Weeelp, *sticks thumbs in braces* I'm not no big-city lawyer, but it seems to me that kinda sucks. I mean, if the price for ebooks bobs down to the level Amazon seems to want in order to sell lots of Kindles, then we just lose the ability to actually publish ebooks.
Yes. Exactly.
Look, Amazon doesn't have any business telling publishers how to price their books when they sell to Amazon or other distributors, wholesalers, or retailers. Amazon is distributing and retailing commerically published ebooks that do not cost Amazon
anything to make.
So with what is a tiny infrastructure investment in servers that are already part of Amazon's expense sheets, a small investment compared to what a single publisher invests in a year in producing ebooks that are day-and-date release of printed books, Amazon has a larger potential profit, because their costs are lower.
From a publisher's point of view the ebook doesn't cost all that much less to make compared to a printed book. The advance and production costs are identical up to the fork for ebook production. On a book by book basis, affected in part by numbers printed, size, and binding, the price differential falls somewhere between 1 to maybe 3 dollars.
Compare a printed book retailer with substantial space costs, employee costs, etc. to Amazon's costs to sell an equivalent number of books. It takes more space and more people to sell say 5000 unique titles with 1 to 15 copies per title, than the same number and titles as ebooks. Those 5000 titles will fit on a single server, and you only need one person or less to deal with it, in terms of support/Customer service/inventory etc.
So Amazon's overhead is much less than the publisher's or a retailers. They don't care if the price is unrealistically low in terms of cost of production and likely sales. Amazon will make it up on quantity.
But it would take a much much large quantity for the publisher to make a profit.
But by making themselves both the cheapest and the largest inventory, Amazon has a great deal of influence on the market--hence their gorilla tactics of removing publishers and distributors who do not fall in line.
Honestly, I think Amazon not the publishers or Apple needs to be looked at.
The agency model is better for authors too; authors need to be paid based on the cover price, ideally, but often they are paid based on what the publisher actually receives. There's a reason authors and agnets are cautious about contracts which pay royalties based on net; net can be creatively defined, and often is.
Conventionally, a publisher has a wholesale price; this is affected by things like how many books a bookstore or distributor buys.
The bookstore then determines what price they wish to sell the books at; it may be cover price, but it often is less.
Amazon is telling publishers you will sell us this book at a price which we have chosen irrespective of what the book's actual P&L suggests the price for this book to a wholesaler/distributor/bookseller should be.
I'd argue that Amazon is attempting price fixing, and a monopoly.
Note by the way that authors will not fare all that well under Amazon's plan.
