Could I have gotten the DoJ impact on ebook pricing completely wrong? Could the elimination of the Apple-mandated pricing bands actually be such a good thing for publishers that loosening the restraints on discounting won’t actually disrupt the marketplace?
The early evidence seems to point that way although we need to emphasize the word “early”.
What Cader was the first to write publicly (and which he told me in conversation before he posted it, but obviously it didn’t sink in) was that the publishers’ ability to raise ebook prices and ignore those bands offered a powerful antidote to the retailers’ ability to offer discounts.
The first reports when HarperCollins titles showed up on Amazon and other ebook retailers with discounts didn’t focus on the fact that the base price before the discounts had gone up on many of their titles.
Cader did the work required for sound analysis: grabbing Harper list prices from their site (showing that they had “re-banded” their prices higher, so that discounting up to 30% wouldn’t change consumer prices much from what they’d been) and doing price checks at a number of accounts.
1. We will for the forseeable have a trifurcated ebook supply chain. Assuming Hachette and S&S employ Harper’s strategy of setting prices higher so that the retailer discounting just brings them down to about where agency had originally set them....
2. The discounts that were shown on the Harper books (also researched by Cader) tended to be 5%, 10%, 20%, 25%, or 30% off the publisher price, or else the trusty old $9.99. This is simple, probably human-set, pricing. It also doesn’t begin to test the upper limits of what retailers can do in discounting. They’re allowed to discount a particular publisher’s ebooks up to the total margin they earn across the list. So for a 30% agency publisher, all the books being sold at positive margin (anything from less than 30% off to full price) contribute to their ability to discount below cost on other books, if they want to.
Does that mean HarperCollins books are still on agency but the retailers are now allowed to discount? (the settlement allowed for agency pricing with retailer ability to discount).
HarperCollins set the list price (say $17.99) as the "agent." The retailers can discount all they want. If they discount their full 30% commission, then the price would be $12.59. If the list price is $14.99, discounting the full 30% commission will bring it down to $10.49.
Or HarperCollins ebooks are now sold wholesale? Or HarperCollins just outsmarted everyone by "setting prices higher so that the retailer discounting just brings them down to about where agency had originally set them."