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:
"...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.
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.
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