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Originally Posted by leebase
Oh, the old "Loss Leaders" gambit. When you take the entire New York Times best seller list, and put in on fire sale, every day, all the time....that's not merely a "loss leader like milk".
You are taking aim at the heart of the publisher's profits. Selling for $10 what the publishers have priced at $25/30 and which normal retailers would sell for $20ish.
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Nonsense. It doesn't hurt the publisher's profits at all. In fact, they make more if Amazon sells more. It helps them, financially, anyway.
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This pricing disparity was SO GREAT...that you could justify paying $400 for the original kindle just on the cost savings alone.
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Sure, buy 80 bestellers - $800 - and you've broken even. That's not a super deal.
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So...Amazon was using it's ability to sustain losses to attack the very profitability of the publisher's who's books it was selling. As Amazon was also the 800lb gorilla in the paper book selling business, the publishers were hand cuffed.
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Again, they didn't attack the publisher's profitability at all. The publishers make the same regardless of whether Amazon sold the book for $10, $15, or $20.
What Amazon was doing with the $10 pricing was *creating* a mainstream e-book market. Something that didn't exist before. And something that would - and has - helped the publishers.
Amazon had 14% of the market at the time. They were important, but not more so than other big sellers. And to the extent that the publishers were handcuffed, it was because Amazon was making so much money for them.
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Along comes Apple and the possibility of a credible alternative to Amazon for the publishers. THEN FINALLY, the publishers were able to bring Amazon to the bargaining table. Amazon had a choice....stop the crazy low pricing....accept time windowing for ebooks....or become an agent seller instead of a retailer of ebooks.
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This is pretty much true.
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All of those choices basically removed the publisher's highly profitable hard back business from having to compete with THEIR OWN product. Just like publishers never release the paper back version until the hard back has had it's run. Nothing new here.
Amazon chose to go the agency seller route as it was the best of the three options. Amazon certainly couldn't allow Apple to have the best sellers months before it did (the time window solution).
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Yes, that was the only option. Everyone thought at the time that Apple was going to dominate the e-book market
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Well...as Amazon had already bought themselves a near monopoly....not much was going to change that.
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Amazon created a mainstream consumer market where there was none before. So, yeah, they dominated it.
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At least, though, there is not a CLEAR and OVERWHELMING price advantage to buy an ebook over a hard back book. And thus, we saw the price of the Kindle device drop like a stone. No longer could it sustain even the $250 price point it had reached by the time of the agency agreement.
Lee
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The kindle dropped like a stone because of competition from other e-readers. Other e-readers were cheap because the technology matured and the popularity of e-ink readers led to massive economies of scale.
Most of your post has been about publishers and Amazon. But you left out the consumers, who were the people really screwed by agency pricing.