Dr Plokta (drplokta) wrote,
Dr Plokta

A Plague on Both Their Houses

As far as I can tell from all the noise and confusion, Amazon and Macmillan both suck, but Amazon sucks more than Macmillan does.

In my view, the "fair" approach to ebook pricing at present goes like this (all prices in US$, since that's where the current problem lies). Wholesale prices for the ebook and hardback edition of the same book should be pretty much the same -- printing costs a dollar or two per unit, but ebooks have some additional production overheads that are currently spread over fairly low volumes. The publisher and author will then make the same amount of money whichever version they sell, and shouldn't care about ebook sales "cannibalising" their hardback sales (Macmillan lose points here, since they apparently do care for some reason). Over time, as ebooks become more widespread, their wholesale price should come down to two or three dollars less than the hardback, since their production costs will be spread over more copies and the hardback's will be spread over fewer -- that will probably happen by pushing up the hardback price rather than reducing the wholesale price.

(This is complicated by the fact that we're currently comparing a rental price for the ebook with a purchase price for the hardback, since Macmillan insist on DRM -- let's assume for the time being that they will eventually come to their senses and we can compare apples with apples.)

The retail price for ebooks should be much lower than for hardbacks, since the distribution channel takes about 60% of the (rather nominal) cover price for a hardback, and should be taking 10% at most for an ebook. Amazon would rather keep getting 60% (or 20%-30% once they've discounted below the cover price), and thus quite rightly see ebooks as a threat to their profitability. But they can't win in the long run, so they lose lots of points for trying to defend an untenable position so aggressively.

Macmillan, however, lose some more points for trying to set the retail price for their ebooks rather than the wholesale price (which is illegal in many jurisdictions), and for practically begging their ebook distributors to screw them over by using DRM and restricting who can sell their ebooks.

So what we should see is new release hardbacks and ebooks sold for a wholesale price of somewhere around $10, which then translates to a cover price of $25 for the hardback, with a discounted retail price of around $15-$17, and around $11 retail price for the ebook. Amazon's profit is thus $5-$7 for the hardback, and $1 for the ebook.

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