Two Important Launches: Amazon MatchBook and Oyster

Two pieces of major exciting news for the book industry was announced this month!

First, Amazon is launching a new program called MatchBook in October 2013. The program will allow you to also get the ebook edition of any participating printed book you purchase through Amazon (past or future), for $2.99 or less (or even for free!).

This is incredibly important for a couple of reasons:

  1. Consumers that want to convert their library to digital format can do it now
  2. This increases sales numbers for an industry that has been suffering
  3. It actually supports printed book sales. Consumers may opt to just purchase the hardback since they know they can grab the ebook version as well (especially if it’s free!)

Not to be overshadowed, a new mobile reading platform called Oyster is launching the beta version of their iPhone app and has received lots of hype! Oyster has been dubbed “The Netflix for Books”, and for $9.95 a month you get unlimited access to over 100,000 titles from various participating publishers.

If this receives early success (as I expect it will), more and more publishers will flock to them and offer to add their books to their content library. This could be a game changer for the book industry, and will certainly keep it alive. You can read more about this start up venture here.

I’m calling it right now: This needs to be a strategic acquisition by Barnes & Noble if they expect to stay afloat and compete against Amazon.
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Apple Guilty of Price Fixing Ebooks

On 7/10/2013, Apple was found guilty of being the ring leader of a price fixing scandal on ebooks. They colluded with these major publishing groups, Hachette, Macmillan, Penguin, HarperCollins, and Simon & Schuster, which all quickly gave in to the accusation and agreed to settlements – leaving only Apple to be the only company that went to trial. Apple made sure that the main publishers all agreed to sell their ebook at the $14.99 price, which would make Amazon eventually raise their ebooks from the $9.99 price point up to $14.99 too.

You can read the full article here.

Related to this price fixing scandal were the previous concerns that many consumers had of why some ebooks are priced higher than hardcovers. Understanding the context of how the prices of books are decided will paint the picture for why Steve Jobs’ “Agency Model” was a scheme to fix the prices. While you can read the full article here, I will provide a short synopsis to explain what is going on behind the scenes with book prices.

If a printed book is listed for $25, half of that goes back to the publisher (which then gets divided among author, agent, and publisher), and the other half goes toward the retail chain. This allows a profit buffer for the retailer to discount the book and still make money (because the publisher will still make half of the original list price no matter what the book gets discounted to). Then Amazon came onto the market and started selling ebooks for $9.99 on the kindle… they were actually selling the books at a loss. The consequences of this is that they were changing consumer’s expectations of the value of what a book should be.

So when Apple launched the iPad, they changed the way ebooks were sold. Publishers got to set the price, they get 70% and Apple gets 30%. They raised the price of ebooks to $14.99 because at that price, even with keeping 70%, publishers were still making less per book sale than selling a hardcover.

If Amazon were to adopt this model, dubbed the Agency model, then they would no longer be losing money per book sold. In addition, since Publishers choose the price in this scenario, the prices would all be set at $14.99, and that’s how Apple led a price fixing scandal.