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Why Steve Jobs doesn’t want you to read

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Sue Zoldak
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      Sue Zoldak

      Sue Zoldak is a Vice President at Adfero Group, a pioneering public relations firm that integrates sophisticated digital strategies with traditional communications tactics to advance our clients’ public affairs or business agendas. She can be reached via Twitter @SueZoldak.

I did something recently that I thought I would never do again. I bought a hardcover book from Amazon. And the reason may surprise you. The hardcover edition was $2 less than the electronic Kindle version.

Last fall, when I reviewed my purchase of the iPad, I wrote about how Steve Jobs had ironically managed to use increased competition between the iPad and other e-book readers to raise, not lower, the price of e-books. Jobs accomplished this feat by negotiating new deals with the major publishers — Macmillan, Simon & Schuster, Hachette, HarperCollins, and Penguin — to set e-book prices roughly 20% to 60% higher than the $9.99 price ceiling that Amazon had set on most Kindle e-books.

Under these agreements made public in early 2010, publishers had to pay Apple a much larger percentage of the sale price than they were paying Amazon but would be allowed to set much higher prices in Apple’s iBookstore, mostly between $12.99 and $15.99. Book publishers hailed Jobs as the savior of their industry. They quickly went back to Amazon and demanded the same deal. Prior to Apple’s entry into the e-book market with the iPad, publishers feared that Kindle’s preferred $9.99 price was too low to sustain their business model in the long term. Now they had the negotiating power with Amazon they did not have prior to the Apple deal.

Amazon argued back that the lower price was necessary to fuel growth and demand. As the first mover in the industry to gain real traction with an e-reader, Amazon mistakenly thought they could write their own rules.

Amazon had, in fact, adopted the same philosophy in selling the Kindle that Steve Jobs had adopted to sell iPods. Now, why would anyone possibly think that was the right way to save an industry?

The real question is, why the diametrically opposed philosophies by Steve Jobs? He wanted everyone to listen to music and revolutionized the music industry with the $0.99 song pricing model, so why doesn’t he want you to read $9.99 books? Why did he think it was important to bring music to the masses at a low price but that what book-lovers needed were higher prices?

“1,000 songs in your pocket” was the marketing refrain in October 2001 when the iPod was introduced. Under the Jobs e-book pricing model, 1,000 books in my pocket will set me back almost as much as a Toyota Corolla.

One possible answer is that Steve Jobs recognizes the power he now holds in the captive iTunes consumer base he happily built up over the past ten years with all those low-priced songs. Ken Auletta wrote in the New Yorker last April that Jobs bragged about the “hundred and twenty-five million credit cards” Apple had on file which would make it “…easy for consumers to buy books on impulse.”

That may or may not be the right answer. I can’t see into Jobs’ mind, but I do know that today’s consumer expects the digital version of any product to cost less than the physical version. Whether this is a reality in terms of bringing a published work to market is irrelevant. Consumers will simply not accept e-book prices that are higher than hardcover prices, a fact that Amazon recognized from the beginning. I also suspect the publishing industry will not be “saved” by the higher pricing model.

  • What about the authors?

    Tell me something. If publishers are pocketing 70% royalties and Steve Jobs keeps 30%, how much are the WRITERS-the CONTENT CREATORS- earning in this little equation? Still that little 14.9% they have to split with their literary agents? Everybody & their mother still making more than the actual writers.

  • Andrys

    Actually, the reality is that the 70-30% the last few people cited was for Amazon’s early Agreements with publishers for Kindle SUBSCRIPTIONS to newspapers and magazines was. Never for books, except for the new-era’s self-published independent ones. Now it’s 35% for self-published books up to $2.98. And the self-published writer gets 70% for books $2.99 and over if they agree to allow the book to be sold internationally and agree to less restrictions with respect to rights — text to voice allowed, no restrictions on shared devices on one account, etc.

    Regular E-BooksS: -Traditional- bookstore pre-Agency-plan method was that the publisher was the one who set the Retail List Price. The bookstore owner guaranteed the publisher about 50% of the publisher-set list price and then the bookstore determined the selling price for the e-books, as they generally had a good idea of what works with their own store customers.

