The interwebs are abuzz over reports that Apple has been in talks with the “big 6” publishers to make their content available on the mythical (and purportedly forthcoming) Apple Tablet.
Mike Shatzkin has a nice analysis piece on why publisher-set pricing is a potential game-changer for ebooks, and while it is indeed refreshing to see retailers and publisher drop the physical-goods framework used to set most current trading terms, it’s hard for me to see it as news for a few reasons:
- It’s already been done. The “publisher” sets the price in the App Store, the Android Market, Scribd, and BookGlutton to name a few.
- The market and platform already exist for publishers to sell content via the App Store, and the terms are already crystal clear: Apple (and Google) take 30%.
- Most publishers don’t have enough experience at retailing to find the price that maximizes sales revenue. Just look at the current pricing for ebook apps from major trade publishers. They’re priced way beyond what the market will bear.
The pricing model I expect to see retailers like Amazon, Kobo, and Sony eventually adopt is a hybrid, where the retailer sets the ultimate price to the customer, and pays the publisher a fixed percentage on the sale price for that transaction (with some minimum in place, like 25-30% of the list price). That nicely aligns the incentives of the reseller and the publisher to finding the price at which total sales revenue is maximized. There is of course a not-insignificant risk that any individual retailer will swallow smaller margin in exchange for building market share, but that’s already what’s happening at Amazon anyway. (The hybrid pricing/commission model isn’t just speculation — we already have it in place with one ebook retailer, and I expect to see it with several others before the end of the year.)
There is nothing stopping any publisher from already putting their books in the App Store, setting the price themselves, and taking a healthy 70% of the purchase price while reaching the 50M+ people walking around already with a bookstore in their pocket. It’d be great to see some fresh attention and interest from Apple in the Books category of the App Store, but the pieces are already in place — the market, the platform, and yes, the pricing model.