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Steve Jobs emails that show how to win a negotiation

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Re: Steve Jobs emails that show how to win a negotiation

#51

Post by fragsworth »

Xcelerate wrote: post #10

To be fair, Apple didn't have much to lose if the deal didn't go through. So I can see why the "take it or leave it" strategy works in this case. It would be interesting to see how Jobs negotiated in a case where the other party had the upper hand.

Apple did have quite a bit to lose if the deal didn't go through. A huge reason for customers to buy an iPad is to read books, and if a large portion of popular books isn't available, customers will not be happy. Try to find a book that isn't available on Amazon. If you buy a Kindle, you can get all of them.

Re: Steve Jobs emails that show how to win a negotiation

#52

Post by fragsworth »

This wasn't mentioned, but I'm sure HC was given the right to terminate the contract, considering the other terms in this deal. If they ever found that they were losing money from the deal with Apple (because they couldn't sell books elsewhere at prices they wanted) they can pull from Apple. So HC had absolutely nothing to lose and everything to gain by going forward with the deal.

This negotiation was too easy for Apple, and HC was just attempting to haggle. I doubt they expected Apple to cave on much of anything.

Re: Steve Jobs emails that show how to win a negotiation

#53

Post by matt-attack »

adventured wrote: post #11

It's impressive how dramatically wrong Steve Jobs was about the iPad when it came to the ebooks market. He missed by a mile in understanding exactly how customers wanted to consume ebooks. So here we are, Apple has sold a bazillion iPads, and yet Amazon dominates ebooks. And there's absolutely no threat on the horizon coming from Apple in the ebooks market.

And why is that?

Re: Steve Jobs emails that show how to win a negotiation

#54

Post by lostlogin »

grimtrigger wrote: post #26
seldo wrote: post #7

My two big takeaways from this are: 1. Amazon sells every Kindle ebook at a loss of $3 -- they pay $13 wholesale and sell it for $9.99. I thought this was a typo, but then Jobs repeated the figure (though he said $12.50). It was my impression that Amazon also sells the Kindle itself at near-cost, so does that mean that Amazon's entire ebook business has been running at a loss the whole time? 2. Jobs certainly did win…

2) Doubt this is a fair comparison. Kindles are clearly a superior device for reading than iPads.

Not for all. 1) Reading for me involves access to a browser and typing on a kindle is deeply unpleasant.

2) Reading in the dark requires a light and the attachments for the kindle have all seemed a kludge to me. That said, the iPad is imperfect here are the screen doesn't dim enough.

Re: Steve Jobs emails that show how to win a negotiation

#55

Post by rkudeshi »

seldo wrote: post #7

My two big takeaways from this are: 1. Amazon sells every Kindle ebook at a loss of $3 -- they pay $13 wholesale and sell it for $9.99. I thought this was a typo, but then Jobs repeated the figure (though he said $12.50). It was my impression that Amazon also sells the Kindle itself at near-cost, so does that mean that Amazon's entire ebook business has been running at a loss the whole time? 2. Jobs certainly did win…

A little backstory to explain the $13 wholesale -> $9.99 retail thing:

Books have traditionally been sold to wholesale at $14, then sold at retail for $28 MSRP. When Amazon started selling ebooks, they stuck with the same model - they were buying ebooks wholesale from the publishers at $14 each.

However, they proceeded to sell them to consumers at $9.99. Yes, they were losing money on every sale. Why? Because they knew this was their chance to dominate the books industry, just as iTunes had done in music. Amazon's MP3 store, despite launching with cheaper and DRM-free music, has never been able to make a serious dent in iTunes' market share. So Amazon knew there was a huge advantage in being the first to dominate the market.

Of course, as Jobs alludes to in the emails, this was unsustainable in the long term. The publishers knew that once Amazon became the dominant ebook seller, they would come back to the publishers and revise the terms of purchase. At that point, $9.99 would've become ingrained in consumers' minds and Amazon would've said they could no longer pay $14 wholesale, probably more like $7 wholesale instead.

The reason the publishers acquiesced to Jobs so quickly was because they knew 70% of $12.99/$14.99 would be better than 70% of $9.99 in the long run.

(Because of most-favored-nation clauses in the contract, publishers forced Amazon to also increase prices to $12.99+ and switch from the wholesale model to the agency model once the iPad went on sale. Amazon pulled HarperCollins books from their site briefly, hoping a groundswell of consumer backlash would force HC and Apple to revise their contract. It didn't happen and now ebooks are sold just like apps - publishers set the price and Apple/Amazon gets 30%.)

