Just after 6 p.m. on Friday, the weeklong standoff between Amazon (AMZN) and Big Six publisher Macmillan came to an end. Buy buttons were restored to print edtions of Atul Gawande's The Checklist Manifesto, Andrew Young's The Politician, and Kristin Hannah's Winter Garden, among other big titles. And by Sunday night, all of Macmillan's print and digital titles were available directly from the online retailer. "We are delighted to be back in business with Amazon," said Macmillan CEO John Sargent in a statement. Amazon has barely commented on the situation.The battle's over, and now comes the war -- a long, costly war. Two more publishers, Hachette (LGDDY) and HarperCollins (NWS), are publicly on board with the agency model Macmillan championed, which sets e-book prices higher but gives retailers like Amazon and Apple (AAPL) a 30% cut of sales.
Penguin (PSO) and Simon & Schuster (CBS) haven't announced their commitment to the agency model, but their deal with Apple to make content available on the iPad seems to confirm the move. Amazon may be "capitulating" (to quote its only missive about the Macmillan imbroglio), but it's a double-edged sword: The agency model will make the retailer more money, but consumers wedded to the $9.99 price-tag will have to readjust their e-book buying habits.
A Shifting Relationship
That uncertainty tempers Macmillan's victory with realism, if not outright skepticism. Macmillan pushed back against Amazon's dominance of the digital-book landscape, and Apple's iPad will probably reach many more buyers than Kindle has attracted, however many that may be -- Amazon has not been forthcoming with sales figures.
But these moves are rooted in publishing's business-to-business model, where booksellers like Amazon, Barnes & Noble (BKS) and Borders (BGP) are the customers. E-reading, however, is very much rooted in business-to-consumer relationships, between the retailers and their customers. And these relationships will grow ever more important as the middlemen in publishers' supply chain struggle to stay afloat.
But other storylines are also tangled up in the Amazon-Macmillan affair. One is the future of e-books, a sector growing at an increasing clip with every quarter. Another is whether the Kindle can stay innovative against Apple's iPad. Yet another is the future of the big box retailers.
Borders's majority stakeholder, Pershing Square Capital's Bill Ackman, asserts that the company is in no danger of bankruptcy, but Borders shares trade barely above a dollar, and even Ackman couldn't rule out consolidation with a rival -- especially B&N, which is contending with the stock-grabbing moves of investor Ron Burkle. And then there's the final ruling on whether the Google Book Settlement will hold, and Google's own impending entry into the e-book market, Google Editions.
A Mix of Doom and Excitement
All of these questions will affect consumers. Lose Borders, and there goes a sizable chunk -- more than Amazon's, in fact -- of the overall market share for books, one that will be tough to replace. Switch to the agency model, and that will mean complex, probably arduous negotiations between agents and publishers about authors' digital royalties, how much the royalties should be (agents want more than a 25% net royalty; publishers are just barely sticking with that new status quo), and whether the author's cut should come before Apple or Amazon takes its.
If the midlist -- that cavernous space between blockbusters and untested authors -- shrinks further, the space opens up just as wide for authors to publish on their own, through pay-to-publish firms, or directly with Amazon's Direct-to-Publish program (for Kindle Books) and AmazonEncore (for select print titles.)
All of these scenarios contain a mix of doom and excitement, and they put publishing in a 24/7 business-news cycle. Eventually, whether two years from now or 10, we'll look back and recall Amazon vs. Macmillan as the first perfect storm. But many more earthquakes and aftershocks are sure to follow.
Improve your investing savvy with the right financial toolset.View Course »