The decision, which means a price rise for all Macmillan titles, will severely affect the demand of the e-book.
“From the consumer's point of view it's obviously not the best decision, but Amazon wants to maintain their position in the e-book market and they've decided to play ball with the publishers,” said Colin Sebastian, analyst at Lazard Capital Markets.
Chink in Amazon’s armor
Under the new terms, Macmillan would be able to set the prices of electronic books individually, and the retailer would get a 30 percent commission under the proposal.
According to the Authors Guild executive director Paul Aiken, Amazon.com has set the stage for the publishers to negotiate new terms.
“There are at least five other publishers who can get this deal from Amazon,” said Aiken. “The other publishers are going to follow suit. It would be irresponsible for them not to.”
Currently, Amazon.com offers e-books for $9.99. However, now, Macmillan will sell its titles for $14.99.
The concession shows a “chink in Amazon’s armor,” according to Collins Stewart LLC.
Price-hike unlikely to curb e-book sales
The recent Macmillan deal has been compared to Apple Inc.’s introduction of iPad, wherein Apple gave publishers a right to set their own price of titles. The publishers were also granted 70 percent revenue.
“Raising the price of Macmillan’s e-books is unlikely to curb demand or hurt Amazon.com sales. Order volume would have to decrease by more than 30 percent in order for revenue to decline,” said Imran Khan, an analyst at JPMorgan Chase & Co.
“Even if best-sellers from all publishers shift to the higher-price point -- a big if -- we don’t think the impact on Amazon is all negative. At the expense of losing some volume, the company will be able to generate better profitability on the best-sellers it does sell,” added Khan.
Amazon.com shares dropped 5.2 percent on the Nasdaq Stock Market, the biggest one-day decline since July 2009.
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