Friday, February 05, 2010

Book Wars

Amazon and Apple are having a book war. Which is to say a war over who will get the biggest market share for electronic books.

One defends when his strength is inadequate, he attacks when it is abundant.”—Sun Tzu, The Art of War

The Apple iPad isn’t even available yet, but already it is forcing Amazon (stock symbol AMZN) to respond in a variety of ways to protect its competing Kindle eBook business. Amazon just snapped up a touchscreen technology startup, presumably to update the already ancient-looking Kindle. Emboldened book publishers are pushing back on Amazon’s $9.99 pricing now that they can sell the same eBooks on the iPad for $14.99, and Amazon is capitulating. And the Kindle team at Amazon, which once had an arrogant approach towards publishers when it was the only game in town, is now bending over backwards to solicit their loyalty, says one editor at a publishing company who has noticed the change in tone.

The coming battle between Apple (stock symbol AAPL) and Amazon will occur on many fronts, but the place where Apple can really hurt Amazon is on pricing. Just as Apple initially did with 99-cent songs on iTunes, Amazon imposed a uniform $9.99 price on bestsellers in the Kindle Store. A single price helps to establish markets for new product categories, especially when that price is at a discount to the physical alternative. While the 99-cent strategy worked well for Apple in digital music, in books Apple doing a jujitsu move on Amazon by allowing publishers to have more control over the pricing. Now Macmillan is demanding that Amazon sell its eBooks for $14.99, and News Corp’s Rupert Murdoch is making similar grumblings about HarperCollins.
So far Apple and Amazon have different digital formats. That means you can't read books you buy from Amazon on your Apple reader. And vice versa. This is similar to the floppy disk wars in the early days of the home computer. I don't see such incompatibilities lasting more than a few years.

Another thing I see happening is a reduction in prices. For one thing high prices will encourage pirates. Just as they do for music. Why should a song which costs under 1¢ to deliver have to cost $1.00? If the artist was getting 50¢ of that it might be a reasonable deal. At least you are supporting the artist.

But that is not how it works.
The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/3 as much as they would working at a 7-11, but they got to ride in a tour bus for a month. The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one never "recouped," the band will have no leverage, and will oblige. The next tour will be about the same, except the merchandising advance will have already been paid, and the band, strangely enough, won't have earned any royalties from their T-shirts yet. Maybe the T-shirt guys have figured out how to count money like record company guys. Some of your friends are probably already this fucked.
Which although a different type of publishing explains why my friend Sgt Mom self publishes and self promotes her own work. You can by her books on Amazon.

Cross Posted at Classical Values

1 comment:

LarryD said...

And why the artists who manage to get themselves well established, start their own record companies.

The only thing record companies do for musicians is promote, if they're lucky the musicians will break even with the record company. Musicians bread and butter is, as it has ever been, live concerts.