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.