Friday, July 30, 2010

Economic Greed or Strategic Conspiracy?

There have been numerous discussions regarding the correct price of ebooks, including on this blog (internal link). While Amazon has allowed publishers and authors to lower the price of their books, they have resisted allowing them to raise the price above $9.99.

This has generally been seen as a commitment to market penetration (helping the reader to become used to purchasing ebooks through offering an attractive price). The question is: why are so many publishers resisting?

The publishers, McMillan, recently confronted Amazon's policy and told the online giants that they planned to sell their ebooks at a higher price. They wanted to maintain the right to set the price of the book, allowing the retailer (Amazon, Nook, iPad etc.) to set their own commission percentage.

Amazon refused to accept this and actually pulled the "buy now" buttons from the pages of McMillan books (both their ebooks and tree books). While a compromise was quickly reached, the impact of Apple's iPad and their willingness to accept the agency model that McMillan and other publishers prefer, has led to an erosion of Amazon's ability to control the price of ebooks.

What puzzles me is why are publishers (and many authors) preferring to raise the price of ebooks especially given that the market is still in its nascent strange? True, they will make more money per copy, but surely they realize that they are going to sell considerably less copies.

Many authors (non A-list) are discovering that once their ebook price drops to less than $5, or even $3, given that Amazon are now offering an unprecedented 70% royalty, their sales become far more prolific. Sales of Oilspill dotcom grew when I reduced the ebook price to $4.99, and Amazon have since dropped it periodically to as low as $3.17.

Given that one assumes the publishing houses have economists with strategic experience, is their decision to raise the price above $10 simply short-term greed, or is it a subtle strategic decision to try and slow the growth of the ebook market.

I doubt I would have thought this a few years ago, but given the recklessness of financial institutions, housing and energy multinationals, doesn't it make you wonder?


Oilspill dotcom is available on Amazon's Kindle for the price of a large, fancy cup of coffee. Be warned: the coffee gets cold before you finish the first third of the book!

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