What is going on with the E-Book Market?

In September of 2006, Sony revolutionized the way that we read books. The introduction of the Sony Reader made the purchase of e-books easy. The slim profile of the Reader was sleek and stylish. Sony’s Reader was on display in stores like Best Buy and Borders. It featured an e-ink screen and “normalized” the reading of books in electronic format. Roughly 13 months later, Jeff Bezos, founder of Amazon, introduced the Amazon Kindle.

Amazon’s Kindle went a great deal farther than the Sony Reader. Kindle allowed the reader to wirelessly download books and read them in under a minute through a partnership with Sprint. It also allowed for wireless daily, weekly, and monthly delivery of periodicals like Time, Newsweek, and The New York Times. The business savvy Jeff Bezos managed to procure deals with the nation’s largest book publishers such that most bestsellers would be available for immediate purchase through the Amazon Kindle store at a price of $9.99.

The $9.99 price point set well with consumers who loved the convenience of carrying an entire library with them and adding to it on the go. Both Martha Stewart and Oprah Winfrey touted it as the greatest invention of the new millennium. The hype caused the Kindle to sell out in five and half hours. Amazon’s future seemed bright until a just a few weeks ago. On Jan. 27, Steve Jobs announced the release of Apple’s iPad. The new device works a a platform for surfing the internet, checking email, and reading e-books. When Apple started negotiating with the nation’s largest partners, the company offered them the opportunity to charge more than $9.99 for each e-book. Since the iPad and iBooks App have not shipped, no one knows for exactly how much an iPad e-book will sale. Rumors have circulated suggesting that the new price for bestsellers will be around $14.99.

Apple, known for strict control of their business model is allowing publishers to set their own prices for content. The nation’s largest publishers went to Amazon frustrated with the $9.99 business model that the industry embraced just a few years ago. Macmillan publishing house vehemently complained about the cheap price of books at Amazon and demanded that more be charged for their most popular titles. Amazon grew frustrated with Macmillan and pulled all their content off their website, included hardcopy. After several days, Amazon ceded and allowed Macmillan to charge more their titles. Macmillan set the tone for a disgruntled industry and now several of the largest publishing firms are asking for higher prices. The problem is that Amazon’s e-book business model is based around the $9.99 price.

The publishing market has suffered massive losses in the past decade. A generation has grown up believing that online and e-content should be free. The industry is looking to “retrain” the consumer. Often discussion of the e-book market parallels that of the music industry. Napster allowed the free exchange of music for four years before being challenged with the iTunes store. The publishing industry is looking to recapture some its lost sales by being at the forefront of the e-book market. Yet, there are many problems to sort out. For now, there are several e-book formats. Kindle books cannot be read on a Sony device or Barnes and Noble’s Nook. Consumers seemed happy with the $9.99 price point for bestsellers. It is doubtful that the American consumer will appreciate a 50% price hike. When the iTunes store went from a $0.99 per song model to a tiered model, record companies reported a precipitous drop in revenue. It would be wise of publishing industry to take note and not run to take Apple up on it “free to name your own price” business model. The results could be disastrous to an already troubled industry.