Re: Steve Jobs emails that show how to win a negotiation

#56

Post by doctorpangloss »

jonknee wrote: post #42

> Analysts estimate that Amazon has sold more than one million Kindles in 18+ months (Amazon has never said). We will sell more of our new devices than all of the Kindles ever sold during the first few weeks they are on sale. If you stick with just Amazon, Sony, etc., you will likely be sitting on the sidelines of the mainstream ebook revolution. Hindsight is a funny thing. Amazon's eBook/Kindle business is continuin…

> Hindsight is a funny thing. Amazon's eBook/Kindle business is continuing to soar while Apple doesn't even mention iBooks anymore.

That's true, but for a few idiosyncratic reasons, if anything.

The Kindle app is available for the iPad, and for a period of time an iPad user could buy the book directly in the app.

If Apple wanted to, it could coerce Amazon to pay 30%, regardless of where the books are sold.

I wouldn't be surprised if Amazon makes most of its money off iPad users. But there are no hard figures. Though if the opposite were true, I'm sure Amazon would be trumpeting everywhere how successful the Kindle is.

Re: Steve Jobs emails that show how to win a negotiation

#57

Post by stock_toaster »

adventured wrote: post #11

It's impressive how dramatically wrong Steve Jobs was about the iPad when it came to the ebooks market. He missed by a mile in understanding exactly how customers wanted to consume ebooks. So here we are, Apple has sold a bazillion iPads, and yet Amazon dominates ebooks. And there's absolutely no threat on the horizon coming from Apple in the ebooks market.

  > So here we are, Apple has sold a bazillion iPads, and yet Amazon dominates ebooks.
There is a kindle app for the ipad. Even while the kindle experience on the ipad is sub par[1], I think the difference in price (cheaper), features (whispersync, email to kindle), and existing library keep people in the amazon ecosystem (via kindle app).

  [1]: you can't purchase books from inside the app because amazon doesn't want to pay apple

Re: Steve Jobs emails that show how to win a negotiation

#58

Post by notimetorelax »

doctorpangloss wrote: post #56
jonknee wrote: post #42

> Analysts estimate that Amazon has sold more than one million Kindles in 18+ months (Amazon has never said). We will sell more of our new devices than all of the Kindles ever sold during the first few weeks they are on sale. If you stick with just Amazon, Sony, etc., you will likely be sitting on the sidelines of the mainstream ebook revolution. Hindsight is a funny thing. Amazon's eBook/Kindle business is continuin…

> Hindsight is a funny thing. Amazon's eBook/Kindle business is continuing to soar while Apple doesn't even mention iBooks anymore. That's true, but for a few idiosyncratic reasons, if anything. The Kindle app is available for the iPad, and for a period of time an iPad user could buy the book directly in the app. If Apple wanted to, it could coerce Amazon to pay 30%, regardless of where the books are sold. I wouldn't…

> I suspect Amazon makes most of its money off iPad users

Just wondering, why do you think that?

Re: Steve Jobs emails that show how to win a negotiation

#59

Post by OrsenPike »

lostlogin wrote: post #54
grimtrigger wrote: post #26

Earlier quoted context omitted.

2) Doubt this is a fair comparison. Kindles are clearly a superior device for reading than iPads.

Not for all. 1) Reading for me involves access to a browser and typing on a kindle is deeply unpleasant. 2) Reading in the dark requires a light and the attachments for the kindle have all seemed a kludge to me. That said, the iPad is imperfect here are the screen doesn't dim enough.

I think a better way to phrase it would be "Kindles are clearly a superior device for reading [novels and similar material] than iPads."

An iPad obviously is better for things like glossy magazines, graphic heavy books/PDFs, etc. However as a replacement to my "books" then the Kindle wins over the iPad.

Also the Kindle Paperwhite (and Kobo Glo, etc) are pretty great for low light reading. I agree the old lights were a bit annoying although the Amazon leather lighted case has always been pretty decent to be fair.

Re: Steve Jobs emails that show how to win a negotiation

#60

Post by OrsenPike »

jtbigwoo wrote: post #31

There's a great moment in the first Jobs email: >>4. $9 per new release should represent a gross margin neutral business model for the publishers. We are not asking them to make any less money. As for the artists, giving them the same amount of royalty as they make today, leaving the publisher with the same profits, is as easy as sending them all a letter telling them that you are paying them a higher percentage for…

What made this even more fun to read is knowing it was Murdoch he was twisting and twisting :)
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