saying "No, we will determine how we do business in our store." or Macmillan, for saying "You are now just our agent, and you will price ebooks our way in your store."?
I heartily disagree, and that's putting it mildly.
First, some basics.
Producers make stuff, and sell it wholesale to retailers. Retailers buy stuff at wholesale and sell stuff to end use customers. That's a gross oversimplification, because in the real world some producers are also retailers, and some retailers are also producers of a few items. (Not to mention I left out intermediate wholesalers.)
Now, producers sell the stuff they make for whatever they can get for it. That is, they set a price, and the retailer either pays it, makes a counter offer, or goes elsewhere. Once it is sold, they have no right to set the subsequent price it's sold for. None whatsoever - they no longer own it. It doesn't matter whether it is food, software, furniture or automobiles. That is determined by the new owners. The "value" (what it can be sold for) is determined by the market. (Note: under US law the producer does retain some liability for quality on certain types of goods.)
If the subsequent "owner" can't sell or trade the item, then it is not an actual sale, it is a rental. This has been a big issue in the software industry for a long time, and is finally being sorted out by the courts.
Retailers buy stuff from wholesalers (assuming they don't make it in-house) at whatever best price they can negotiate, and then sell it to the customer for whatever the customer will pay. Sometimes they lose money on the deal.
Grocery stores and even bookstores (among others) often have items that are called "loss leaders" because they bring people into the store to shop, and people seldom buy just the thing that is on sale. So retailers selling things at a loss in order to co-sell other things is not a new tactic.
What if some producers don't like their items being loss leaders? Suppose they try to unilaterally change the terms, tell the retailer that they will set the prices from now on, that the retailer will just be their agent, giving them shelf space, advertising, stocking, etc? What do you think your grocery store would do? The ones I frequent wouldn't carry that brand anymore, period. (IIRC, this is why restaurants are either Coke or Pepsi - because the beverage producers were able to do this little game and the restaurants didn't have the market clout to stop them.) But, who is the bully? The grocery store, for saying "Get lost, we're not going to be pushed around"?
Now lets go back to Amazon and Macmillan.
Macmillan is a primarily producer of books. Not just dead tree books, either - ebooks, audiobooks, etc. They are also a wholesaler (seller to third parties - intermediaries) and a retailer. You can go to the US Macmillan website and buy their print books. But you can't buy their ebooks there. Why? They don't publish them in an open format usable on any reader, only in a DRM laden form for the Kindle (and soon the
Amazon is primarily a retailer. Their first, core, market is books. They also own a device manufacturer that produces the Kindle. They do not sell (wholesale) Kindles to intermediaries. They also act as a consignment store for third party retailers, under specific terms. While they are fairly flexible, they set their business model from within the company, and you either do business on their terms, or go elsewhere. They will negotiate prices that they will pay for what they buy from you, like any other retailer.
Now, previously the relationship between Macmillan and Amazon was producer (wholesaler) and retailer. Macmillan wanted to change it to retailer and passive agent, unilaterally, on its terms, and still wanted Amazon to do all the heavy lifting. They wanted to dictate pricing, but have Amazon take the publicity hit with its customers for raising prices. They wanted to be the tell the "grocery store" that it was unilaterally changing its terms. The store, Amazon, pulled the brand.
Now, if Macmillan wants to sell through Amazon, it can sell as a third party seller. They can even get a fulfillment deal going - like all of those other "fulfilled by Amazon" items you see. But they can't set prices and have Amazon be the seller. Also, when a wholesaler dictates to retailers (like Amazon and Apple) the final price for items it sells, and the retailers go along with it, that becomes price fixing IIRC. That could get the DoJ involved.
So, if you want a Macmillan title, order it from Macmillan. You won't get a Macmillan ebook in an open format anywhere, regardless - they are apparently one of the publishers that demanded that Amazon use DRM on its Kindle. Originally Amazon had intended not to bother with DRM at all, but the publishers refused to sell their books in electronic format to Amazon unless they were encumbered with DRM. In order to sell ebooks at all, Amazon had to cave to crippled ebooks.
It is not, however, obligatory for everyone who publishes ebooks for the Kindle to put DRM on it. In fact, Amazon just (Jan 2010) made it easier for small self-publishers to decline to do so. See Amazon adds optional DRM for Kindle publishers and Amazon Allows Some Publishers and Authors to Opt Out of E-Book DRM
The Kindle format itself (.azw) is a variant of .mobi. If you have an unprotected .azw file, you can rename it as a .mobi and read it on your PC using MobiReader. Coupled with a hopeful move away from DRM as publishers see the handwriting on the wall, and cross platform ebooks will be real.
So, again, who is the bully? Amazon, for saying "No, we will determine how we do business in our store." or Macmillan, for saying "You are now just our agent, and you will price ebooks our way in your store."?
