Wednesday, February 3, 2010

State of eBooks

Pretty much everyone is chiming on the ebooks situation.  Right now, you can buy an ebook from Amazon for $9.99 for most bestsellers.  This is also true if you were to buy them from BN to use with the Nook.

But with the introduction of a certain hardware from a fruit-oriented computer company whose CEo appears to have some sort of spell over the masses when he speaks, things have changed in the digital book market.  And it's made things very very interesting.

In the past, by that I mean last week, Amazon paid publishers $15 per book and sell it at a loss at $10 to it’s Kindle and Kindle app users like those on the iPhone.  The idea is to drum up awareness and bring folks over to the Amazon website where you can buy other things, including ebooks, that Amazon isn’t selling at a loss.

Now because Apple is offering publishers the freedom to set their own market price, some are calling this the agency model, the publishers felt like they’re in a better position.  With Apple taking 30% and the publishers taking 70% but with them calling the shots, the publishers feel now there is value in the books.

Having said all that, the publishers will be making less money with Apple’s model than with Amazon’s.  Apple is looking at $13-$15 a book. After Apple’s cut, the publishers will rake in $9.10 to $10.50 a book, less than the $15 that Amazon currently pays the publishers.

How does that make any sense?

See, with Amazon setting the price at $10 a book for the market but at a loss of $5, the publishers were afraid Amazon will come back one day and ask for a lower wholesale price.  As in lower than $10.  And if they don’t capitulate?  Well, Amazon can pull their books as they did last week with one publisher who didn’t agree with Amazon’s model during negations (Amazon eventually back off).   

But now, that’s all changed.  That threat has been removed.  On the iTunes app store or any app store, publishers can price their books at market price rather than one set price. 

On the short run, it definitely means the next Tom Clancy or Dan Brown book will cost $15 instead of $10.  But the hope is that over time, that price will come down as sales drop.  That’s what we hope will happen.

There's still a  lot of sorting going on.  We'll know more after the iPad goes on sale.

Note:  Tom Clancy?  Sorry, my bad. 

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