Sometimes it feels like Amazon is trying to make the publishers look ridiculous

Thursday, January 9th, 2020

The 2010s were supposed to bring the ebook revolution, but it never quite arrived:

Instead, at the other end of the decade, ebook sales seem to have stabilized at around 20 percent of total book sales, with print sales making up the remaining 80 percent. “Five or 10 years ago,” says Andrew Albanese, a senior writer at trade magazine Publishers Weekly and the author of The Battle of $9.99, “you would have thought those numbers would have been reversed.”

And in part, Albanese tells Vox in a phone interview, that’s because the digital natives of Gen Z and the millennial generation have very little interest in buying ebooks. “They’re glued to their phones, they love social media, but when it comes to reading a book, they want John Green in print,” he says. The people who are actually buying ebooks? Mostly boomers. “Older readers are glued to their e-readers,” says Albanese. “They don’t have to go to the bookstore. They can make the font bigger. It’s convenient.”

Ebooks aren’t only selling less than everyone predicted they would at the beginning of the decade. They also cost more than everyone predicted they would — and consistently, they cost more than their print equivalents.

[...]

Printing and binding and shipping — the costs that ebooks eliminated — accounted for only two dollars of the cost of a hardcover, publishers argued. So the ebook for a $20 hardcover book should cost no less than $18. And according to publishers, by setting the price of an ebook at $9.99, Amazon was training readers to undervalue books.

[...]

Print books are generally sold under a wholesale model, which works like this: First, the publisher will set a suggested list price for a book; say, $20. Then it will sell the book to resellers and distributors for a discount off that suggested list price. So if Simon & Schuster wants to sell a $20 book to Amazon, Amazon might negotiate a discount of 40 percent for itself and end up paying Simon & Schuster only $12 for that book.

But once Amazon owns the book, it has the right to set whatever price it would like for consumers. The $20 list price that Simon & Schuster set was just a suggestion. Under the wholesale model, Amazon is free to decide to sell the book to readers for as little as a single dollar if it chooses to.

Until 2010, ebooks were sold through the wholesale model too. So if Simon & Schuster was publishing a $20 hardcover, they could choose to set a suggested list price of $18 for the ebook — two dollars less than the hardcover — and then sell that ebook to Amazon at a 40 percent discount for $10.80. And Amazon could, in turn, feel free to sell that ebook for $9.99 and swallow a loss of 81 cents.

[...]

Apple was offering publishers an incentive to root for it over Amazon. With its App Store, Apple had established a resale model that worked differently from the wholesale model publishers were used to. It was called the agency model, and it worked like this: publishers would decide on what the list price for their book should be, and then put it up for sale at that price in the iBooks store. Apple would take a 30 percent commission on every sale.

Apple wasn’t willing to sell ebooks for $18, but it thought a cap of $14.99 was perfectly reasonable. And if publishers decided to go along with Apple’s plan, they could set a list price of $14.99 for an ebook and be sure that no one in the iBooks store would ever discount it without the publisher’s express permission. Apple, meanwhile, would pocket $4.50 from each sale.

But Apple couldn’t enter the ebook market while charging consumers five dollars more per unit than its biggest competitor was. It needed some assurance that no one would have a cheaper product than it had. So it made a deal with five of the Big Six publishers (Simon & Schuster, Penguin, HarperCollins, Hachette, and Macmillan; Random House, then the biggest trade publishing house, abstained): They could all sign on to Apple’s agency model, as long as they guaranteed that they’d also use that same agency model with every other retailer they worked with. That way, Amazon, too, would be forced to sell its ebooks for $14.99 — and if it refused, publishers could withhold their ebooks from Amazon and make them exclusive to Apple.

[...]

“Amazon can still discount whatever they like on the print side,” explains Jane Friedman, a publishing consultant and the author of The Business of Being a Writer. On the ebook side, however, Amazon now lists publisher-mandated prices, often with the petulant italic addition “Price set by seller.” “So the market is very weird, and often the ebook costs more than the print,” Friedman says. “Sometimes it feels like Amazon is trying to make the publishers look ridiculous.”

Comments

  1. Harry Jones says:

    There are a lot of ebooks listing at $2.99. These are not available in print. They seem to be the literary equivalent of straight-to-DVD.

    I have a feeling this is where the real action is. The long tail.

  2. David Foster says:

    “So it made a deal with five of the Big Six publishers (Simon & Schuster, Penguin, HarperCollins, Hachette, and Macmillan; Random House, then the biggest trade publishing house, abstained): They could all sign on to Apple’s agency model, as long as they guaranteed that they’d also use that same agency model with every other retailer they worked with. That way, Amazon, too, would be forced to sell its ebooks for $14.99 — and if it refused, publishers could withhold their ebooks from Amazon and make them exclusive to Apple.”

    If this isn’t an illegal conspiracy in restraint of trade, it certainly gets very close to the edge of being one.

  3. Freddo says:

    David, if you follow the link it explains Apple and the publishers were given a slap on the wrist.

    At this point they could probably do with another one.

Leave a Reply