The iPad Cometh
Prior to the unveiling of the iPad in late January, the New York Times reported that many publishers were hoping that Apple’s device would resolve their industry’s difficulties transitioning to the electronic book market and “undo mistakes of the past” the same way the iPod and iTunes presented a clear and viable mp3-based business model for the troubled music industry "With Apple Tablet, Print Media Hope for a Payday", New York Times, 25 January 2010).
The nascent iPad’s influence was visible long before Steve Job’s press conference, most noticeably in the behavior surrounding Amazon.com's Kindle device, the dominant e-reader currently on the market. Publishers have long chafed at the way Amazon has demanded that certain e-books be priced at $9.99, similar to the way Apple prices albums on iTunes at $9.99, in an attempt to define and dominate the market. In December, Amazon offered Kindles to the employees of publishing houses at a sharp discount in an attempt to assuage bruised emotions over their competitive business practices and shore up a crucial amount of market space within the publishing community before Apple can get there.
Whatever goodwill was gained by this maneuver has been diminished in the past few weeks, when Amazon got in a nasty war with publisher Macmillan over their pricing policies. Macmillan appears to have more or less come out on top with the right to set their prices. In the process they were successful at depicting themselves as the earnest bookmaking David battling the monopolizing corporate Goliath Amazon, rallying other publishing houses and booksellers to their side. (Booksellers have their own gripes with Amazon due to their steep discounts and used book offerings.) In the wake of this success other major publishing houses will no doubt try to broker similar agreements with Amazon.
Even though they ostensibly “won” this battle in controlling pricing before the e-book market solidifies, publishers might want to rethink their pricing strategies and reexamine the lessons of the iPod and the music industry before they celebrate.
With an electronic product, consumers don’t seem to care about how much something costs to be produced. The file is ephemeral and costs basically nothing to exist. So it makes sense to the mass-market consumer to price these virtual objects at a set price and that this price be significantly lower than the physical version of that object. (This rule doesn't necessarily apply to a specialized market.) If consumers don’t get a price point that they find to be reasonable they won’t buy it or they will steal it. Apple helped to diminish the music industry’s illegal downloading problems with their successful $9.99 per album pricing strategy on iTunes, which struck a favorable middle ground between buyer and seller. Amazon was mimicking this same strategy with e-books, even if it was carried out in an unseemly way.
Publishing has so far evaded a rabid craze for illegal e-book downloads and consumers are probably not as interested in, nor is it really desirable, to carry 10,000 e-books in one’s pocket the way it is convenient and thrilling to have 10,000 instantly accessible songs on an mp3 player.
Yet because the demand for e-books is comparatively lower, it is all the more imperative that publishing figures out a pricing strategy that is attractive for consumers and it may require some painful changes. The world of media is not short on other distractions and publishing's window of opportunity may be closing. A story in the New York Times on 11 February said that some e-book buyers are already angry about having to pay anything more than $9.99 for a title ("E-Book Price Increase May Stir Readers’ Passions", New York Times, 11 February 2010).
Even though the publishing industry is seemingly eager for Apple to replicate its success with the music industry, they're resistant to adopting one of the crucial elements of that success. Who the public perceives as David or Goliath can shift quickly.