E-Book Prices Going Up, Will You Still Tolerate DRM?

Since Amazon has capitulated to the Macmillan Publishing company, and decided to raise the prices of e-books, it also means that other prices will go up, some creeping, so as to not upset the boat, but others will shoot up right away.

With the increase in price, will the average user ask more of the product used to deliver the content? Will they be content with the nebulous and ephemeral storage system that doesn’t allow for offloading of purchased content? Though appearing quite late in the game, rumbles from some users are surfacing, perhaps after quickly filling their Kindles, and wondering, “What next?”

From AllThingsD we have a report about the pricing, that might further spark dissention in the Kindle ranks.

That was fast.

Less than two days after pulling books published by Macmillan in a dispute over e-book pricing, Amazon has conceded.

The world’s dominant e-commerce company says it has agreed to Macmillan’s demands to sell its books at a higher price — and in doing so, has made a tacit admission that e-book prices will be rising across the board.

Of course, it did not have to be that way, as Amazon could have held the line, as the most major supplier of this new content. All it would have taken is a firm stand; two days does not constitute a firm stand.

That’s because most of the industry’s big players have embraced a similar plan, advanced by Apple (AAPL) to support its iPad launch, to sell e-books for $12.99 and $14.99, instead of the $9.99 that Amazon (AMZN) had been pushing.

In an extraordinary statement published on the company’s site, the retailer says that it “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.”

No word yet from the other big publishers who have sided with Apple in the e-book pricing war — Pearson’s Penguin Group, News Corp.’s (NWS) HarperCollins, Hachette Book Group and CBS’s (CBS) Simon & Schuster. But keep in mind Steve Jobs’ all-knowing pronouncement about Amazon and Apple e-books: “The prices will be the same”.

Steve Jobs, on the other hand, knows how to make a firm stand. He is familiar with what it takes.

Also bear in mind that publishers will actually make less money with the Apple pricing plan. Under the old plan, they sold books to Amazon for around $15 wholesale, and Amazon took a loss in order to retail them for $9.99. Under the new plan, the publishers will get closer to $10 per book.

But the publishers are so freaked out by the parable of the music labels, which let Apple replace $15 CDs with $1 songs, that they are willing to take the hit in order to maintain some control of their digital pricing.

Odd as that sounds, there’s a logic to it, since e-book sales will be small for some time, and publishers think that this strategy will help keep the prices up when buyers really do embrace digital.

(Aside: The notion that digital pricing should be dirt cheap simply because it doesn’t cost the publishers — or music labels, or Hollywood studios, or whoever –  very much to distribute bits is facile. If you don’t believe me, try ordering a vegetarian entree the next time you go out to dinner, and then tell your waiter you refuse to pay full price because you know that vegetables cost much less than meat. It may be dumb for publishers to try to keep digital prices high, but it’s equally stupid to demand that they lower them on principle.)

It will be interesting to see what Kindle buyers make of the impending price hike, particularly since so many of them are price-conscious consumers who prefer to pay nothing at all for their books.

While I disagree wholly with the logic put forth above, it will be interesting to see what happens. When assessing the motivations of the people who buy the Kindle, I believe the author makes a basic mistake in thinking they are so price conscious – if they were, they would not have acceded to the strangulation of DRM’ed content, with no eventual end game but loss of content, when space runs out. Or perhaps they were simply excited, and did not think ahead. I think a good case could be argued, however, that a purchase of a Kindle is hardly a checkout counter impulse buy.

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Treating the greater public as though they are as clueless as Homer Simpson will only work for so long…

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