Third Major Publisher Dumps Amazon's $9.99 E-Books Model

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The future of the $9.99 e-book is in danger. A third major publisher, Hachette, is going for Apple's agency model in order to s

ell e-books for up to $14.99 apiece, the company revealed in a memo to agents.

Following Amazon's public dispute over e-book prices with Macmillan early this week, Hachette is also seeking a shift to the agency model, which allows the publisher to set the price for the e-book, while the retailer keeps 30 percent of the sales.

Hachette's action follows a similar move by HarperCollins, whose owner Rupert Murdoch was quoted as saying during an earnings call that "We don't like the Amazon model of $9.99...We think it really devalues books and hurts all the retailers of hardcover books...And now Amazon is willing to sit down with us again and renegotiate."

In the memo to agents, Hachette claims that it is "not looking to the agency model as a way to make more money on e-books. In fact, we make less on each e-book sale under the new model; the author will continue to be fairly compensated and our e-book agents will make money on every digital sale."

The $9.99 e-book price point is clearly a hot topic this year. Two of the five largest publishers have denounced the Amazon model, and a third is pushing to renegotiate its pricing structure. Will Penguin and Simon & Schuster, the other two publishers in the big five, follow suit? Most probably.

What Is This All About?

On January 27, Apple unveiled the iPad, a tablet-like computing device that will come bundled with the iBookstore, the company's response to the increasing popularity of e-books.

Unlike Amazon, which buys e-books from publishers at around $1

5 and subsidizes them to sell copies for $9.99, Apple said that it will adopt the agency model, which allows the publisher to set the prices for e-books while Apple keeps 30 percent of the sales (as with its App Store).

Apple also announced deals with Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster for the iBookstore. A little more than a week after the announcement, three of those publishers had objected to Amazon's model, claiming that it devalued books, even though the agency model would bring them lower returns on e-books.

Amazon retaliated against Macmillan, the first publisher to abandon the wholesale model, by removing the company's books from its inventory. Macmillan now advertises its books as "Available at booksellers everywhere except Amazon."

Amazon is probably in a losing battle with the publishers, but at the end of the day this will mean that consumers will have to shell out several extra bucks apiece for e-books.

Yet the Internet retailer is not going anywhere. Amazon has acquired Touchco, a maker of flexible touchscreens--an acquisition that will allow the company to produce Kindle models with multitouch capabilities. Also in the works is an app store for the Kindle, which will offer simple applications to users.

Amazon's earning increased by 40 percent in 2009, the company revealed on Friday.

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