Last Updated Mar 29, 2010 12:57 PM EDT
What we couldn't tell from outside the negotiations is that the whole question of agency pricing -- publishers set prices on e-books and resellers (Apple in this case) take a cut -- was a mirage. Under Apple's plan, if a title is already in print, a publisher is can set any e-book price ... so long as it doesn't exceed Apple's imposed maximums. E-book self-publishing company Smashwords let the secret slip in an email to its author-customers:
If your book is not available in print, you can price your book at any price you like. Free is an acceptable price at Apple.If you do have print editions, here are the rules you must follow:No wonder Random House said that Apple's model would lead to lower prices. My argument about agency pricing being essentially the same as traditional discounting from list is completely wrong -- because it assumes that publishers are free to set prices as they wish. Clearly, this isn't the case.
For ebooks, if you publish print counterparts elsewhere as mass market paperbacks (small, airport size) or trade paperback, then allowable pricing bands are as follows:
For all print books published with a list price of $22.00 or less, your Smashwords ebook price cannot be greater than $9.99 during the first twelve (12) months after publication in those print formats. Thereafter, you, the publisher may set whatever price you want, provided Apple doesn't deem it unrealistic.
For any mass market or trade paperback books with a list price greater than $22.00, you can set whatever price you want.
If your book is only available in Hardcover, and the Hardcover price is under $22.00 (U.S.), then the maximum allowable price for your ebook is $9.99.
If your price is $22.01-$24.00, the maximum ebook price is $10.99; $24.01-$25.00 is $11.99; $25.01-$27.50 is $12.99; $27.51-$30.00 is $14.99; $30.01-$35.00 is $16.99; $35.01-$40.00 is $19.99.
If your hardcover book is priced above $40.00, you can price your Apple ebook at any price you like.
Even though calculations generally show that the production cost savings of an e-book over, say, a hardback is only a few dollars, Apples expects that publishers will offer more than 40 percent price discounting over paper versions. Why not? Apple loses nothing from a low price -- the company gets its cut of the transaction -- and it gains from having inexpensive content to help sell the iPad.
However, this is a big problem for commercial book publishers. As more titles sell via electronic versions, revenues and profits continue to drop. Authors see shrinking return from their work, so as my colleague Damon Brown points out, the authors can write e-books and go direct to the market. Here are some factors driving them:
- Given the variety of tools and services to turn manuscripts into books, creating an e-book is becoming ever easier.
- As a reader of this blog pointed out publishers frequently use less care and editing in e-books than in printed versions, resulting in more typos and sloppy production. Perhaps this is a result of lower prices. In any case, authors may not get the same professional care as with print.
- Most authors already must do most of their own sales and marketing.
- It's relatively easy to get an e-book into "print," and so the one-time publisher advantage of having access to necessary title distribution is disappearing.
Image: RGBStock.com user dyet, site standard license.