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Tuesday, February 2, 2010

Amazon vs The Book Industry


Martin Peers of the Wall Street Journal has more on the empowering of publishers:

In Amazon vs. the book industry, the latest round has gone to the publishers. But they might not want to claim victory just yet.

It's no doubt gratifying to publishers, and all content companies, to see Amazon.com affirm their control over their own product by capitulating on e-book prices. But it won't do the publishers much good in the long run if they raise prices so far they snuff out the burgeoning market for e-books.

Leaving aside the pricing issue for a moment, e-books offer big advantages for publishers. They eliminate one of the industry's major costs – printing, binding and distribution. No longer does cash have to be tied up in inventory. With e-books, there are no costly returns of unsold books to worry about.

Publishers should therefore be flocking to e-books. That includes trying to figure out how to keep the low prices. There's little question the Kindle's $9.99 pricing on best-sellers is part of the reason Amazon now claims six Kindle sales for every 10physical sales when the same title is available in both formats.

Instead publishers are fretting about the Kindle's impact on higher-priced hardcover sales. Raising the e-book price to $13 or $15, as reportedly contemplated in Apple's discussions with publishers, isn't the way to embrace the digital future. A price of $15, for instance, is close to the hardcover book price charged by discounters like Costco.

The music industry showed what happened when content makers try to hold back their product, including through high pricing: Piracy takes over.

By introducing iTunes, with low prices for music, Apple saved the music industry from itself. Publishers appear to have won the right to set e-book prices. They should use that power wisely.
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