I’ll start this post about Amazon’s fabulous Kindle just like I did the last one: I really, really like my Kindle and I’ve written about it positively here and all over the web (Internet smartie and publisher Rex Hammock says I’m his go-to Kindle fanboy). And, I really want to see the Kindle succeed. That said, just like my weekend post about Kindle DRM junk, this post has negative implications for we the Kindle consumers, customers and readers.
As I’ve feared for a while, Amazon is raising prices in the Kindle store. It’s really, really hard to nail this down exactly since there’s no way to monitor the store comprehensively over time. Some people take big snapshots of the whole database, which show an increasing proportion of books being added above $9.99, but that’s not conclusive. The growing protest against books over $9.99 and my anecdotal experience looking for newly arriving Kindle books provide additional support for the theory.
But two big macro pieces of evidence arrived recently. First, Jeff Bezos declared that Amazon’s Kindle hardware business and Kindle publication business each had to operate profitably on their own. No razors subsidized by the sale of razor blades here. That put a big question mark over Amazon’s $9.99 price point for most new hardcovers, since its been widely reported that Amazon loses money after paying publishing royalties on such titles. And with Amazon already selling Kindle books for Apple’s iPhone and iPod Touch, hardware that generates zero revenue for Amazon, there’s only so long the company could keep selling most titles at a loss.
Ultimately, I think Amazon ends up just where Barnes & Noble did a decade ago. Discounts shrink away for almost all Kindle books except top best sellers and special promotions. Maybe $12.50 becomes the new price point for Kindle books also available as new hardcovers. Now, about that $12.50 figure…
The second piece of evidence was a report by two Wall Street analysts, Claudio Aspesi and Jeffrey Lindsay of Sanford C. Bernstein, that came out on Friday (the piece isn’t publicly available and the best summary of the Bernstein piece I saw was by Joseph Tartakoff at PaidContent). The two analysts theorize that Amazon pays an average of $8.73 to acquire a $9.99 ebook versus $9.38 on a $12.50 ebook. There’s no sourcing back to Amazon but plugged-in analysts like these two have no doubt gotten some guidance from the company and talked to legions of other industry insiders, providing a one-off look at what Amazon is saying to publishers. I couldn’t quite figure out how the analysts had calculated that Amazon pays less than 100% royalties on $9.99 Kindle books, as has been widely reported, unless the analysts’ figure also includes paperbacks with lower print list prices, which it may. But looking to the future, as I explore below, it starts to make sense.
The increasing frequency of higher-priced Kindle editions of new hardcovers at least come at a 15% to 20% discount versus the dead-tree pulp version. The more annoying price hike is on Kindle books that are actually priced well-above the cost of paperback editions. Look at this screen shot of the Kindle edition of Tim Russert’s book about his dad, Big Russ & Me:
The e-book costs $9.56 and there’s no box showing other editions of the book and how much they cost. There’s a good reason for that. Amazon’s also selling a paperback version of the book for…drum roll, please…$5.58 and a hardcover version — brand new, from Amazon — for $9.18. See the screenshot:
So what the heck – how is the Kindle edition page showing that you’re “saving” $4.39, or 31% off list price? Because Amazon is now showing a made-up “Digital List Price.” Unsure where a Kindle book is sold at digital list? Me, too. Could be that some publishers and Amazon have struck a new deal to cover Kindle book sales, breaking free of the older print royalty and discount model (that would explain a lot about the Alliance Bernstein report, too). But by hiding the actual price of other editions available from Amazon and showing a “digital” list price that isn’t actually charged anywhere, consumers aren’t getting the best information.
And all of this is happening, of course, as several higher-priced ebook vendors are pushing into the space, giving Amazon some cover. Scrollmotion’s ebook prices for its iPhone app reader are horrendous. And Google says it will let publishers themselves set retail prices for ebooks it plans to sell. It’s a darn shame for consumers, but it looks like the future is arriving with higher Kindle prices.