Quote:
Originally Posted by Sil_liS
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.
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It is interesting to speculate on what Amazon perceived as the business model.
In a bricks and mortar world, retail margins are very small. Retailers try to buy on credit from the manufacturer and turn over (sell) their stock quickly, so they can collect cash (and even invest it for a few days) before they have to pay for the product. They make extra money on stuff like marketing fees from manufacturers who want good shelf position.
For ebooks there is no stock and, I assume, no obligation to pay until the book is sold. Assuming payment is not due the instant of sale (ten days later?) then Amazon would have ten days of free money to collect interest on. Furthermore, selling the book is automated so there are minimal transaction costs. Finally, I could see Amazon asking the publishers for promotional dollars as Amazon began to control an increasingly large portion of the access to consumers. The only real costs I see are for customer service / returns, credit card fees, and servers/Internet.
I'm not arguing that ebooks are free to create. However, since there is no physical good for Amazon to stock they don't see any of those costs. In effect, an income of three cents on very low costs could be a huge margin as a percent.