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Amazon Yields to Macmillan in Kindle Standoff

After a weekend standoff, Amazon has acquiesced to publisher Macmillan's demands to loosen control over the pricing of digital books for the popular Kindle e-reader.

Amazon (NASDAQ: AMZN) made the revelation in a post in its Kindle forum, indulging in a bit of sour grapes as it relayed the message to consumers that MacMillan had strong-armed the online retailer into breaking from its standard $9.99 price point for e-books.

"Macmillan, one of the 'big six' publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases," Amazon said.

For a brief period over the weekend, Amazon had pulled all Macmillan titles -- both printed and digital editions -- from its online store, a gesture it said was intended to express its "strong disagreement" with the publisher's pricing demands.

Price and revenue share arrangements are emerging as key sticking points as producers of traditional media content warm up to new methods of digital distribution, such as the Kindle or the iPad tablet Apple (NASDAQ: AAPL) introduced last week.

Apple's device is the latest entrant in the fast-growing e-reader market that Amazon continues to lead with the Kindle. Both devices offer digital book stores, as well as an alternate distribution channel for other traditional media such as magazines and newspapers.

Last year, Amazon introduced its large-screen Kindle DX, pitching the device as a worthy facsimile of the reading experience readers enjoy with a newspaper. Publishers, in turn, looked hopefully toward the device as a new path to digital subscriptions, though for some those hopes fell short when Amazon insisted on keeping the lion's share of the revenue.

In the dustup with Macmillan, Amazon claimed the high road, telling its customers that the short-lived boycott of the publisher's titles was an effort to keep prices for the digital versions of newly released hardcover titles in line with the rest of its catalog.

"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," the company said.

"Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay $14.99 for a bestselling e-book."

Macmillan CEO John Sargent addressed the imbroglio in a full-page ad that ran in the trade journal Publisher's Lunch on Saturday, when Amazon's boycott was still in effect.

Sargent described a meeting with Amazon last Thursday at the retailer's Seattle headquarters. He was aiming to strike a distribution deal with Amazon under what is known as the agency model, which would see Amazon net a 30 percent commission for each Macmillan title sold through its site, with e-books typically appearing the same day as a hardcover release, initially priced between $12.99 to $14.99.

"The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model," Sargent said. "Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market."

He added, "Amazon and Macmillan both want a healthy and vibrant future for books. We clearly do not agree on how to get there."

Kenneth Corbin is an associate editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.