In the comment section, Mike Shatzkin (well known publishing consultant) wrote this:
http://www.idealog.com/blog/hats-off-to-amazon/
Quote:
1. According to my understanding, Amazon *always* "made money" (as in "made margin") on the content. I was told by am Amazon executive before agency that 4% of the titles were discounted below cost and they constituted 25% of the sales. The margin made on the other 75% of the sales more than compensated for the "losses". That's what they said and I don't disbelieve them.
3. There is already a stipulated (but impossible to enforce) "cap" on the margin a retailer can give away; they're not allowed (theoretically) to lose money on the whole body of ebooks they sell from any particular publisher over the course of a year.
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