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Amazon surrenders to Macmillan price hikes

By Blake Ellis, staff reporter

NEW YORK (CNNMoney.com) -- Amazon.com will raise the price of some of Macmillan Inc.'s electronic books, ending a dispute that led to the online bookseller halting its sales of the publisher's e-books and printed books over the weekend.

Prior to the decision, all e-books on Amazon's Kindle e-reader were offered at a set price of $9.99.

Amazon (AMZN, Fortune 500) said on its online Kindle Forum that it will begin charging $12.99 to $14.99 for e-book versions of Macmillan's bestsellers and most hardcover releases even though it deems those prices too high.

"What this does is it takes the tool out of Amazon's hands that they were using against their competitors," said Mike Shatzkin, a book industry consultant and CEO of Idea Logical Co. "The fact that Amazon is having its arm twisted by publishers to charge higher prices is an advantage to all its competitors and a disadvantage for Amazon."

While Amazon said it doesn't expect all major publishers to follow in Macmillan's footsteps, Shatzkin said he predicts the company will soon be forced to raise prices for a number of other publishers as well.

"It's pretty clear that at least five of the big six publishers are moving to the terms Macmillan announced," he said. "They are all concerned about their deep discounted pricing on brand name authors."

And it's not just the publishers who are concerned. Many authors are upset about the low prices Amazon charges and at the bookseller cutting off sales of their books for two days.

"Amazon apparently forgot that when it moved against Macmillan, it also moved against Macmillan's authors," said science fiction author John Scalzi in his online blog titled Whatever. "Macmillan may be a faceless, soulless baby-consuming corporate entity with no feelings or emotions, but authors have both of those, and are also twitchy neurotic messes who obsess about their sales."

In the end, however, it was a matter of competition that caused Amazon to surrender to Macmillan's request. If Amazon had refused to raise prices, Macmillan would have simply sold its books through Apple (AAPL, Fortune 500)'s new iPad or another competitor, said Shatzkin.

"What's going on right now is publishers are saying, 'Hey, we have another way to consumers besides just you. If we make our way to Apple, we don't need to go through you,'" said Shatzkin. "That's the leverage that has caused the whole brouhaha, and that leverage is going to persist unless the iPad falls flat on its face."

Complying with Macmillan was therefore the only viable choice for Amazon if it wants to stay in the game, said Shatzkin. And this sentiment was echoed in the company's statement Sunday.

"We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles," Amazon said. "We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books."

The publisher's decision to raise prices will also create an opportunity for other publishers and independent presses to offer lower-priced alternatives, Amazon said. To top of page

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