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Old 09-14-2012, 12:37 PM   #3
Kali Yuga
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HarperCollins is now back to wholesale pricing.

As before, HC sets a list price. Amazon buys a "copy" from HC for a set price (roughly half the list price), and the author's royalty rate is determined by the list price. The retailer can then discount any amount it wants, including losing money on the sale (aka "loss leader").

E.g. the ebook of Telegraph Avenue has a list price of $27.99, and Amazon is selling it for $9.99. Amazon is undoubtedly losing money on each copy sold.

The short-term result is that the publishers and authors make more money per sale with wholesale pricing. The goal of agency pricing is to prevent Amazon and Walmart from turning their premiere products into cheap commodities.

Amazon's goal, by the way, is not to shower its customers with cheap books out of the kindness of its heart. Amazon is willing to lose money to build dominant market share, and subsequently pressure publishers to slash list prices (and thus reduce Amazon's costs).


I don't know much about Shatzkin, but he's missing something if he doesn't think Apple can handle a price war with Amazon. H'm, what could it be, it's on the tip of my tongue... oh yeah:



Apple doesn't make money off of content, by the way. They make it off of hardware, and the only reason to have iBooks in the first place is to tie people to iOS, so they keep buying iPhones and iPads and iSockWarmers and so forth. I suspect there's a limit to how much they are willing to lose on iBooks, but there's no doubt they can afford to lose a heck of a lot more than Amazon.

In addition, Shatzkin fails to note that the real victim here will be Barnes & Noble. If they match or beat Amazon's prices, they will lose money. If they maintain higher prices, they will lose market share. Microsoft did throw $300 million at the Nook, but at their burn rate -- accelerated by what is now a partner requirement to switch platforms -- they'll be back in the red by the end of the year.

Yes, lower consumer prices are definitely a good thing. Too bad it's going to be at the cost of a duopoly or monopoly in ebook retailing.....
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