The Wall Street Journal reports today in a front page story about the growing prices of electronic books.
Turns out, the six biggest publishers have decided to set their own consumer e-book prices, rather than letting retailers like Amazon and Barnes & Noble decide on the price. As such, e-books which used to cost far less than print book versions, now often cost about the same and sometimes more than print books.
Here’s the kicker, from the story:
Ironically, though, publishers make less money with the arrangement…Under the old book arrangement, major publishers charged the same wholesale price for e-books as they received for hardcovers. For a new novel priced at $25, for example, they received $12.50 for the e-book and $12.50 for the hardcover. When Amazon.com discounted the e-book at $9.99, Amazon took the loss.
But under the new pricing model, a $25 hardcover is often priced at $12.99 for the e-book. And because publishers receive 70% of the e-book retail price—while retailers retain 30%—that means publishers receive only $9.09. Publishers were willing to accept the lower profits because they felt the new arrangement preserved the value of books and encouraged other retailers to enter the e-book market.
So, basically, the big publishers made a decision which:
- Costs them a lot of money. Judging from the example given in the article, this decision costs the sinking industry millions of dollars in precious profits.
- Has slowed the sale e-books.
- Has not slowed the sale of print books.
- Has angered retailers.
- Has angered consumers, who don’t want to pay more.
- Has brought on investigations of price collusion by the European Union and, probably, the United States.
- All to “preserve the value of books and to encourage other retailers to enter the e-book market.”
This is so backwards that it’s mind numbing. And it’s so ludicrous that it completely and entirely explains the industry’s recent struggles.