Quote:
Originally Posted by ottdmk
What I'm really curious is this: What's in the deal that "creates a financial incentive for Simon & Schuster to deliver lower prices for readers"?
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If you check out the Howey column linked above you'll see one (likely) possibility: sliding-scale terms.
As in: Amazon gets a 30% cut at $10, 33% at $12, 40% at $15, 50% at higher, with the nominal "agency price" at $10. So going to $12 gives the publisher only half the increase and going to $15 gives them only 40%. Higher than $15 and they'd be making less per unit than at $12 and losing volume unless it's a jackpot seller.
Limit Amazon to 15%-20% discounts unless they're price matching (at shared expense) and you have a deal like you had last year with S&S bestsellers generally selling for $8-$12, instead of $12-15. S&S sets their price range and Amazon keeps their power to discount. If S&S wants to protect pbooks at ebook expense, they have to give Amazon pbook-like margins (40-50%) and deal with lower revenue--set them lower and Amazon gets a lower cut but higher volume. (Tweak the numbers a notch or three either way and you get a deal both sides can live with.)
It's very similar to what Amazon gives Indies: they take a 30% cut between $2.99-$9.99 but 50% above that to make up for the (expected) drastically lower sales volume.