From The Wall Street Journal:
When the world’s largest publishers struck e-book distribution deals with Amazon.comInc. over the past several months, they seemingly got what they wanted: the right to set the prices of their titles and avoid the steep discounts the online retail giant often applies.
But in the early going, that strategy doesn’t appear to be paying off. Three big publishers that signed new pacts with Amazon— Lagardere SCA’s Hachette Book Group, News Corp’s HarperCollins Publishers and CBS Corp.’s Simon & Schuster—reported declining e-book revenue in their latest reporting periods.
“The new business model for e-books is having a significant impact on what [the big] publishers report,” said one publishing executive. “There’s no question that publishers’ net receipts have gone down.”
A recent snapshot of e-book prices found that titles in the Kindle bookstore from the five biggest publishers cost, on average, $10.81, while all other 2015 e-books on the site had an average price of $4.95, according to industry researcher Codex Group LLC.
“Since book buyers expect the price of a Kindle e-book to be well under $9, once you get to over $10 consumers start to say, ‘Let me think about that,’” said Codex CEO Peter Hildick-Smith.
. . . .
On Thursday morning, there wasn’t a single title priced at $9.99 among the top 20 titles on the company’s Kindle best-seller list. Last summer, Amazon offered the digital edition of James Patterson’s thriller “Invisible” for the bargain price of $8.99. Mr. Patterson’s newest tale of suspense, “Alert,” went on sale Aug. 3 on Amazon for $14.99, a price set by Hachette, Mr. Patterson’s publisher. The unit sales for Mr. Patterson’s e-books weren’t available.
The precise impact of the deals with Amazon, the dominant player in book sales, is still a matter of industry debate. The drop in sales could be partly due to a crop of lackluster new titles. But some publishing executives say higher e-book prices, resulting from the Amazon deals, are discouraging purchases.
. . . .
Hachette cited fewer hot titles and the implementation of its Amazon deal as reasons that e-books fell to 24% of its U.S. net trade sales in the first half of 2015, from 29% a year earlier. Declining e-book sales contributed to a 7.8% drop in revenue in the period.
. . . .
Pricing e-books is a Goldilocks problem for the book giants: For years they worried that consumer prices were too low, and now they are seeing the disadvantages of bumped-up prices. Publishers said the current pricing model involves some sacrifice but they felt it was worth it to keep Amazon in check. What’s more, they have noticed a bump in sales of physical books that is possibly related to the higher price of digital books.
To figure out how to set prices, a team of data specialists at Macmillan’s Manhattan offices in the Flat Iron building sifts through a database of 74 million transactions looking for trends. Amazon looms large in that decision-making: It accounted for 64% of the U.S. e-book market, by units sold, during the second quarter, according to Codex.
. . . .
One high-level publishing executive disputed that the Amazon pacts are contributing to the e-book sales decline. “This is a title-driven business,” he said. “If you have a good book, price isn’t an issue.”
Link to the rest at The Wall Street Journal (Link may expire) and thanks to Nirmala for the tip.
Of course publishers don’t know how to price books at retail. Bookstores know how to determine retail prices for books because they actually sell them to readers.
Since Amazon is the biggest bookstore in the world, one which obsessively collects and analyzes data concerning customer behavior, it is much better qualified to set optimum prices to maximize revenues from the sales of ebooks than a bunch of provincial publishers who have never run any sort of store and have virtually nothing in common with a typical reader.
If you give a kid a stick of dynamite, why would you expect anything other than trouble?