The big players in the publishing world are slugging it out over something called “agency pricing,” but the war is lost. Agency pricing is another word for price fixing, and it is flagrantly illegal.
Amazon achieved a dominant position in the book market in the 1990’s by aggressively cutting prices. I owned a bookstore then and when a Tom Clancy book was released they would cut the price by 40%. I paid more than that for a bestselling hardcover. Walmart offered the same discount. It took the profit out of the small bookstores, and they’ve gone out of business. We can weep for the demise of the small bookstore, but I can search Amazon’s (or Barnes and Noble, or KOBO) web site and find just the type of book I want faster than any bookstore. When I owned the bookstore I took special orders, and I used Amazon’s web site rather than Ingram’s (the distributor) because it was much better. It was a revolution in publishing.
Ebooks unleashed thousands of independent publishers and authors. No longer restricted by the arbitrary selection process of agents and editors, anyone is now free to publish their book. Amazon jumped on this trend by letting independents upload electronic books and showcasing them alongside the products from major publishers. Consumers like unlimited, cheap, fresh content to browse, and they buy it. Some of the best selling authors are now independent of any traditional publisher.
As profit margins got thinner the publishers began buying each other out, the strong consuming the weak. It has come down to 5 major publishers, and all are international conglomerates. Hachette, a French company, is the largest.
Enter Apple. When Apple got into selling books through their Itunes store, they cut a deal with the publishers to allow publishers to set the retail price for electronic books, and they set them high to keep the price up for their hardcovers. Apple was attempting to leverage the popularity of its hardware to keep its customers within the Apple world and charge them higher prices. The Justice Department sued and won in federal court. The judge saw agency pricing as price fixing and has ordered fines.
Now Amazon is further discounting electronic books and forcing the publishers into their pricing model. It isn’t illegal to cut prices. Amazon’s pricing model is generous, allowing the publisher/author up to 70% of the price of an electronic book. Hachette wants more and is resisting, so Amazon is slowing down distribution of their paper books. Hachette’s media blitz message is that this hurts authors, but that’s bullshit. A few of the most famous names benefit when the rest of us are excluded by the old publishing model.
The bottom line is clear. There isn’t going to be enough profit margin in publishing for a giant publishing company to sustain their infrastructure. Anyone can publish really good books from a computer. The big publishers will shrink accordingly. Competitors to Amazon are springing up all over. The distributor Ingram is now enabling independents to publish electronic and print on demand paper books and get them distributed to every bookstore in the world. Amazon can’t do that. Alternatives to Amazon, with their clever search capability and fast delivery are springing up daily. Some of these actually sell on Amazon’s web site at a discount to Amazon’s already cheap price! That’s competition.