New e-book pricing scheme a surprising assault on the wallet [View all]

[The Straight Story]

The problem of so-called "e-book sticker shock" is becoming a reality ever since six of the top book publishers banded together and agreed to set prices for the electronic books they sell, according to a story in The Wall Street Journal. In some cases the price for the e-version of a book is actually higher than the physical version, the article said.

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That means retailers can still slash the price for physical books as much as they please in order to entice readers to buy, but they'll have to comply with the new, higher prices for e-books set by the publishers. The wholesale price charged by the big publishers for both e-books and hardcover books was $12.50, meaning that before the agreement, Amazon.com was losing money by selling e-books at $9.99, books, according to the Journal, but the low price encouraged consumers to get in the e-reader game.

The Journal story goes on to explain the reasoning behind the change:

“Under the new pricing model, a $25 hardcover is often priced at $12.99 for the e-book. And because publishers receive 70% of the e-book retail price -- while retailers retain 30% -- that means publishers receive only $9.09. Publishers were willing to accept the lower profits because they felt the new arrangement preserved the value of books and encouraged other retailers to enter the e-book market. Indeed, the new arrangement means guaranteed profits on best-selling titles for retailers like Barnes & Noble Inc., which today claims about 27% of the digital books market, as well as Amazon.”

The whole agreement was actually launched at the behest of Apple’s Steve Jobs, who had wanted to create an e-bookstore for the iPad but didn’t want to compete with Amazon.com’s cheap titles, according to the story. And now the Justice Department is looking into whether Apple and book publishers improperly colluded to prevent price discounts, the Journal said.

http://bottomline.msnbc.msn.com/_news/2011/12/15/9469981-new-e-book-pricing-scheme-a-surprising-assault-on-the-wallet