Publishing is made out of pipes. Traditionally the supply chain ran: author -> publisher -> wholesaler -> bookstore -> consumer. Then the internet came along, a communications medium the main effect of which is to disintermediate indirect relationships, for example by collapsing supply chains with lots of middle-men.
From the point of view of the public, to whom they sell, Amazon is a bookstore. From the point of view of the publishers, from whom they buy, Amazon is a wholesaler. From the point of view of Jeff Bezos’ bank account, Amazon is the entire supply chain and should take that share of the cake that formerly went to both wholesalers and booksellers. They do this by buying wholesale and selling retail, taking up to a 70% discount from the publishers and selling for whatever they can get. Their stalking horse for this is the Kindle publishing platform; they’re trying to in-source the publisher by asserting contractual terms that mean the publisher isn’t merely selling them books wholesale, but is sublicencing the works to be republished via the Kindle publishing platform. Publishers sublicensing rights is SOP in the industry, but not normally handled this way — and it allows Amazon to grab another chunk of the supply chain if they get away with it, turning the traditional publishers into vestigial editing/marketing appendages.
The agency model Apple proposed — and that publishers like Macmillan enthusiastically endorse — collapses the supply chain in a different direction, so it looks like: author -> publisher -> fixed-price distributor -> reader. In this model Amazon is shoved back into the box labelled ‘fixed-price distributor’ and get to take the retail cut only. Meanwhile: fewer supply chain links mean lower overheads and, ultimately, cheaper books without cutting into the authors or publishers profits.
Amazon are going to fight this one ruthlessly because if the publishers win, it destroys the profitability of their business and pushes prices down.
— via antipope.org
The e-book pricing conflict has been around for a while, but it has now reached an unprecedented intensity. This is an issue that, like the Google Books settlement, could actually have fairly wide-reaching consequences. Let’s say that the publishers just aren’t willing to budge, but Amazon and Apple still want a way to maintain acceptable margins on book sales. The result might resemble the unfortunate “minimum advertised pricing” rules that end up making shoppers have to jump through hoops in order to view how much an item will cost.
But ebook shoppers would refuse to support such annoyances. Maybe I’ll put a $300 digital camera in my shopping cart so I can see if I get 10% or 15% off retail price, but for a book with a hardcover price of $15? Fuggedaboutit.
I bet there are some more creative, innovation solutions here to please the publishers, vendors, shoppers, and even the authors. And I’m sure the publishers may need some help to come up with them.
How about opening up the playing field by offering your inventory via a flexible digital content affiliate platform? Even with the agency model - especially with the agency model - let the developers run wild with this stuff, and come up with 1,000 new ideas that will rejuvenate the publishing industry. After all, wouldn’t it be a shame to waste this perfect storm of an opportunity?