Tuesday, June 12, 2012

The Future of Publishing - Part 4

June 12, 2012
About the Justice Department’s decision on Amazon and the case of publisher price fixing:

How can any publisher claim that Amazon is pricing eBooks at a loss when for DECADES paperbacks have been profitably sold at about $8.99 or less? A paperback requires everything an eBook requires in pre-sales and production, BUT paperbacks also require additional costs, including paper, printing, trucking, and distribution costs, making the break-even for an $8.99 paperback about $4.00. And, at that sales price and breakeven, they sell paperbacks profitably and give the authors about $0.28 to $0.63.  Do literary agents or authors complain that this price is too low?

On the other hand, selling an eBook, which requires none of the above except the distributors’ cut (and, if an eBook is sold at less than $10.00, Amazon gives the publisher 70% or $6.99 to divvy up, there’s an additional $2.00 beyond the $4.00 breakeven for a paperback.

So, as I read this, the publishers are complaining that Amazon is only giving them about $2.00 more than they would for selling a paperback.

The publishers are full of crap on this one. For another thing, lower prices increase sales (as traditional economics states, there is a lower intersection of supply and demand). So the publishers are actually stating that they want eBooks to sell fewer units. That’s crazy and it also implies that print publishers are actually using the higher price of eBooks to support their declining paper sales. If that’s so, then no one can deny that the print publishers are engages in price fixing, by setting prices for eBooks so that each and every eBook sold subsidizes the depreciation of the print factories owned by the largest print publishers.

The justice department is right going after the print publishers for their despicable behavior. But when they’ve done that, they need to ensure that Amazon and Barnes and Noble remain competitive so there is no monopoly in any format of (e)book sales.