You may not agree, and seem to feel that the technical accomplishments in software and hardware for selling and displaying content should grant them the power to run those content industries. I don’t think that’s good in the long run for publishing, authors or readers.

Specifically:
—I don’t know if you’re purposely mis-describing Amazon’s self-publishing platform and negotiated deals—
Amazon had two general deals set up pre-iPad. Self-publishers licensed their material to Amazon and got 35% of the proceeds. Big publishers got 50% of the hardcover price on an e-book. The latter was, of course, unsustainable, as Amazon ended up losing money on most e-book sales, eating the loss in an attempt to sell Kindles, build the market and lock-in customers. There’s no way Amazon was going to continue with this business model for long, but once they’d established the price point for e-books at $9.99 and themselves as the dominant force in the market (estimated at 90% here), they’d have the hammer to demand a better deal from all publishers, resulting in even slimmer margins for those publishers and the loss of variety and quality noted above.

Post iPad, Amazon changed their licensing deal with self-publishers, offering a better rate (clearly a competitive marketplace was better for self-publishers as their cut just went up), provided those self-publishers met Amazon’s price point and other demands. MacMillan (and shortly others) have negotiated a new standard, the agency model, getting that same 70:30 split but not conforming to Amazon’s demands as far as pricing and licensing goes. That is rapidly becoming the industry standard. You may doubt that those terms will extend beyond the big 6, but Apple seems to be willing to offer them across the board. Google looks to be doing the same. If Amazon won’t offer those same terms, my company will simply not sell through them, and most independent publishing houses will likely do the same. If Amazon hopes to remain competitive in this market, they need as complete a catalog as possible. If they wish to be the one retailer with an incomplete supply, that’s their decision, but I see it as unlikely. Here the oligopoly throwing their weight around has improved the lot for the indies, as has competition in the marketplace.

I’m not confusing the actions of MacMillan with the results of competition in the retail marketplace. MacMillan’s actions were possible due to that competition. Again, you’re convinced only the big 6 will see those terms from Amazon, Apple and Google. Do you have any evidence that confirms this, or are you speculating? If Amazon won’t offer similar terms to their competition, do you think this will hurt their place in the market?

Yes, higher prices may be rejected by buyers. But that’s how the free market works. I’d rather see that, and see publishers have to adjust and find ways to make things profitable at a lower price than see our products condemned to be loss-leaders used to sell other items.

—I’m not sure you understand the term “monopoly” in an economic context. It doesn’t mean having a really, really big market share. It means have dominance over the terms of sale in a market (generally, being able to dictate the price). As we just saw in Apple’s losing struggle against another powerful group of content suppliers, the record labels, Apple has no such dominance.—

Really? Music companies wanted prices to range from $1.25 to $2.99 per song. Because Apple “has dominance over the terms of sale in a market”, they held the price at $0.99 for several years, and then, in order to get the concession of dropping DRM, let the ceiling rise to $1.29, still less than the music companies wanted. That sounds exactly like the “monopoly” you’re describing.

—Do you really think it was because of Apple’s dominance, for example, that the Zune has failed? Or is because it’s a pretty lame product that doesn’t offer enough attractions to pull away iPod customers? —

Have you seen the new Zunes, or any of the reviews? They’re arguably vastly better products than iPods:
Gizmodo
“The Zune HD is the best touchscreen PMP on the market. It’s got the most unique vision, the most impressive hardware and the most stylish software.”
CNet
“The Zune HD delivers one of the best portable music and video experiences money can buy.”

It seems quality of the device is not what’s stunting Zune sales.

Now there is the post-iPad, post-Macmillan Kindle ecosystem. Some things have changed. Under self-publishing, Amazon now pays 70% of an ebook’s list price if that price is under $10 and meets certain other conditions. I don’t think that helps you since you say your books sell for much higher prices (p.s. it’s still not an agency model at all – Amazon still can discount off your digital list price and you still get a fixed percentage of the list price). Macmillan and soon a couple of other of the big six have just renegotiated their own special deals. How exactly does this help your press? Not at all. It is not “directly beneficial” to your company because those terms don’t apply to your company. And furthermore, Macmillan agreed to a maximum ebook price of $14.99, which means a lot to consumers who were paying generally less but still doesn’t remotely solve your issue. (There was previously and still is no list price cap for the self-publishing platform).

Next, you have confused the effects of the tremendous and healthy competition among ebook retailers with the complete lack of competition and unhealthy oligopoly among ebook suppliers (for mainstream-type books). Amazon cut the price of the Kindle, opened international versions, changed its self-publishing royalty rate, announced it would allow 3rd party apps on Kindle and made several other pro-consumer moves months and weeks BEFORE Macmillan CEO John Sargent arrived in Seattle with his new demands. They were clearly reacting, as we discussed after your panic at Amazon comment the other day, to stories about terms and features Apple was circulating, B&N’s terms, Sony’s new models and features and so on. Macmillan wanted an agency model, where the publisher sets retail prices. That’s not something Amazon is offering you or anyone but a couple of the big six. Independent publishers and authors are much better off with more retailers competing to sell ebooks, yes. They are not any better off because of the big six or with the agency model which actually generates LESS revenue for publishers and authors. And if, as basic economics might suggest, higher prices reduce demand for ebooks and scare off customers, that’s probably bad for the indies, too.

