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What was missing from the print book market for a long time was competition between publishers.. The BPH oligopoly had a stranglehold on everything, and the industry operated to their benefit. Both Authors and Consumers were, at least in my opinion, ruthlessly exploited. Where there is no competition the market does not work very well in setting prices. Whilst prices need not be inflated that will often be the result. Rational players will collect extensive data and experiment with price so as to find the optimum price point where overall profit as opposed to per unit profits are maximised. A complacent industry without effective competition may well be satisfied with less than optimal pricing and feel no need to experiment or change the status quo. When Amazon decided that the optimum price for a newly released BPH ebook was about $9.99 this was perceived as a grave threat to the status quo, despite Amazon effectively subsidising the difference and thereby enriching the BPH. And of course, in determining optimum price, the BPH needed to consider not only the effect on EBooks but on PBooks, a consideration that I imagine was not of great concern to Amazon.
But the situation now has produced competition, despite agency pricing. Indie/Self-Published books sell at much lower prices, and efforts are made to optimise those prices. However, I suspect that these lower prices cannot sustain a tradiional publishing business model with all of its associated inefficiencies. Yet traditionally published books must compete with Indies. Under agency publishers essentially attempted to differentiate the market for their books based on alleged better quality because of their gate-keeping. This has not been the catastrophe tat it could have been, because there are a not insignificant number of readers who perceive value in this gatekeeping role and/or the higher prices. However, indications seem to be that the BPH are continuing to lose market share, and will ultimately have to face up to this and drop their prices.
The issue is not agency. It is the huge disparity between supply and demand and its effects on price. Whether an agency or a wholesaling model is used, the lower prices will need to be funded largely by the Publishers and not by Amazon. If the BPH cling to their higher prices I don't think they will collapse tomorrow. But I do expect that they will continue to haemorrhage market share pretty well indefinitely until they do adapt with lower prices or become irrelevant.
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