Quote:
Originally Posted by Sil_liS
But this still wouldn't preserve their hardcover profits. People wanting lower prices can get the book used, or in paperback form, or from the library. Paying extra for the hardcover is good for those who specifically want the hardcover or they want any paper version but don't want to wait for cheaper alternatives.
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You have to understand that the publishers weren't worried about Amazon undercutting mass market paperback (MMPB) prices. The ebook price when there was a paperback edition available was typically no more than 10% off, if that, because the ebook price was already under $10, which was what Amazon was setting as a soft high price for ebooks. Amazon wasn't even discounting all $10+ ebooks, mostly just best sellers as loss leaders, which is also the practice in hardcovers.
What the publishers were concerned about is that NYT bestsellers in hardcover were already in the $20-25 range, and often discounted to about $15 or so. When Amazon was selling the bestsellers in ebook for $10, nearly as soon as the book was released, the publishers were afraid that the consumers would stop buying hardcovers, switch to ebooks, and demand that ebooks be priced at no higher than $10 (i.e., close to MMPB prices). Since a couple of breakout hardcover bestsellers (or some from bestseller authors) typically pay not only for themselves, but also subsidize most of the rest of the books they publish, a transition from hardcover to $10 ebooks would kill their primary profit center.
With Amazon selling 90% of the ebooks, they were afraid that Amazon would push them to sell all new ebooks for $10 or less even when just released, and with such a price differential between hardcover and ebook, switch to ebook. With Apple entering the marketplace, and Apple making agreements with the publishers to enter into agency pricing (with Apple getting their 30%) with the proviso that if Apple's prices were undercut by a competitor, the publishers would drop the price at Apple. Apple would still profit even if Amazon sold a loss leader best seller for a couple dollars under cost. Also, with Apple in place with a 20%-30% market share, it would be much harder for Amazon to say to the publishers, "You're pricing this ebook too high, you need to sell it to me for $X" where X is substantially less than 50% of the hardcover price.
I don't think anyone ever claimed Amazon was forcing the publishers to sell them ebooks for less, but clearly the fear was that they had the clout to do so. The precedent for that is that even though Wal-Mart does not have a monopoly, it often has enough clout to dictate prices to its suppliers.