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Originally Posted by Sao
This post, by former literary agent Nathan Bransford, actually explains the whys of the agency model and the economics behind it. As he states,
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Wholesale model e-book:
Publisher: $12.50 (roughly 50% of $24.99 hardcover retail price)
Amazon: - $2.50 (selling at $9.99)
Agency model e-book:
Publisher: $9.09 (70% of $12.99)
E-bookseller: $3.90 (30% of $12.99)
See what's happening there? Publishers left money on the table to have more control over pricing and so more e-booksellers could compete with the elephant in the Amazon.
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In the short term, I can see people saying, "Who cares that Amazon loses money as long as I get to pay less!" The question, however, is what will happen in the future if one company gains the bulk of all ebook sales. Will Amazon be content to keep losing money forever? I doubt that.
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Actually the split wasn't 50-50, but more like 60-40 in favor of Amazon.
Publisher: $9.96 (roughly 40% of $24.99 hardcover retail price)
Amazon:
+ $0.03 (selling at $9.99)
Yes, it isn't much, but it isn't a loss. And it's obvious that the author isn't exactly truthful when he said "They raise prices to somewhere between $10.99 and $14.99 for new e-books". Since they were selling them at $24.99 before, you don't really call that raising the price.