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Originally Posted by DMcCunney
Amazon's pricing and selection are such that Kindle owners don't see this as an onerous restriction, but it's still vendor lock-in.
The question is whether Amazon is playing the loss-leader game and accepting no margin or a loss to build market share. It's possible, but I doubt it. I definitely doubt it in the US market affected by Agency Pricing. The publishers were reacting to lowered revenues because Kindle editions were competing with hardcovers. If Amazon was actually paying publishers the same price for the Kindle edition as the hardcover, Amazon would be putting the loss in "loss leader", and I really don't see them doing that. Retailers will accept lower margins (or even losses) on selected hardcover titles to generate traffic and other sales. (The Harry Potter books were popular for this.) They won't do it across the board on all new titles. They want to stay in business.
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Dennis
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I don't know what Amazon is or was actually doing. I'm not an insider with information about their hidden financial workings.
However, reading about the issue online in blogs/news sources/etc, it had been stated multiple times by multiple sources, that when Amazon was charging $9.99 for new ebooks, it was selling them at a loss and publishers were being paid some amount which was higher than the selling price and additionally was the amount they had requested (I don't recall anything comparing it to hardback costs, probably because no one had those numbers and Amazon wasn't telling).
The reasoning provided was that Amazon wanted to become the primary source of ebooks and were able to support the Kindle division with profits from the ebook division.
If publishers had simply been losing money on ebooks, they could have renegotiated their contracts with Amazon. After all, by instituting Agency pricing they _did_ rewrite their contracts with almost no warning at all.
Perhaps if publishers had increased the amount they asked Amazon to pay, it would have put more pressure on Amazon to increase prices themselves (it might have been harder to justify the losses).
I don't think anyone reported Agency pricing was put into place because publishers were losing money on ebook sales (vs. hardback sales). Agency pricing was supposedly put into place because publishers were worried about the future "perceived" value of ebooks. If everyone expected to pay $9.99 for a freshly published ebook, they'd scream at the price increasing sharply in the future to bring them in line with hardback prices.
Shifting back to the "now" of things, that prediction was certainly correct. People _do_ resent being asked to pay hardback prices for ebooks. Now, I don't think anyone is saying Amazon is taking a loss on ebooks, in fact, one of the stated purposes of the Agency model was to force Amazon to make a profit on ebooks (by not allowing them to discount).
All of that aside for a bit, the publishers have spent the last 25+ years convincing the reading public that hardcover books justified sharply increasing book prices. When paper supplies were costly, book prices went up. Ink prices went up -> so did books. Etc. Etc.
Now, having spent all this time convincing us that we should feel obligated to pay more for hardcovers, when there's a popular medium involving none of these costs and people look for a corresponding discount on book prices, they magically have become only 15% (or so, varying by source) of the cost of a book.
I personally think the issue is that publishers controlled the distribution channels of books (just as record companies controlled the distribution of music, and the studios controlled the distribution of movies). During the past 20-25 years, there has been increasing global communication and prosperity (thank you Internet!), and that led to increasing profits. However, (a) the profitability joyride is over and (b) content creators can distribute their content on their own (thank you again, Internet!)
So now book publishers are scrambling around in fear, trying to stay in business any way they can.
The thing is, I don't feel sorry for them. No one feels sorry for me taking a total of $10/hour in systematic pay cuts over the past 10 years (that is, I was making $10 more per hour a decade ago, doing nearly the same job). I've had to do this because the I.T. market collapsed and if I want to have a steady job that lets me feed my family, I have to be realistic about what I can expect to get paid. I don't say this to be self-pitying, it's just a simple reality. I used to expect to get paid much more than I expect to be paid today. Globalization has brought costs down, and pay down as well.
If they want to distribute other peoples content, publishers *have* to be willing to accept cuts, and probably much sharper ones than I've experienced. Distribution of products _EXCEPT IN THE CASE OF MONOPOLIES_ is always a cut-throat business.
Agency pricing is just delaying the inevitable.