[Kali Yuga]

Originally Posted by mcl

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.

Perhaps you're forgetting this little thing known as "inflation?" Costs on goods like books and other media content actually tend to go up, not down. It's really only electronic devices that swiftly and routinely decline in value. Ironically enough, the publishers are trying to maintain a similar pricing model to electronics -- charge high prices at first to defray costs and exploit the initial high demand, then reduce prices once those costs are covered and/or to increase demand.

A set $10 price is not necessarily a bad thing, but it seriously curtails the ability to stimulate demand by lowering prices.

Originally Posted by mcl

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....

If a publisher can't break even on most titles with high-margin tactics like stratified cost structures, I don't see why they are likely to embrace a flat price with little or no room to lower prices to stimulate demand.

Besides, you're missing the point that this whole brouhaha is about the future, not current contingencies.

Originally Posted by mcl

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.

If you're expecting publishers to lay down and get run over by a middle-man reseller, well... that's just too bad.

Originally Posted by mcl

The market is changing, and publishers need to adapt, or die.... The advancement of technology is inexorable; they may delay the inevitable, but it WILL come, and they MUST change, margins be damned.

They will need to change. But I see no particular reason why the only acceptable price for a brand-new ebook absolutely must be $10, or why dynamic pricing won't work -- especially since it seems to work reasonably well in other content industries (e.g. video games). Nor do I see why publishers have absolutely no choice but to give up, eviscerate their margins and fork over influence to whatever reseller happens to be selling the most books on a given day. Instead they've gotten extremely lucky and may have found a different way to adapt, largely because one major player is currently willing to give the publishers what they want in exchange for title availability.

Originally Posted by mcl

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.

I'm merely pointing out that the publishers have a valid reason to stick to their guns in order to try and protect their margins. In fact, the publishers might be more willing to put out ebooks in a timely fashion, if they believe it won't decimate their profits.

And in contrast, your argument is that the publishers should just accept the retailer's attempt to crater the value of their product, regardless of the consequences to their ability to conduct business? Sweet.

Originally Posted by mcl

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.

In case you missed it, publishing has notoriously thin margins. And no one in their right mind likes to leave money on the table, or have the value of their product cut by 60% or more, especially when their costs are only falling by 15% or so.

By the way, if your boss said "you can take a 50% pay cut or we'll outsource your job to India, and I know you can afford it because you just moved into a cheaper apartment so your cost of living is lower," I doubt that you would give him a cheery smile and thank him for his consideration. (Or if you did, you'd email out 50 resumes and/or pour sugar into his gas tank by the end of the week. )

Originally Posted by mcl

One nice thing about a digital economy is that as value declines, volume increases. So one offsets the other.

Lower prices can result in higher volume... only if, as I mentioned, the consumers plow their savings back into ebooks. But that is hardly a foregone conclusion, especially given the extensive competition for various types of content and the time it takes for someone to read.

Again: if I consistently spend $20/month on ebooks, I may wind up getting two ebooks a month instead of one hardcover. Perhaps the net profit is the same, but perhaps not -- e.g. a $20 hardcover may have better margins than two $10 ebooks. Or, if I consistently read 1 book a month (instead of following a budget), then the money I saved very well might go somewhere else. In which case, the diversified retailer is significantly more likely to recapture those dollars than an individual publisher.

Originally Posted by mcl

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)?

Amazon most certainly isn't on "our" side, they are on their own side. I do think they want to promote ebooks for reasons beyond mere profits or market dominance; but I also believe that publishers also care about a lot about books, probably more than they do about profits. (If you're greedy, the book business is definitely the wrong industry for you -- as any investment banker's asset portfolio can clearly demonstrate.)

And I've explicitly stated that I have not chosen a side, only that I view both Amazon and Macmillan as having valid reasons for their actions.