article from 2 years ago
http://www.newyorker.com/reporting/2...a_fact_auletta
Onstage, Jobs, demonstrating how Apple would sell books, had selected Edward Kennedy’s “True Compass” and clicked on a “buy” icon with the price $14.99 next to it.
Why, Mossberg asked, should consumers “pay Apple $14.99 when they can buy the same book from Amazon for $9.99?”
“That won’t be the case,” Jobs said, seeming implacably confident. “The price will be the same.” Mossberg asked him to explain. Why would Amazon increase prices, when consumers were buying so many books? “Publishers may withhold their books from Amazon,” Jobs said. “They’re unhappy.”
The next day, a Friday, John Sargent, the C.E.O. of Macmillan, a publishing conglomerate that includes Farrar, Straus & Giroux and St. Martin’s Press, flew from New York to Seattle to meet with Amazon. Macmillan is the smallest of the big-six publishers, which produce sixty per cent of all books sold in the U.S. Like its peers, Macmillan relies heavily on Amazon, which sells about fourteen per cent of its trade books and the vast majority of its e-books. But Sargent was determined to force Amazon to change the way it does business.
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For months before Sargent’s visit, the publishers had talked about imposing an “agency model” for e-books. Under such a model, the publisher would be considered the seller, and an online vender like Amazon would act as an “agent,” in exchange for a thirty-per-cent fee.
Yet none of the publishers seemed to think that they could act alone, and if they presented a unified demand to Amazon they risked being charged with price-fixing and collusion.
In Seattle, Sargent met with Russ Grandinetti, the vice-president in charge of Kindle Content, and told him that if Amazon would not accept the agency model Macmillan would restrict the publication of its e-books. Sargent was giving an ultimatum: Amazon had built its business on comprehensiveness, and if Macmillan withdrew its books it could no longer claim to be the world’s best-stocked bookstore.
Amazon did not react as Sargent had hoped. Before he stepped off the plane, back in New York, that Friday evening, it had stopped selling all of Macmillan’s titles. But, as Jobs hinted, four other major publishers—Simon & Schuster, HarperCollins, Penguin, and Hachette—were quietly planning to follow Sargent’s lead. On Sunday afternoon, Amazon reversed course.
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The head of another house said, “Amazon was incandescent with rage. They switched because they figured out that if all publishers withdrew their books Amazon’s business was dead.” Whatever the explanation, Amazon’s announcement was good news for publishers. John Sargent had called negotiations with Amazon a “chess game,” and he seemed to have won the opening gambit.
