For one thing, Amazon hasn't given up yet. As of this writing, it still refuses to allow customers to buy Macmillan books through its website, even such bestsellers as Atul Gawande's The Checklist Manifesto. Who knows how long "ultimately" will take.
For another thing, Amazon was snarky and disingenuous in its announcement. It ignored the fact that it is the online retailing monopoly, especially in e-books, where it dominates with 80% of all e-book sales. It acted as if it were a poor little store being pounded by huge, monopolistic publishers—as if Amazon, and not publishers, were being squeezed in today's marketplace. And it totally ignored authors, the ones who ultimately will suffer most from the pricing wars.
Its announcement attacked Macmillan "one of the 'big six' publishers" (cue horror-movie soundtrack), and condemned it for having "a monopoly over their own titles." How horrible, you must be thinking. Next thing you know, authors will have monopolies over their own books. Finally, it says that prices above $9.99 are "needlessly high for e-books."
In my previous post, I briefly sketched the economics that lead to decisions about pricing. Given two facts—that e-books cannibalize the book market, rather than expanding it, and that the cost of printing and distributing a physical book amounts to no more than 12% or so of the price—then cutting e-book prices to half or a third of the hardcover price necessarily deprives the author of income.
In the case of my book, $9.99 represents only 27% of the hardcover list price. Since royalties represent a percentage of the list price, cutting the list price of my book by 73% absolutely must result in a lower royalty payment. On top of that, the industry standard (at the moment) for royalties on e-books is actually lower than for hardcovers—and publishers are trying to cut it down still farther. Even the modest increase in e-book prices that Macmillan demands still represents a major cut from the hardcover price. So Amazon's claim that it will "ultimately" cave in offers no comfort to us authors. We lose either way—and our incomes from writing are already past the breaking point.
For readers, the question is, how much do you value books? Is guaranteeing Amazon's market domination more important to you than guaranteeing a steady and varied supply of good books? The short-term gain of being able to buy an e-book for only $10 or $15 will come at the long-term cost of driving authors out of the business of writing books.