Quote:
Originally Posted by binaryhermit
Also, aren't KDP-published books generally sold under the agency model when sold in ebook form, yet they're generally significantly cheaper than their dead tree counterparts?
EDIT: I also suspect that the move to agency allowed Amazon to profit on ebooks, which let them sell kindles near cost whereas they used to almost have to have the kindles subsidize the books they often sold at a loss?
|
To the first: Amazon's original KDP terms were a 50-50 split between them and Indies. They switched to 30-70 in november 2009 when their stool pigeons inside the conspiracy warned them of the Apple terms. At that time Indie ebooks were a very small part of the nascent Kindle business. The Agency pricing then triggered a gold rush of authors dusting off their reverted backlst. Especially in romance where Harlequin's policy of reversion-on-request lasted until they were sold off. Once reports of writers making more in one month of ebook sales than in the book's entire pbook run surfaced, it was off to the races. Other genre writers followed suit.
To the second: yes and no. Near-cost ereader pricing was indeed another of the indirect results of the conspiracy but it wasn't Amazon's idea: it was B&N that triggered it, thinking somehow they could undercut Amazon's Kindle 2 when their reader cost more to build.
https://www.manufacturing.net/indust...uts-nook-price
https://www.fastcompany.com/1662394/...-nook-and-ipad
It is easy to forget that Amazon's immediate response was to drop prices and undercut tbe Nook reader price...with refurbs and ads. It took them months, until the K3 came out, to actually undercut Nook at $149. And that was with their near-exclusive Pearl screens. *That* was the turning point for Kindle.
Before the agency-inspired B&N price cut, Nook had gone from zero to a quarter of the market and Amazon had gone from 90% of a tiny market (tens of thousands of units of the K1) to 55% of a much bigger market. When K3 came out they started selling by the million.
So yes, Agency fostered both Indies and cheap ereaders, as well as walled gardens and the marginalization of interoperability as a selling point. The latter ended up *helping* amazon and hurting buyers.
Two added points:
First, the Kindle ads got Amazon's foot in the door of ad sales, which has beome a multibillion dollar business for them across readers, tablets, video, and online. And rapidly growing to the point it now outstrips the book side. Law of unintended consequences at work.
Second, Amazon has *never* lost money on ebook sales. DOJ said it. And so do teardown analyses of tbe various Kindles. Fully documented. The first Kindles sold at 40-55% markups which was the going rate set by Sony. When B&N switched to near cost, the Kindle 2 was at $259 and with hours moved to $199 which was still $10-30 above build cost calculated by teardowns. Even today, Kindle prices follow Kobo, usually higher without ads. Essentially, they're back to market pricing and with 30-40% markups on the sales.
When Amazon first hit $99 the teardown cost came in at...$96. Just enough to stay clear of the law, which Amazon's book side has been scrupulously obeying to the letter.
The myth of Amazon selling books below cost comes from two misunderstandings propagated by bookstores: the first is that Amazon gets their books direct from the publishers so their price only reflects the profit margin of the publisher and Amazon (no middleman distributor, aka, Ingram, adding their profit) and *publishers'* volume discount policies. So yes, Amazon often sells books below the cost on physical booksellers...but not below *their* costs. The second is a misunderstanding of basket pricing and loss leader sales, which is a standard and totally legal traffic generator practice. Losses in the sale of one book leading to increased sales of another. The perfect example are the FIRST READS, Prime monthly titles, where each nominally free to the reader book (PRIME actually pays for those books) generate added consumer sales for those books as well as others. In basket sales, one unit sold cheap or nominally free, generates further full price sales (think BOGO deals) that generate a net profit. Lots of retailers all over do it.
The thing is Amazon has a big footprint and they think outside the standard retail box. The best example being the PEARL screen limited exclusive. They had almost a year as the only source of those (ahem) clearly superior eink screens. They got that by helping finance the factory that made them via an upfront payment to eInk. eInk got their new product line to market sooner, Amazon and Sony, got first dibs. Sony underestimated tge market and sold out right away but Amazon rrad it correctly. So while others were sellibg 30,000 units a year and bragging of it, Amazon was quietly selling 4-5 million a year.
With their size and volume discounts they don't need to sell below cost to undercut most competitors. They don't go out of their way to prove it because "Amazon sells below cost!" ) is great marketing. Useful.
Wity enemies like these Amazon barely needs friends.