Following Macmillan's insistence on setting its own rates for e-book prices rather than follow Amazon.com's preferred $9.99 per title, the chairman and CEO of Hachette Book Group has issued a memo outlining Hachette's desire to control its own pricing. In the memo CEO David Young explains that a new pricing model has been under consideration for some time.
In response to Macmillan's recent actions, Amazon.com, which has been driving up demand for digital books with its Kindle e-reader, removed the publisher's books from its online catalog. Amazon.com later relisted the books and agreed to Macmillan's request for higher prices.
"It's important to note that we are not looking to the agency model as a way to make more money on e-books," Young wrote in the memo, which was posted on media blog Mediabistro. "We're willing to accept lower return for e-book sales as we control the value of our product-books, and content in general. We're taking the long view on e-book pricing, and this new model helps protect the long-term viability of the book marketplace."
The decision has prompted speculation that publishing giants Simon & Schuster and Penguin may similarly rebel. Amazon currently offers many books at a flat $9.99 rate; Macmillan and Hachette would prefer a tiered model with books selling for between $12.99 and $14.99. The movement comes at a time when Apple's touch screen tablet, the iPad, is about to hit the market, providing stiff competition for the Kindle. Apple also announced agreements with Macmillan, Hachette and HarperCollins Publishers, which are all adopting Apple's "agency model" pricing structure.
During News Corp.'s earnings call earlier the week of Feb. 1, CEO Rupert Murdoch expressed his displeasure with Amazon.com's pricing model. "We don't like the Amazon model of $9.99," he said during the call. "We think it really devalues books and hurts all the retailers of hardcover books." Murdoch went on to explain that his company isn't against electronic books and embraces the format because they cost less to distribute, it's simply that, "We want some room to maneuver."
While Amazon.com deals with the demands of the publishing companies, movement is under way to strengthen the Kindle's chances against the iPad, which has received heavy media scrutiny and boasts a number of features (like a color screen and full Web browser) that the Kindle lacks. On Feb. 3 Amazon.com reportedly acquired Touchco, a small startup focusing on multitouch technology, in a deal that if confirmed would allow the online retailer to draw on new technology for its line of Kindle e-readers. The Kindle currently retails for $259, while the cheapest version of the iPad comes in at $499.