[DMcCunney]

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?

It's not that simple.

Agency pricing is about protecting the hardcover best seller. Those are the crown jewels of publishing. Those are where they get the highest revenue and make the most profit.

Amazon is the retailer. They get a cut of the sale. They make out regardless. The publisher is a different story. Amazon gets books from publishers and resells them. They give the publisher a contractually agreed upon cut of the sale.

How much do you think the publisher gets from Amazon from the sale of a $25 - $30 hardcover? How much do you think they get for the sale of a $9.99 Kindle edition? How much less total revenue do you think they get on a hardcover best seller if a large number of buyers decide to buy the cheaper ebook version?

The answer to the last question is "enough to cause them to take drastic action and impose agency pricing." The hardcover best sellers may be the difference between whether a publisher makes or loses money in any particular year. Most books at best break even, and many don't do that. The publisher is betting enough books will do well to cover the losses on the ones that don't.

There are reasons why mass market paperback editions don't hit the stands till a year after the hardback, to give the hardback time to sell. The same reasons will affect the pricing and/or release timing of ebook editions.

For the publishers, this is about survival.

So Publishing company X suggests a price of $25 and wants $5 of revenue per book. Amazon sells it for $20 (still making a profit for them even having a bigger discount than $5) and gives the publisher its $5.

The publisher gets more than $5. The wholesale price will vary by publisher and contract, but the publisher's cut of the sale is likely to be in the area of 40% of the cover price.

Now same scenario with ebook. Because of savings associated with eBooks let’s say its suggested price is now $20 yet Amazon sells it for $15 (still for a profit). The publisher still gets its $5 per book.

Nope. Read on.

From a different POV if the printing costs are 10% of retail value (per publishers comments) and we assume another 10% for storage and distribution costs then we still have a cost savings of that about $5 to $6 per book.
This doesn’t include the cost associated with the return of books to the publisher which are none for ebooks but can be substantial for physical books.
What doesn’t make sense is to be able to buy a hardback book for $15 and pay $14 for the ebook.

It makes perfect sense. A friend of mine who is an editor for a major house estimated printing, binding, warehousing, and distribution accounted for about 10% of the total budget of the average book. I think his estimate is low, but he sees the numbers and I don't, and he has no reason to lie about it. Even if he's off by 100%, the savings in not having a physical book is far less than what a lot of folks would like to believe, and won't permit the sort of pricing folks would like.

Yes. But this should be automatic ie when they get the paperbacks then the ebooks should drop accordingly (cheaper than paperbacks BTW).

The problem is what will automate it.
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Dennis