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Originally Posted by lotrfan
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Not sure I can agree with this. Publishers normally price a new hardback book anywhere from $20 to $30 yet Amazon and others have been able to sell them for much lower and I am sure that still at a profit for them otherwise they would be out of business. While I don’t know the process, logic dictates that a book retailer has to pay the publishing company a fixed amount per book regardless of the selling price ie if the publishing company wants $5 profit per book Amazon has to pay them that amount regardless if they sell the book for only $5. If so why would the publishing company lose money on a ebook vs a hardback book?
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Hardcovers on sale are usually loss leaders to get people looking at the store for other stuff while they are there.
Places like amazon have lower staff and lease costs for their locations (just the warehouses), where the MSRP is set to provide a buffer for physical retailers to be able to pay for the costs of operating the store and paying the staff that work there. Which also encourages them to lower their prices below MSRP to drum up business because of the lower overhead they pay for their business model.
Right now, ebooks follow a similar model of wholesale pricing with a buffer in the MSRP for the retailer. The catch is that Amazon and the like have used this to go back into loss leader mode on bestsellers. If the publishers try to go for a percentage cut instead of the flat price, then their revenue actually DROPS versus the wholesale model when Amazon and B&N go into price war mode and keep selling the books for 10$ or less. But the percentage cut winds up being more fair to the smaller sellers in the long run.
It's not a simple math problem.