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Book Publishers Make Their First Move Against Amazon

Publishers finally shook out their cold feet and took a stand against Amazon to fight the $9.99 price of most e-books. Simon & Schuster was first to announce they will delay the e-book editions of about 35 titles next year, including books by potential powersellers Karl Rove and Don DeLillo. The Hachette Book Group and HarperCollins are following suit in "windowing" e-books this winter -- releasing them months after the hardcover but before the paperback.

Plenty of people think it's a dumb move on the part of publishers. James McQuivey at Forrester Research says it seeks to preserve an analog business model in a digital economy. He argues that books are no longer worth $25 and that $9.99 is a "darn awesome price to pay given how cheap it is to distribute an e-book."

They're all wrong -- and short-sighted. This is just the beginning of a negotiation process about what books will and should cost. McQuivey forgets that publishers' business model is still about the physical book. So they're still paying for all that paper, the ink, the binding, the shipping, the print marketing, the PR, and the rest. That costs a chunk of money. Sure, e-books are cheap to create and distribute. Not so for an actual hardcover. And right now, e-books are still an afterthought. Publishers are still basing their economic model on actual books, and that's a totally different ball game than running a company with minimal production and distribution costs. E-books are still just another way to distribute the physical book. And until e-books get enough volume to make up a good chunk of sales, the business model is still built around the old-fashioned hardcover.

HarperCollins, for example, is delaying the e-book for Sarah Palin's "Going Rogue" until after Christmas. At $14.50 a pop, and 1 million copies (and rising) in the first two weeks, that's $14.5 million bucks. Say all those sales went to the e-book. Well, $9.9 million just isn't the same.

Remember that Amazon sells those e-books at a loss â€"- publishers still get paid the full wholesale price by Amazon and other retailers. The big fear is that consumers will get used to paying ten bucks for a book, and that will cannibalize hardcover sales ($20-$30). The even bigger fear is that if e-books pick up even more speed, Amazon has enough leverage -- it has cornered the majority of the e-reader market -- that it can demand to pay publishers less. It's foolish to imagine a tech-forward company like Amazon is going to perpetually sell stuff at a loss.

If books go for ten bucks, publishing fizzles out. Which is why delayinging e-books is potentially game-changing. It's really the only weapon publishers have right now to fight the diminishing price of books. Sure, maybe publishers need to figure out a consumer-friendly pricing model for e-books, but just slashing the rate and saying "move on" is not the answer. Should publishers become the new music industry, barely a skeleton of their former selves? Good luck finding a decent (e-)book to read, if that's the case.

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