    The publisher list prices averaged about $26 although the ebooks could be ‘discounted’ (as are bestseller hardcover books as we know). Amazon and other bookstores would guarantee about 50% of publisher list price and therefore the publisher would get a sure $13 for a $26 list-price book, from which to pay expenses and author’s percentage.

    When Amazon decided they’d pay the publisher the guaranteed $13 but then sold those e-books on the NY Times Bestsellers list for only $9.99, Amazon took a $3 LOSS on each of those books – that’s the Loss Leader method they’ve preferred.

    Amazon made up losses via charges on other, older ebooks and other items they sell.

    The publishers said, outloud, that Amazon was “Devaluing” its paper books, both hardcover and paperback, by charging only $10. They insisted (with Steve Jobs’s encouragement) on setting the prices they prefer — $13-$15 instead, and now Amazon product pages for the Big6 publishers state clearly when the publisher has set the high price you see.

    It’s known that the publishers make less, Net, this way (less for the authors too), but it’s actually Control over pricing to protect its paper books and the whole way publishing has been done for decades — the profit margins from hardcover books.

    The idea of $10 e-books is like poison to publishers. It makes their hardcover books less attractive to buyers. Amazon was willing to take the loss but it put other online bookstores at a disadvantage as it would be unpleasant to match a losing store price of course, and they all feared Amazon’s control over the marketplace if most of the consumers bought from Amazon.

    Now, the Agency plan guarantees that no online store can undersell another one — no special sales are allowed anymore. There is no use trying to shop for a better price at this or that store. If they have an Agreement to sell the Big6 publishers’ books, they must all sell the e-books at the same price.

  • GeeWhiz272

    Then I believe it is time for all ereaders to write to the publishers and Amazon and B&N and tell them that as long as paper is cheaper and easier to share Ebooks are not going to be the choice.

  • Scrap Iron

    Don’t want a Kindle.
    Don’t want an iPad, or iBook, or whatever else they want to come up with.
    I love reading, and I want a REAL book in my hands.
    There’s just something about a book that a computer screen doesn’t give you.

  • adamjk

    Great Article, Sue. While many have been there to congratulate Jobs on his feat of lowering music prices, not many cried foul when he used the iTunes market position to raise the price of digital books.

    Minicapt, Amazon can not keep the low prices due to the agency model to which Sue is referring in the article. This is the same model that iTunes and publishers initially agreed to where the publisher sets the book price. Amazon no longer has pricing control under the contract. That IS why the prices are higher. This model has been under a lot of scrutiny by trade lawyers as it places all pricing controls in the manufacturer which is ripe for it being subject to cartel-like pricing structures: http://www.huffingtonpost.com/2011/03/16/agency-model-selling-ebooks_n_836531.html

    Also, citing a single book as being lower on iTunes than Amazon is not a significant sample for the argument that iTunes is cheaper.

    It’s pretty amazing to me that there are so many Apple fans out there that are simply blind when jobs makes sketchy anti-consumer moves.

    • minicapt

      1. You didn’t read the article you linked; it is in support of the ‘agency model’, which is being tacitly opposed by the EU.
      2. You apparently missed an interesting point: under Amazon’s rules, the publisher gets 30% of the price Amazon sets, under Steve Jobs’ rules, the publisher gets 70% of the selling price. There is a difference.
      3. ‘iTunes’ versus ‘iBookstore’; note the respective spellings. They hint of further distinctions between two ‘different things’.
      4. A clue why there are so many Apples fans might be the downloads of Kindle software onto iOS devices. On the other hand, perhaps we are just so much better looking, and smarterer.

      Cheers

  • Pingback: Why Steve Jobs doesn’t want you to read | Teck Talk

  • minicapt

    1. The pricing cofusion at Kindle pre-dated the arrival of the iPad.
    2. A reason for the Kindle low prices was 70-30 prices, where Amazon took the 70% and returned 30% to the publishers. Apple screwed thing up by keeping the 30% and paying the publishers 70%
    3. Today at the Kindle store, “Tom Sawyer” is $0.99; at the iBookstore, $1.99. Which part of ‘Blame SteveJobs? I don’t think so” is hard to understand. I would suggest this article is a little coy with the information presented.
    4. The Kindle is a spiffy piece of kit, and I keep mine handy, just in case. Unfortunately, when I grab for a ‘book’ as I head out the door, it is generally on my iPad.

    Cheers