Battle of the E-book models (a follow up)

Yesterday we posted a blog on the week-end brouhaha of Amazon pulling the “buy button” plug on all titles from Macmillan Publishing.

Things are beginning to sort themselves out. Amazon pretty much admitted that they were capitulating because Macmillan had a “monopoly” on their books. Although this is technically true, the use of the loaded term, “monopoly” was artful and paradoxical; since Amazon’s strategy all along has been to establish a monopoly on the distribution of the e-book to the consumer.

I have gotten some questions about some of the technical issues , specifically the economics of the conflicting models, who gains and who loses and what will be the competitive impact on  the physical book and the community bookstore. I would refer you to Mike Shatzkin’s blog, “Ideological” which offers some very detailed answers to some of the questions. Mike’s language is pretty technical and seems to speak to industry insiders, but it is also pretty incisive.

Mike just emailed me and made a significant point, an error in my observations. He said that the Amazon model is “sustainable”. They are only selling about 25% of their e-book titles as loss leaders. E-books are actually profitable for them. The reason that publishers are fighting on this (and will probably prevail) is that they are concerned that Amazon will be the only retail channel for sales. They do not want this to happen.

One other issue to consider is that under both plans, the price of e-books will be heavily discounted off the price of physical books, at least in hardcover. Ideally publishers would like there to be parity in price so as not to discourage the consumer’s choice. This does not appear to be happening. On the other hand, there is no indication at the moment that the e-book price will be reduced at the time that a paperback will come out. The e-book price will be much closer to the price of the paperbacks.

We’ll be bringing you updates on this important issue. Stay tuned.

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