The price of romance

The rise of ebooks has rocked the publishing world. Who sets the prices for ebooks? Who gets the profits? What will readers pay, and how should pricing compare with hard copies? Battles between the major publishers decide what you pay for the fiction you download, says agent Steven Axelrod.

Transcript

How is book pricing changing?

One of the things that happened when the big six eventually took over pricing their books is for the first time, they were actually pricing the retail price. You know, what’s printed on a book is the suggested retail price, and it’s always called “suggested retail price” and, you know, the big booksellers would discount, and that was really part of their expertise was to know how much to discount to bring, you know, the maximum profitable sale. All of a sudden, publishers had that responsibility. At the same time, with the ebooks, they had the problem of not allowing the price for the ebooks to drop too low because then the perceived value of a hardcover would seem to be improportionate and they needed to keep the print business going. And then, people with KDP came in – $0.99, free, $2.99, $4.99, $5.99, and it’s just created this enormous confusion.

Originally five of the big six publishers agreed with Apple to basically break Amazon’s hold on pricing. Amazon was paying, you know, wholesale prices for ebooks. So, you know, if the suggested retail price was $25.00, they were paying $12.50 and then they were selling it for $9.99. The publishers felt that this was really undermining their print, you know, sales. Apple came along when they were getting ready to launch the iPad and the iBookstore, and they said, you know, “If we can get four publishers to sign on, you know, you do it the way we do it with the app store, the way we do it with iTunes, which is, you know, we take 30%, you keep 70% and you set the price.” So, for the publishers, this was great and they, you know, went to Amazon. Macmillan had a huge confrontation with them, but ultimately Amazon blinked and starting out with five publishers and then Random House joined about a year later; the big six publishers all were setting their own selling price, their own retail price on Amazon, on all the other services for ebooks only. So, you know, Amazon was still selling the hardcover at whatever price they wanted, but on the ebook, that was set by the publisher. The Department of Justice, possibly at Amazon’s persuading, who knows, brought a suit against the big six—well, actually, five of the six publishers. Random House was exempt from it because they came in a year later, so they couldn’t have colluded in theory with the others for, you know, price fixing, and I can’t remember the other specifics, the legal specifics. And three of the five affected publishers have settled. Macmillan and I can’t remember who the other one is are fighting it, and no one knows where pricing is going to be. You know, the terms of the settlement are apparently amazingly complex and, you know, possibly unenforceable or certainly untrackable. So it’s just a big mess at the point we need it so little.

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