Amazon
Publishers typically earn about $2.15 per digital book versus 26 cents for a print copy, according to Sanford C. Bernstein & Co. While publishers see digital books as the future, the market is dominated by the Kindle, leaving them vulnerable to Amazon.coms bargaining power.
“We dont want it to be where you can only get your book in one spot,” said Maja Thomas, senior vice president of digital media at New York-based Hachette Book Group, a unit of Frances Lagardere SCA. “We want what every publisher wants and what every author wants, which is ubiquity.”
Amazon.com, which cut the Kindles price yesterday, pays publishers $12 to $13 for Kindle editions of books on the New York Times best-seller list, and typically sells them for $9.99, said Paul Aiken, executive director of the Authors Guild, a New York-based group providing legal support to writers. Publishers are concerned that Amazon.com will start demanding lower prices from them so it can start making more money on digital books, he said.
Dominance
“The industry as a whole is a bit nervous about the Kindle and the possibility that Amazon will really lock up the e-book market,” Aiken said. “The early path its taken here could really determine a lot about where the industry winds up and where people get their e-books in the future.”
As it stands, Amazon.coms $9.99 e-book price is unsustainably low for the company and publishers, said Claudio Aspesi, a Sanford C. Bernstein analyst in London, in a June 19 note. Amazon.com will probably raise the price it charges Kindle users to $12.50 and pressure publishers to sell electronic books for less so it can make a profit, he said.
Amazon.com is the worlds biggest Internet retailer, with $4.89 billion in first-quarter sales. Drew Herdener, a spokesman at Seattle-based Amazon.com, declined to comment on the companys relationship with publishers. He also declined to discuss the companys pricing strategy and whether it sells some books at a loss.
Amazon.com rose $1.73 to $77.36 in Nasdaq Stock Market trading yesterday. The shares have gained 51 percent this year.
$2 Billion Forecast
The Kindle comes in two versions, one for $299 and a larger $489 model designed for newspapers and textbooks. The company cut the cheaper versions price yesterday from $359. There are more than 300,000 books available on the device. It takes less than a minute to download individual titles, and a high- resolution black and white screen mimics the look of a printed book.
By 2012, Amazon.com may post more than $2 billion in annual revenue from the Kindle and content on it, said Sandeep Aggarwal, an analyst at Collins Stewart LLC in San Francisco. Amazon.com doesnt disclose Kindle sales.
Publishers are counting on an influx of competitors to reduce their reliance on the Kindle. Companies such as Plastic Logic Ltd. and FirstPaper, which is backed by Hearst Corp., are introducing digital readers. By the end of the year, Google Inc. plans to offer a program for publishers to sell e-books directly to consumers through the Web, said Gabriel Stricker, a spokesman for the Mountain View, California-based company.
CBS Corp.s Simon & Schuster said last month that would work with a Web company called Scribd to sell digital books online.
ITunes Equivalent
Those efforts may give publishers more options and avoid the dilemma faced by the music industry with Apple Inc. The Cupertino, California-based maker of the iPod was able to set the industry standard for songs at 99 cents as iTunes grew into the dominant music-download service.
“Publishers and authors want to make sure theres healthy competition so that Amazon and Kindle dont become the equivalent of Apple and iTunes,” said Brian Murray, chief executive officer of HarperCollins, a unit of New York-based News Corp. “We want to make sure there are a number of successful companies selling e-books on devices.”
Newcomers in digital readers may be able to capitalize on tensions between Amazon.com and publishers, said Sarah Rotman Epps, an analyst at Cambridge, Massachusetts-based Forrester Research Inc. In February, Amazon.com disabled a Kindle read- aloud feature after the Authors Guild complained. The Guild also criticized the company in 2002 for promoting used books at the expense of new sales.
“Amazon has not historically had great relationships with publishers,” Epps said. “Thats a real emphasis for Amazons competitors. Were still early in this game.”