Thread: Kindle US Marketshare at 45%, Sony at 30%
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Old 08-21-2009, 11:47 AM   #49
Kali Yuga
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Quote:
Originally Posted by GA Russell View Post
Kali, in my view you're still not appreciating the power Amazon has to negotiate.
Oh? So, why didn't they get better wholesale rates from the start?

Even if they did drop wholesale prices on "introductory" ebooks to $1, if Amazon makes $7 of profit per ebook, with a $300 credit a customer would still need to buy 43 ebooks -- after getting 30 free ebooks -- for Amazon to break even. And there's no way to contractually obligate that customer to buy 43+ ebooks ($430) without ruining the customer experience. This also results in, say, $170-200 or more of lost revenue for the publishers. So, it still doesn't work.

I think you're laboring under the common illusion that ebooks have zero costs for the publishers, which is not the case -- in no small part because most books do not break even, let alone turn a profit, in the first place. I.e. if you have a book in the back catalog that is still $30,000 in the hole, you still need to sell a lot of ebooks with a good wholesale price to break even -- and back catalog is not exactly the Land of High Volume Sales for an individual title. Nowadays, the costs of printing a back catalog title can even be mitigated by POD options. Printing and distributing a book is only 12% or so of the total cost of publishing a title, not 90%.

So it may be in publisher's interests for ebooks to become common (though I suspect it favors retailers, readers and the environment much more than publishers), but the shift to ebooks is not going to reduce the costs of publishing a title nearly as much as most people expect.

You may be right about one thing though, namely that publishers are doing free samples. They're pricing selected ebooks by unknown / low-volume authors at $0.00, on the premise that this will build interest in those authors and drive sales of other books. However they are doing this in a much more targeted and controlled way than indiscriminately slashing wholesale prices, i.e. they can select an author whose work isn't selling much anyway, thus the giveaways are much more cost-effective than, say, losing $7+ of revenue on a bestseller. It is also unclear whether the strategy is effective, especially if it gains wider use.
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