Kelly said (in part): I think you may be missing the biggest price point issue for consumers — the price of the mass market paperback. Publishers need to give readers a reason to pay more for an e-book
Bear in mind that most print books don't start out at mass market paperback prices. They start out at hardback prices. That's where the book makes most of its money. To sell an ebook at day one at mass market prices undercuts the business model of making your profit lead off the hardback. That's the whole point of dynamic pricing — to have ebook prices fall in parallel with print book prices over time, as demand softens and widens. That kind of dynamic pricing has been successfully in play on the print side for decades. Publishers understand it, booksellers understand it, book buyers understand it.
There may be a perfectly good argument to be made about not using dynamic pricing, but simply "lower prices" isn't enough, unless a revised model can ensure publishers sufficient profit for books to earn out. Otherwise we get what's already been happening — fewer titles, more low-performing authors dropped, increasing focus on bestsellers without the midlist to back them up. Where do future bestsellers come from? Often as not, the midlist, which serves as a ‘farm team' for the book line.
If you want to pay paperback pricing for ebooks, waiting for paperback availability isn't unreasonable. The market's worked that way since before I was born. Amazon has skewed consumer perceptions with the $9.99 promise, but that's my underlying point. $9.99 makes it much harder for publishers to sell hardbacks against ebooks priced there, which undercuts their margins, which is slowly strangling the supply side of the book industry.
Ashavan Doyan said (in part): I want the authors to make money. But I also want reasonable consumer prices as a reader of books. For instance… The Great Hunt (book 2 of the wheel of time, published by Tor) – paperback $7.99. Ebook – $9.99 WHY??? This book was published what? 15-20 years ago?
I'm not even remotely prepared to defend current ebook pricing practices. I think the whole point of the agency model is to rationalize that, and lower backlist prices toward the $5.99 price point. Can I prove that? No, not at all. But it just doesn't pass the smell test to make this much fuss, then not deliver.
And yes, the agency model may be anti-competitive, but if you look at Amazon's model from a publisher's perspective, it is far more anti-competitive. Check out the discussion of this on Making Light for a far more intelligent analysis than I can offer. My opinion is once Amazon's lock is broken, the models will continue to shift under market pressure, and the competitiveness issue will come into play.
CharlesP said (in part): I’m curious as to what your take is on how it seems we’re going from one fixed price structure (Amazon setting new/best sellers at $9.99) to another (the publishers setting the price for all retailers). We’ve gone from no market competition in pricing (because Amazon owns so much of the market) to no market competition in pricing (because the publishers are setting the price no matter where the consumer goes).
First, understand I don't speak for the publishers in an official or unofficial capacity. I have common interests, as a Macmillan author, and a view of the industry from that side, which is frankly pretty opaque even from within the sausage factory, and in many ways deeply counterintuitive to outside observers.
I'm not convinced that the agency model an improvement in and of itself, but it's definitely a step in the right direction. Right now we have a single player (Amazon) at 75+% marketshare setting terms for the entire ebook industry. Under the new model we have six players (the big six publishers) setting terms to at least two outlets (Amazon and Apple iBooks). That produces a lot more opportunity for flexibility and innovation in models when no single player is holding all the reins. Amazon has no trouble remaining in lockstep with itself as a single-source chokepoint, but you won't see consistent solidarity from the big six over time as they have different ideas or entertain different proposals.
Likewise Apple, which, for example, has changed business models within iTunes several times. So I see this move as not a final fix, or even necessarily much of an interim improvement, but as a breaking of a logjam which will now allow multiple players and market factors to participate in setting price points and retail terms, instead of leaving everything in Amazon's hands. By definition that is more competitive.
CharlesP: I have trouble understanding what the publishers are hoping to accomplish by making sure everybody is paying them the same amount, which happens to be less per book than they were currently getting from Amazon. The only semi-plausible explanation I've thought of is that they're hoping to (or at least OK with) hurting eBook penetration to protect hardcover sales.
You're on the right track here, but you're putting a very different spin on it than the publishers would. Consider how critical dynamic pricing is to their business model, that is to say, $28 print hardcover -> $8 mass market paperback.
"Hurting ebook penetration" isn't the issue. It's preserving the business model, which enables profitability and continued operations. Whether that business model should be preserved is a different and legitimate issue, but it's how they work today. What they're after is maintaining the value perception of initial high-demand releases, which the $9.99 price point is threatening to destroy, especially with the ongoing growth of ebook market share. Publishers don't "hate ebooks", they're desperate to understand them, but they're even more desperate not to lose money on ebooks.
CharlesP: The future with an enforced "everybody selling at our selected price" future
I don't actually buy this. The pricing war is far from over. What we're doing right now is moving from "Amazon sets all terms" to "multiple players set terms", which is far more competitive than the current model as it exists today. The big six will jockey for position over time, Amazon and Apple will jockey for position over time, Sony will get their head out of their collective heiney and become a player... Lots of options once a single player is no longer in control of the vast majority of the market terms.
I do recommend following the give and take on the original post, but these strike me as some of the high points worth emphasizing. There's also some pretty interesting stuff in comments on the LiveJournal mirror, including a long exchange with randallsquared about future revenue models for authors.
I'm terribly pleased to have such an thoughtful, patient set of commentors on my blog. Thank you all.