Quote:
Originally Posted by tompe
But even in the non-agency model according to your interpretation Apple will take $4.50 from the $5 so they earn only $0.5. So why does the agency model matter? I really do not think your interpretation is correct.
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This is a good point. Apple taking 30% of the sales price - agency or non-agency - is going to be a big blow to any business, and may well have doomed them, regardless.
But it's not clear that this would be the case. In the agency model, the publisher keeps 70%, Apple keeps 30%, and there is 0% left over for iFlow.
In the wholesale model, the publisher gets 50%, Apple gets 30%, and there is, theoretically, 20% left over for iFlow. In the case of hardbacks, especially if you are competing with Amazon, you may have to discount to move the books, in which case the 20% would likely not be enough. But in the case of paperbacks, which are not discounted as much, this might give enough room to survive. I.e., they pay $4 for an $8 paperback; Apple gets $2.40 and they keep $1.60. That leaves 20%, which is decent, when you keep in mind that Amazon - which is doing well for a bookseller - has a profit margin of less than 5%. (Obviously the 20% is revenue, not profit, but even if they spent 75% of the revenue on costs, they'd still make 5% profit, or 40c per book).
And since revenues are almost entirely fixed (Apple picks up the credit card transaction fees, for example), this is a reasonable business model if they can do enough volume.