Book Publishers Have Lost This Fight

In the arena of business, very few things are certain but I have been making written bets on this weblog about the arrival of Kindle and the possibility that it will change not only the delivery of books but also the economics of publishing. It is apparent to me that the arrival of the Internet led to successful distributors like Amazon and Barnes and Noble but these alone did not shake the economics of the book industry by a great deal. As it is, the same stores had to deal with the publishers and were merely trying to develop retail outlets with a wide number of titles.

That is why, the books publishing industry has been behind the curve even as the arrival of digital formats has required some degree of revision. They have failed to note that just because they have a trusted model that ensures their profitability off hard covered books does not mean that the market will continue to respect that. I argued here that it is particularly ill-advised that in spite of the clear difference in costs, they have insisted on selling digital copies at the same cost as the paper copies. Whatever the reasons given, they forgot that in the long term, the prices must draw closer towards the marginal costs.

Marion Maneker presents the best analysis I have seen following the recent price war on this year's best sellers between Amazon, Target and Walmart. In my view, a price war may not be ideal for the corporations but it is ideal for students of economics and especially for the book readers who purchase those titles. The article is incisive because it states that the economics of books publishing will change especially in the manner in which the pricing and royalties are paid. In my view, the sliding scale approach is more apt because it reduces the risk of failure for the publisher and rewards the authors in accordance with the real sales of the text. As Marion Manker argues, the publishers are more inured to the existing model and less inclined to reducing their profits per copy of the titles.

In conclusion, the publishing industry is already incrementally losing this battle and it is best to reconsider the model now than have to be supplanted completely by either Walmart, Amazon or Target. The longstanding model that worked for hard cover and which allowed a title that is published at US3 to sell for 8 times the amount will most probably survive for a large number of books. My bet is that it surely cannot be transplanted in whole as a pricing model for e-books.