I'm not sure your figures are correct. My understanding is that royalties are based off of the cover price, not whatever discount the retailer sells at (though afaik that depends on the specific wording of the contract).
More importantly, I suspect the reality is far more complicated, and difficult to predict without access to far more information.
For example, royalty rates aren't static; they alter depending on the type of book sold (e.g. 25% hardcover, 20% trade paper, 15% mass market), and also with the number of copies sold. Royalties also kick in after the advance is recouped, which doesn't happen for a lot of books. Further, in the short term the agency model is in part about ensuring that ebooks don't eviscerate hardcover sales, which will also influence the eventual royalty rates.
And while so far it seems that Amazon has the wherewithal to lose money on ebook sales, especially while sales numbers are relatively low, that won't last forever. The theory is they will eventually try to force publishers to slash wholesale prices. In which case, one possible scenario is:
Current
$25.00 cover price
$12.00 wholesale price
$10.00 reseller's price
$5 royalty
Future, Same System
$15 cover price
$7.50 wholesale price
$10.00 reseller's price
$3 royalty
Agency Pricing
$15 cover and reseller price
$10.50 publisher's cut
$4.50 retailer's cut
$3 royalty
Again, this is still over-simplified, and there are numerous other factors that are too complicated to evaluate without in-depth information on continuing paper/hardcover sales, overall sales figures, contracts and other contingencies. So the actual effect on author's incomes is extremely difficult to evaluate.
Quote:
Originally Posted by Daithi
Looking at the figures I really wonder if other publishers will adopt the agent model.
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The other 5 major publishers already have, with Apple. It's possible they are already pushing retailers towards the agency model, though they may wait to see how the Apple deal works out first.
Quote:
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Originally Posted by Daithi
I think Amazon is making a huge mistake for which they are starting to pay for now.
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That was quick.
I don't think anyone knows for sure what will happen. It's possible Amazon may be able to hold onto their current agreements, undercut Apple on price, and still generate enough revenues that the publishers accept the new price point. The $10 price point may already be established, so consumers may react negatively to a $15 price point on new books (even if the price drops after 3-6 months). Amazon may look for more subtle ways to "punish" Macmillan. Other publishers could delay non-agency ebooks. Apple could do a good business even with a premium price.
No one knows which model will work best, but this is the time to experiment, while the ebook market is still small.