Get What You Pay For

The market for ebooks in the US is far more mature than the market for ebooks in the UK, so it's interesting to hear that just as I've gotten myself a gadget the pricing wars are suddenly erupting at Amazon.

Basically, the big players in the UK publishing industry--Penguin, Hachette, HarperCollins, MacMillan, and Simon & Schuster--have all decided that they will no longer allow Amazon to set the prices for their ebooks.  Previously, pricing had been set at a uniform $9.99 for all ebooks, which actually makes each ebook sale a loss-leader.  Though ebook sales are starting to outstrip sales of some versions of the printed book (i.e. hardbacks), Amazon was losing money on every purchase.

What do they gain from this?  More importantly, what does that say about books?  Let's say your technical handbook on book publishing retails at a brick-and-mortar for $34.99.  The ebook (should you make it available) is $9.99.  The paperback guide to getting your first job as an editor is probably only $12.99 in stores.  The ebook?  $9.99. That makes it slightly more difficult for Suzy College and Professor Pompous to discern which book is meant for whom.  They could go on the website and read the blurbs, or read the first chapter, but that's much more time and investment than the usual consumer will take when deciding to make a purchase.  Make no mistake: how publishers price books is very important to how publishers sell books.  Take away that lever, and you're removing a very powerful tool.

So, publishers understandably want to have a little bit more say on their own marketing mix.  Fine.  Amazon, of course, is unhappy, and sent UK Kindle owners a letter to prove it.  Their own lever has been removed--uniform, cheap pricing across the board.  With the iPad looming over the punchbowl with its own publisher-set price model, it seems Amazon would rather set their own terms and keep their loss-leader rather than cede marketing power.

This article from the Idea Logical Blog makes a great point, though.  Smaller publishers, or publishers who already focus on the ebook model, still stand to benefit from Amazon's one-size-fits-all pricing.  These publishers can't pay Barnes and Noble or Borders the same huge sums to get their books featured at the front of every store (if they can get their book into the store at all).  I especially like the point this writer makes that big publishers should be doing everything they can to keep brick-and-mortar booksellers in business, given Amazon's flattening of the marketplace.  Through customers may buy more books thanks to lowered prices, they also take away a lot of intangibles which bias the big powerhouses.  Amazon, after all, doesn't hold Harry Potter parties.