March 20, 2013

In for a penny, out for a lot of pounds: Sony v. Amazon price war ends


The last few times I’ve been in London, it’s all everyone in the book biz there was talking about: the war between Sony and Amazon UK. People would bring it up and shake their heads in wonder … and admit to confused glee at the idea that Sony seemed to be winning. “I don’t normally root for big conglomerates,” was the way one publishing friend explained it to me. “But Sony hasn’t been trying to kill us all.”

It started last July when Sony, in an effort to draw traffic to its new ebook retail site, offered a few select titles for a mere 20 pence (about 30 cents). Amazon — in a froth when it realized that here was a player from whom it could not demand most-favored-nation status — immediately cut its prices on the same books to 20p also. So Sony offered still more titles for 20p. Amazon again immediately slashed its own prices on those titles to 20p. So Sony did it again.

This went on for a while.

Before you know it, books by Peter James, Alan Hollinghurst, Yann Martel, Ken Follett, James Herbert, John Lanchester, Jeffrey Archer, and even E.L. JamesFifty Shades of Grey, were all on the Kindle bestseller list … all for 20p.

Meanwhile, publishers pressed their lips closed tightly, looked at their shoes, tried not to grin, and said nothing. They were still selling their books to Amazon for the same price as before. Granted, that was a heavily discounted price pretty much extorted out of them, but it was still a hell of a lot more than 20p. The suppressed grins were not so much about how much money they were making, but at the fact that Amazon was losing a shitload of money.

And as the battle dragged on through the fall and into the winter, it became a real question in the minds of many in the British book business: How long could Amazon keep it up? “They must be losing tens of millions of pounds,” one publisher gushed to me.

It seemed likely. To cite just two examples of books priced at 20p, Life of Pi has sold 250,000 copies since Christmas alone, and The Hundred-Year-Old Man Who Climbed Out Of The Window And Disappeared, a novel from tiny indie Hesperus, sold 145,000 by the end of 2012, according to a report on Future Book.

But of course, this is Amazon’s history: No matter how much money it loses with seemingly-insane “loss-leader” pricing, its stock valuation climbs. (Partly because its cash flow is astronomically high, meaning it always has cash and therefore access to more.) What’s more, I didn’t want to point out to the cautiously giddy publishers of London, Amazon is worth more than twice as much as Sony these days — Amazon’s current net worth is over $100 billion, whereas Sony is worth about $43 billion.

Which may be why, finally, Sony finally ended the promotion yesterday. As Joshua Farrington reports in a story for the Bookseller, “following a re-design of the Sony website, all books that were in the 20p offer have now been returned to higher prices.” Amazon, he reports, immediately raised its prices, too.

However, Farrington notes,

Sony has held the door open for a return of the promotion, or an alternative, saying: “Discounted 20p pricing is not currently offered on the newly relaunched UK Reader Store. However, pricing is always subject to revision. The duration of our 20p pricing is indicative of our commitment to provide great e-books at exceptionally accessible prices, which is a philosophy we continue to hold.”

But Amazon still seems to be making a point: It didn’t raise its prices on the 20p books as much as Sony did. As Farrington reports:

On Amazon, titles which have topped the Kindle chart while at 20p have also returned to higher prices. The Hundred-Year-Old Man Who Climbed Out the Window and Disappeared (Hesperus) is at £3.99 on Amazon (£5.59 in the Sony store), changing this morning (Monday 18th March). Life of Pi (Canongate), which spent weeks at the top of the Kindle chart is now at £3.47 (£5.49 in the Sony store).

Of course, most of British publishing is probably relieved it’s over. In the back of their minds, of course, was the sneaking suspicion that they were going to pay for this brainless mayhem. As Samuel Muston reported in a story for the Independent back in January, “today’s sunshine may mean a long winter for publishers and consumers alike in years to come.” We should all — readers, writers, publishers, the culture at large — rightly shudder at the deepening of the notion that a book is worth mere pennies.

But Bookseller editor Philip Jones, in a brief (unlinkable) comment on the magazine’s daily newsletter, makes a final smart point:

Now that the age of the 20p e-book is over, I sort of miss it. In a world of confused pricing, at least we all knew that 20p was the most visible least sensible price-point. Now that it has gone what price will shift 1,000s of e-books and break new authors on an unsuspecting nation. Sony’s smart new e-bookstore features a number of Pan Macmillan titles at 59p, but not as part of a Sony initiative. On eBooks by Sainsbury’s some of the same titles are priced at 66p. Amazon is matching against both sites (somewhat randomly), so James Herbert’s The Dark is priced at 66p on Kindle, while Kerry Wilkinson’s Locked-In is 59p. As I write this there are two 66p e-books in the Kindle top 10, one published by Pan, another by Head of Zeus. At least 20p had a logic to it. Perhaps in the kingdom of meta-data, the algorithm is king.

Perhaps it is. The problem, of course, is that algorithms don’t have much in the way of nutrition in them.



Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House.