I’m not championing any companies. All companies can help or hinder their customers. Google and Amazon obviously have done things you find offensive in some areas. When Amazon yanked back copies of “1984,” many, many people were outraged (I blogged about it extensively). Companies operate within the realities of their markets and the laws of the land.

I’m not sure you understand the term “monopoly” in an economic context. It doesn’t mean having a really, really big market share. It means have dominance over the terms of sale in a market (generally, being able to dictate the price). As we just saw in Apple’s losing struggle against another powerful group of content suppliers, the record labels, Apple has no such dominance. Other companies freely enter the downloadable music and MP3 player markets and compete. Do you really think it was because of Apple’s dominance, for example, that the Zune has failed? Or is because it’s a pretty lame product that doesn’t offer enough attractions to pull away iPod customers?

Ironically, it was Amazon’s entry into MP3 sales that facilitated the record labels’ win over Apple despite Apple’s then-ultra-high market share. In just a short time after all the big labels allowed Amazon to sell DRM-free music (and not Apple), Amazon picked up 16% of music customers and was growing fast. Apple gave in to the labels. They have the power over price, not Apple (subject of course to other market realities, like the current recession).

I’m not lauding any companies for being sweet and wholesome. I’m in favor of companies that innovate in ways that benefit consumers. That can be through producing cool new gadgets like the iPhone. It could be movie studios deciding to set the wholesale price of DVD movies much lower than they priced video cassettes, perhaps undermining the rental market somewhat but creating a bonanza for movie lovers (and sparking the creation of a new $10 billion market). It could be Amazon recognizing that discount ebook prices and other innovative features would unleash a similar explosion of sales.

The big six book publishers like Macmillan could be an oligopoly and still be worthy of praise and excitement. They are choosing to do things that don’t benefit their customers, perhaps to preserve legacy markets. If they changed course, I’d be happy to celebrate their good sense.

Would Amazon have changed their terms from demanding 65% of sales revenue to their current 30% without competition from others? Would Amazon have purchased Touchco in an attempt to improve their device offerings without the presence of Apple’s iPad? Would Google have improved their offer without the presence of Amazon and Apple?

I have no ties to the big 6 publishing houses, I work for a small, not-for-profit niche scientific publisher. The moves made here by MacMillan and others, however, are directly beneficial to my company. There is no way we’d be able to enter the e-book market under the terms Amazon was initially offering. We publish large technical manuals that appeal to a small audience. They usually cost upwards of $150 and they don’t sell a huge number of copies. $9.99 wasn’t exactly going to cut it for us. Now, because we can demand the same terms as the big 6, we can experiment in this space and see if it interests our customers.

I’ll ask you straight out–are independent publishers and independent authors better off with an agency model or better off with Amazon’s original demands to license rights and take on the role of the publisher themselves (without providing any of the value adding work usually done by a publisher)? Are independent publishers and authors better off with a 70% cut of revenue or a 35% cut? Without the moves by MacMillan here, what sort of terms do you think Amazon was going to offer small publishers or independent authors?

—And please don’t go on and on with your Amazon wanted a monopoly bit. The structure of the market made that highly unlikely, as current events are now bearing out. There is no barrier to entry for competitors to introduce competing ebook stores and devices and plenty of ways for those competitors to entice consumers to switch despite the fact that consumers face some loss of value by not being able to transfer Kindle ebooks to other platforms.—

Let me rephrase that for you:
And please don’t go on and on with your Apple wanted a monopoly bit. The structure of the digital music market made that highly unlikely. There is no barrier to entry for competitors to introduce competing music stores and devices and plenty of ways for those competitors to entice consumers to switch despite the fact that consumers face some loss of value by not being able to transfer DRMed iTunes purchases to other platforms.

Hmm, how’s that working out? Apple only has what, 70-80% of the music download market?

I find it odd how willing you are to champion companies looking to exert such dominance over markets, companies like Google who are known for ruthlessly destroying anyone who dares compete with them (and many companies well outside of their own space). Why should we laud Amazon, Apple or Google for making power plays to control entire markets yet fault the big 6 publishers? Shouldn’t they all receive the same level of criticism?

Look what has happened here. A ground-breaking retailer used its ability to discount to ignite the long-moribund ebook market. The success of that retailer attracted other smart retailers to enter the market and/or improve their own offerings.

Suddenly all that progress, growth and consumer benefit is threatened because the oligopoly of book publishers figured out a strategy (one that would probably have been illegal before the Supreme Court’s controversial 2007 decision on wholesalers dictating retail prices) to put the kibosh on all the retailers.

And please don’t go on and on with your Amazon wanted a monopoly bit. The structure of the market made that highly unlikely, as current events are now bearing out. There is no barrier to entry for competitors to introduce competing ebook stores and devices and plenty of ways for those competitors to entice consumers to switch despite the fact that consumers face some loss of value by not being able to transfer Kindle ebooks to other platforms.

By contrast, the barriers to entry to crack the big six publishers’ oligopoly remain at this time quite substantial. Only a handful of companies have the printing and distribution might to handle print best-sellers. Because print still represents the lion’s share of the book market, few authors can afford to ignore the print side and just go with an ebook release while even fewer still are famous enough to demand that the big six separate their ebook rights (look at the tussle that’s erupted over just a few famous authors trying to get control of their own backlist for ebook purposes).

Apple or Google or B&N can spend a few months cutting deals with the big six and overnight become big players in the still tiny ebook market. No one can challenge the big six in the print world, at least for the foreseeable future.