|09-14-2012, 09:48 AM||#1|
Join Date: Mar 2012
Mike Shatzkin U-Turn? Rethinking what’s happening with ebook prices
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."
Last edited by Top100EbooksRank; 09-14-2012 at 10:00 AM.
|09-14-2012, 10:30 AM||#2|
Join Date: Dec 2011
Location: Land of the Loonie
Device: Kindle Paperwhite and Keyboard, Kobo Aura, iPad mini, iPod Touch
Even with a wholesale model the publishers can keep ebook prices high by doing exactly what HarperCollins is doing (increasing the list price). Which is why the "race to the bottom" fear mongering and excuse after excuse by the publishers about how they had to collude to "save the market" were so ridiculous. The publishers still have a great deal of control over prices since retailers aren't going to sell every single book at a loss.
|09-14-2012, 11:37 AM||#3|
Join Date: Mar 2009
Device: Kindle 4 No Touchie
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.....
|09-14-2012, 11:32 PM||#4|
Join Date: Sep 2011
Location: Wandering God's glorious hills, valleys and plains.
Device: Kindle3-3G, Archos 43, Samsung S3
I thought it was always obvious that the losers in these wars were the Brick and Mortar stores, and those people that liked to frequent such stores.
|09-15-2012, 08:47 PM||#5|
Grand Master of Flowers
Join Date: Oct 2010
Device: Kindle PW, Kindle 3 (aka Keyboard), iPhone, iPad 3 (not for reading)
Amazon's profits are lower not due to them not making an appropriate margin generally, but due to them spending a lot of money building out distribution centers and developing various kindle products (which are less expensive than the distribution centers). The idea, of course, is that this will help them expand sales and once these one-time type expenses are gone, they will have increased volume from which to take their tiny margins.
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