Amazon.com (NYSE: AMZN) has begun to raise the price of some of its e-books above their paper versions. According to The New York Times, “Don’t Blink,” by James Patterson and Howard Roughan, whose publisher, Little, Brown & Company, is priced at $14.99 for the e-book. (Ed. note: A small number of publishers price their ebooks under an agency model, which means they set the price. This is clearly marked on the detail page for a book. According to Amazon “this price was set by the publisher.”) Amazon priced the hardcover at $14. “Fall of Giants” by Ken Follett, was published by Dutton, an imprint of Penguin Group USA, last week. On Amazon.com, the price for the e-book was $19.99; the hardcover edition was $19.39, the paper reports.
Amazon could not prevent customer rants about the actions, but the trend will probably grow.
Amazon has brought down the price of the Kindle twice. One reason was to get mass market adoption of the e-reader which, by some industry estimates, will have sales of 4 million units by the end of the year. The other cause of cost cuts is competition from the Barnes & Noble (NYSE: BKS) Nook and the Apple Inc (NASDAQ: AAPL) iPad. Amazon may not face much competition from multi-purpose iPad now. That will change when Apple drops the price of the device, which it will inevitably do. Consumer electronics prices usually fall as companies try to spur demand and component prices drop.
Amazon priced the Kindle in such a way that it probably loses money on each unit, so it must have a way to get that money back. Its only recourse is to make money on e-books. Those profits may need to be improved because the Kindle is likely to be a drag on Amazon.com earnings.
Amazon customers may be upset, but the price they will have to pay for a low-cost Kindle is more expensive e-books.
Douglas A. McIntyre
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