Digital Content Pricing Issues

In the glare of last week’s iPad press circus, a case example of the conflict between old and new media content pricing, may have been lost in the glare.

The CEO of one of the world’s largest publishing companies, Macmillan, delivered an ultimatum to Amazon “We want the prices of our digital content to be increased, or else! 

Amazon has been very happy with the success of their Kindle eBook reader. Although they still have not released sales figures, they claim that 4 book purchases out of every 10 are electronic book. The main reason for those strong numbers is because Amazon subsidizes the cost of books, to sell more Kindles.

Amazon took offense at Macmillan’s demand and retaliated by pulling all of the publisher’s titles off their shelves. Frustrations were only compounded by the iPad announcement – the Kindle was finally about to see some competition in the marketplace.

Macmillan composed a letter to the their authors, illustrators and agents explaining that they only want “a level playing field” on which all electronic readers can compete. The next day Amazon re-stocked their Macmillan titles and self-righteously announced that they would defend the rights of their consumers and do their best to fight price increases by publishers.

Macmillan feels that a $9.99 price point cheapens the value of a book. They want the power to set their own pricing and believe their digital books should sell in the $12.99-$14.99 range. Apple has already agreed to this model for the iPad.

The book publishers need to be wary how they price their digital content. As of February 5, the average Amazon cost of the top 5 New York Times hardback fiction and non-fiction titles, came out to $13.00. If digital titles sell for the same price or a little less than their paper counterparts, what will the attraction be to the consumer? How serious are publishers about making money in the digital marketplace? They will need to accept the challenges of content pricing in the developing digital marketplace.

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