Money shot: In any event, in order for the e-reader market to thrive publishers must lower their wholesale prices so that distributors can turn a reasonable pro

Money shot: In any event, in order for the e-reader market to thrive publishers must lower their wholesale prices so that distributors can turn a reasonable profit. We believe that if the price is lowered enough publishers may earn less per unit, but could ultimately earn more in overall revenue and profit through a greater number of sales. Except they can't. I gather (can't cite my source) that amazon were leaning on British publishers to give them an 80-90% discount off list for Kindle books. Normal trade discounts are in the 40-55% range; anything over 60% is harsh, 70% has the publisher losing their shirt (making a loss). Remember, about 10% of the cover price of the book goes to the author, and the publisher takes another 10% to cover editorial/marketing/production costs, even if you don't include covering chunks of dead tree with ink (another 10%). (Unfortunately, the "physical" production costs don't go away if you switch from paper books to ebooks -- publishers still have to run a royalty accounting system for authors who expect to be paid a percentage cut per book sold.) The other 70% of the cover price goes to the supply chain, or is split between the supply chain (aka Amazon.com) and that nice 30% discount Amazon gives you, the customer, for shopping with them. If they're lucky, the publisher can keep 10-15% of it for themselves -- and that's the profit their shareholders dine out on. The major publishers are between a rock and a hard place over the ebook discount setup. Relatively nimble small players and startups such as Baen's webscription subsidiary (www.webscription.net) can add new boilerplate to newly signed book contracts that free them to pursue more ebook-friendly business models, but how do Penguin re-negotiate every contract for a backlist of on the order of 40,000 titles? Amazon have built a business model on disintermediation -- they've replaced wholesale distributors and the bookstores they feed with a single hybrid entity, and therefore take the tranche of profit that would formerly have fuelled both those earlier types of business. But there isn't enough slack left in the supply chain to let them cut prices further -- not without eating into the author's cut (long-term fallout: fewer books get written), the publisher's cut (long-term fallout: fewer books get published) or the reader's wallet (books cost more). I bloviated about this back in 2007 ... much less has changed since then than most people seem to believe: http://www.antipope.org/charlie/blog-static/2007/03/why_the_commercial_ebook_marke.html http://www.antipope.org/charlie/blog-static/2007/03/why_the_...