[mcl]

Originally Posted by Kali Yuga

Retailer's costs are part of the package, and that's going to figure into whether or not a specific price is sustainable. As to just the publishers, of course ebooks will increase the IT infrastructure costs. But my primary points are that 1) ebooks are not 60% cheaper to make and sell than paper books, and 2) price does not, nor should it have to be, inextricably set at, say, 5% above the cost to produce the item.

Yes, retailers' costs are part of the package. And Amazon's $9.99 pricing was not sustainable over the long term. But Amazon was gambling (right or wrong) that eventually their costs would come down, making the price sustainable. Whether that was due to wholesale prices decreasing or other costs decreasing is anyone's guess.

Wait, it's irrelevant that publishers don't make money on most of their titles to begin with? Or that their margins could be destroyed by ebooks?

No, the retail price, and how many copies are sold at that price, is irrelevant in a non-agency model because the publisher makes their money from wholesalers, not retailers. Retailers do not buy directly from the publisher. As for margins, Macmillan had no decreasing margins for ebooks; Amazon was paying 50% of hardcover price, just as always. In fact, Macmillan lowered the monies paid to authors by 5%, INCREASING their margins (on top of the existing increase they saw with ebooks as a whole, due to the lack of printing, warehousing, distribution, and returns).

If you're referring to the publisher's fear that ebooks would destroy their margins across the board due to decreasing physical book sales, well...that's just too bad. Expecting ebook purchasers to prop up their margins on dead tree media is just a stupid business move. Would you pay $4 per MP3 just to preserve the margins on CDs? No. Neither would I. It's an idiotic business decision, and one that's insulting to the consumer. The market is changing, and publishers need to adapt, or die. The MPAA is learning this. The RIAA is still struggling with this but will ultimately have to adapt. The print publishing industry needs to learn it now. The advancement of technology is inexorable; they may delay the inevitable, but it WILL come, and they MUST change, margins be damned.

The common assumption is that Amazon (and other retailers) were going to pressure publishers to lower the wholesale cost.

So? That's ALWAYS an assumption in business: Producers are going to attempt to charge as much as they can get away with, and the rest of the retail chain is going to look for cost efficiencies wherever they can be had. That includes a constant downward pressure on the supply cost.

So your argument is that, because the wholesale cost might go down, the publisher should just force retailers to accept the retail price the publisher demands. That's specious, because the publisher already controls wholesale cost. The only difference between now and an agency model is who gets to balk at the price. Now, it's the retailers. Under an agency model, it's the consumers.

Know why Macmillan wants the agency model? Because the consumers have less leverage than the retailers. In short, it's easier for them to walk all over us, than it is for them to walk all over retailers.

Why would you willingly want to surrender what little power remains on our side (if one can paint Amazon as having been on our side)?

In addition, publishers are facing the erosion of the value (perceived and actual) of their product. In the short term this will lead to a cannibalization of higher-margin hardcover sales (you don't really think it costs 3x as much to make a hardcover as it does a paperback, do you?). In the long term it could lock them into an unsustainable price for years, regardless of the effects of inflation for example.

It's the cost of doing business. The wonderful thing about business is that it evolves, even though some overfed bureaucrat in Manhattan may fight tooth and nail to see that it doesn't. So their margins decrease for several years? So what? They're not going to go out of business, and they're not going to suffer any great hardship by making slightly less profit. They don't have R&D costs. There's no need for significant reinvestment of capital back into the company from profits taken.

As for declining value, that's always going to happen. It's the nature of the beast. Value declines. Get over it. One nice thing about a digital economy is that as value declines, volume increases. So one offsets the other.