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Be careful what you wish for.
When Apple introduced the iPad last month, it said several major publishers were on board to sell e-books.
Steve Jobs also talked about how publishers hated Amazon’s habit of selling ebooks at the relatively low price of $9.99. Publishers had thus rejoiced at the arrival of Apple, which they viewed as a white knight.
Apple’s ebook terms were supposed to be according to the agency model, where book publishers set the price and receive a straight 70% of revenue. This would allow publishers to set high prices for ebooks and no longer worry about ebooks cannibalising print-book sales.
However, according to a story last week by New York Times, Apple is now twisting the screws–offering publishers the agency model but also insisting that bestsellers be sold at the lower prices long complained about on Amazon.
Here is an excerpt:
“Apple inserted provisions requiring publishers to discount e-book prices on best sellers — so that $12.99-to-$14.99 range was merely a ceiling; prices for some titles could be lower, even as low as Amazon’s $9.99.
Essentially, Apple wants the flexibility to offer lower prices for the hottest books, those on one of the New York Times best-seller lists, which are heavily discounted in bookstores and on rival retail sites. So, for example, a book that started at $14.99 would drop to $12.99 or less once it hit the best-seller lists.”
- This is bad for publishers since they will make less money than they currently do on Amazon and won’t be able to sustain dying print sales by inflating the prices of e-books.
- This would be good for Apple since it would remain competitive with Amazon on price at least with regard to newer releases.
- In some respect this is bad for Amazon since it loses competitive pricing power over Apple on some of its books.
- On the other hand, Apple’s plan sounds a lot like Amazon’s 70% royalty option it announced about a month ago. As a result, if Apple convinces publishers to adopt its plan, Amazon could have an easier time getting publishers to accept its model (and its associated pricing restrictions) or lower wholesale prices on e-books so that the company can make money selling them.
But, bottom line, it means Apple is doing exactly what we expected it to do: Rush to town and get covered in white-knight glory, while sowing the seeds to do exactly what it has done with iTunes — take control of pricing and distribution.
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