Jousting for book and e-book profits

Thursday, March 3, 2011

Random House made two interesting announcements this week: First, it is adopting "agency model" pricing, which means that the publisher sets the retail price and 30% of that sale price is kept by the retailer. That means one more large publishing house will now provide fixed profits for booksellers. The move may prove advantageous for indie bookstores.

Second, Random House joined iBooks, coinciding with Apple’s release of the iPad 2. Still, Kindle is still the best-selling e-reader, and Amazon exercises heavy-handed control of e-book pricing in today’s market. Readers at this point expect to pay lower prices for e-books, but publishers and authors would like to see Amazon stop undercutting prices. Pricing will undoubtedly evolve over the next few years.

When e-readers were less ubiquitous, libraries began to buy unrestricted licenses from publishers to lend e-books. Now HarperCollins has alarmed librarians with its announcement that new e-book licenses will be restricted to 26 sequential copies, or one year of continuous loans, then will expire. Publishers Weekly summarizes the comments of Josh Marwell, president of sales at HarperCollins:

He pointed out that it has been projected that nearly 40 million e-reading devices will be purchased by consumers in the coming year and said, “We have serious concerns that our previous e-book policy, selling e-books to libraries in perpetuity, if left unchanged, would undermine the emerging e-book eco-system, hurt the growing e-book channel, place additional pressure on physical bookstores, and in the end lead to a decrease in book sales and royalties paid to authors.”

While some independent booksellers have already embraced selling e-books, others remain uncertain. Josie Leavitt of Flying Pig bookstore in Vermont writes:

It’s so hard to know what to do. I still offer books for sale on my website and there are still a myriad of places where people can buy books. How important will e-books be to my bottom line? I just don’t know and that is the question that worries me every day.

As for the iPad 2, it is thinner and lighter than its predecessor, has both front- and back-facing cameras, has equal battery life, and is priced similarly. Apple makes a higher profit from hardware sales than from iTunes, or, presumably, iBooks. That should help keep e-book price wars interesting.