Comment by lionhearted | Hacker News Reader

Comment by lionhearted | Hacker News Reader

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> Amazon are going to fight this one ruthlessly because if the publishers win, it destroys the profitability of their business and pushes prices down.

Wait. This guy is claiming that publishers are trying to push book prices down, and Amazon is trying to keep them up. This doesn't jive - Amazon has cut the prices of books so incredibly heavily since they came along, and had a very good shopping experience with reviews, excellent customer service, shipping, and so on.

I think people are afraid of any company getting too powerful because of the abstract concept - but myself, I'm starting to get comfortable with companies like Google and Amazon taking large share by being the best. If they get corrosive later, they'll have a few year window where they're still on top, but then someone will come and take them out. But I think the current leadership of companies like Amazon and Google is good enough that they won't make shortsighted bonehead decisions against their customers.

No, what I'm saying is that, of the $16 net price you pay for a hardback, you might think that the lion's share goes to the publisher and the author gets 10%, but the reality is that 70% goes to the distributors and booksellers while the author and publisher split 30%.

What Amazon have done is to sneak up on the distributor/bookseller pipes and merge them into one lucrative hose, and now they're playing both ends for their own benefit.

Amazon squeeze their suppliers, just like Wal-Mart. Amazon is already corrosive -- if you're a small supplier.

That hardcover which I paid $16 for likely has a list price of between $25 and $30. If the publisher was only paid 30% of that $16 sale ($4.80), that means they sold it to the distributor at a wholesale discount of over 80% off list.

Are any publishers really offering those kinds of terms, even to Amazon?

Hardcover list prices are pretty much pegged at $24 in the USA, ever since word went out within Borders (or was it B&N?) about eight years ago to stop buying hardcovers with SRP over $24.

Yes, Tesco (in the UK) and WalMart can and do demand discounts up to 70%. I have heard hearsay reports (I can't cite sources, due to confidentiality) of Amazon demanding 80% discounts off ebooks from British publishers -- which is why they only launched Kindle in the UK about three months ago: nobody would take them up on it.

But even if some resellers are getting titles for 70% off list price, that doesn't translate to them retaining 70% of the revenue from the sale unless they're selling the title at list price. No reseller with the market muscle to demand a 70% wholesale discount is selling those titles at list price!

Personally I think your figures ($24 list price, 70% wholesale discount) are edge cases, and don't represent a typical sale. But even if we take them at face value, in your example the publisher/author get $7.20 of my $16 and the distributor/reseller get $8.80. That's a 55/45 revenue split, not a 70/30 split.

This also assumes I'm buying at 1/3 off list, which is on the low side. Amazon is discounting bestsellers by at least 45%, with a select few going for 60% off or more. Example: Going Rogue, list price $28.99, sale price $13.50 (53% off). If Amazon's getting a 70% wholesale discount, HarperCollins gets $8.70 and Amazon keeps $4.80. That's a revenue split of 65/45 in the publisher's favor.

So: when I buy a hardcover that's been discounted down to $16, the actual reality is that the distributor/reseller is not making twice as much on the sale as the publisher/author -- it's more like a 50/50 split.

None of which is to say I support Amazon OR Macmillan's position in this particular battle (they're both wildly overreaching, IMO). I just think your example inappropriately conflates two different things.

So they'll fare better with the Kindle--70% of $9.99 with no printing or shipping expenses.

Ah, but the devil is in the small print ... (which is a lot less favourable than that headline figure suggests).

Could you elaborate? AFIK the "fine print" is the requirement that the ebook be at least 20% cheaper than the dead-tree version, that it be priced under $10, that you don't price it lower on some other store and that you enable stuff like text-to-speech. Maybe I'm not thinking like a publisher but that all sounds pretty good.

You missed out "and Amazon can set the price they sell it at".

So: you (the publisher) guarantee not to sell ebooks for less than $9.99 elsewhere, and not to publish a dead tree edition for less than $12 ... and Amazon are free to cut their competition off at the knees, sell books for $6, drive their competitors into extinction, and then can raise their price to whatever the market will pay.

Meanwhile, as the author's royalties are a percentage of the SRP, that 10% of SRP cut they're due -- $1.20 of a $12 title -- comes out of whatever Amazon pays you -- $4 in the case of a book they choose to sell for $6 on Kindle. The SRP is set to reflect the price at which the publisher expects to sell enough books to gain sufficient sales to break even -- assuming a 40-50% discount. If the discount goes to 70%, they're in the stinky stuff up to their eyeballs. That $12 ceiling is forced on what was formerly a $24 SRP, and a $14-16 expected sale price. The money has to come from somewhere, and it ain't going to come out of Jeff Bezos' wallet ...

Sure they'll have to give up some control, but they'll sell more units and make more money on each. All without having to fire up a printing press. The future is moving on with or without print book publishers, they should hop on while they have the chance.

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