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Originally published January 31, 2010 at 10:07 PM | Page modified February 1, 2010 at 1:44 PM

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Amazon.com gives in to Macmillan price demand

After a weekend of brinkmanship, Amazon.com surrendered Sunday to a publisher and agreed to raise prices on some electronic books.

The New York Times

After a weekend of brinkmanship, Amazon.com surrendered Sunday to a publisher and agreed to raise prices on some electronic books.

The Seattle company shocked the publishing world late last week by removing direct access to the Kindle editions as well as printed books from Macmillan, which had said it planned to begin setting higher consumer prices for e-books.

Until now, Amazon has set e-book prices itself, with $9.99 as the default for new releases and best sellers. But Sunday it said it would accept Macmillan's decision.

On Friday, Amazon removed "buy" buttons from thousands of titles published by Macmillan. Customers who wanted to buy print editions could do so only from third-party sellers. Digital editions made for Amazon's Kindle device disappeared.

In a strongly worded message on its Web site Sunday, Amazon said that while it disagreed with Macmillan's stance, it would bow to the publisher's plan.

"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."

In a statement to Publishers Marketplace, Macmillan CEO John Sargent said: "We are in discussions with Amazon on how best to resolve our differences. They are now, have been, and I suspect always will be one of our most valued customers."

Under Macmillan's new terms, which take effect next month, the publisher will set the consumer price of each book and the online retailer will serve as an agent and take a 30 percent commission. E-book editions of most newly released adult general fiction and nonfiction will cost $12.99 to $14.99.

Those terms mirror conditions that five of the six largest publishers — Hachette Book Group, HarperCollins Publishers, Macmillan, Penguin Group and Simon & Schuster — agreed to with Apple last week for e-books sold via the iBookstore for the iPad.

For more than a year, publishers have been fretting about the price of digital books, which Amazon, as the dominant player, had effectively been able to set.

Amazon buys and resells e-books in the same way it handles printed books, by paying publishers a wholesale price generally equivalent to half the list price of a print edition. Because Amazon has discounted the price of most new and popular e-books on its Kindle e-reader to $9.99, it loses money on most of those sales.

Amazon's goal has been to have a low price to help sell more Kindle devices.

Amazon's decision is also a victory for Apple CEO Steve Jobs, who earlier pitched the idea of selling e-books under the agency model to publishers. Now Apple, whose iPad tablet is due in March, can compete on fairly equal footing with Amazon.

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