About Me

A blog wherein a literary agent will sometimes discuss his business, sometimes discuss the movies he sees, the tennis he watches, or the world around him. In which he will often wish he could say more, but will be obliged by business necessity and basic politeness and simple civility to hold his tongue. Rankings are done on a scale of one to five Slithy Toads, where a 0 is a complete waste of time, a 2 is a completely innocuous way to spend your time, and a 4 is intended as a geas compelling you to make the time.

Monday, February 1, 2010

Planned Outcome?

For all the sturm and drung over Amazon's battle with Macmillan...

Amazon has been paying most publishers for e-book content based on the publisher's list price for said content, while charging a price chosen by Amazon. If Macmillan sets the list price to match the print edition, and Amazon pays a 30% royalty, we might have a $25 list price, and Amazon pays the publisher $7.50 out of $9.99 Amazon Kindle price. That leaves $2.49 for Amazon to enjoy. And if Amazon is paying the biggest content providers a bigger royalty, maybe not even $2.49.

Macmillan now establishes a $14.99 list price, and Amazon gets to keep 30% of that as Macmillan's agent for this sale. Suddenly, Amazon goes from getting $2.49 or less to getting $4.50.

Places, everyone? Are you ready for your close-ups?? Lights, camera, action, and then a few days later "Cut!"

Maybe from a very long term perspective Amazon would still prefer to sell the e-book for $9.99 so there's a bigger gap between the $25 print edition which Amazon sells at discount for $16.75, which makes the Kindle more attractive. But all the long term perspective aside, how angry can you be when your big customer forces you to take $4.50 instead of $2.49?

2 comments:

Jim C. Hines said...

"...how angry can you be when your big customer forces you to take $4.50 instead of $2.49?"

Doesn't that assume Amazon will sell the same number of e-books under the new pricing? If raising the prices cuts sales in half, Amazon ends up losing money.

The Brillig Blogger said...

Jim is entirely correct that elasticity of demand is a basic economic concept that should be taken into account. If Macmillan is setting its own uniform list price on its e-books, then customers will not be able to buy the book from an authorized vendor for less. In such a situation, Amazon would not lose sales to another vendor. If Macmillan is alone in charging a higher price for front-list hardcover-equivalent e-books, then it is possible that Macmillan could lose market share to cheaper e-books. I'm not sure people who want a new hardcover equivalent e-book will decide to buy a a three-year-old book at a $7.29 paperback equvalent price.