Soon we’ll know just what Apple’s new tablet will really do, how much it will cost and whether it can save the world from global warming. Okay, just joking about that last bit — I think. In any event, many believe the tablet will shake things up in ebook world where Amazon’s Kindle is the leader followed by improving entries from Sony, Barnes & Noble and others.
Today, The Wall Street Journal has yet another story about Apple’s ebook strategy and efforts to woo book publishers. There’s something kind of wacky about the situation, however. The only party that comes out better under Apple’s apparent strategy is…Apple.
Start with readers, aka consumers, aka you and me. We get to read ebooks on cool Apple mobile devices. Oh wait, we can already do that on the iPhone and iPod Touch. What we do get is higher prices. $9.99 is out and the new normal is $12.99 or $14.99. Sounds kind of like last year when Apple caved to the record labels and hiked music prices across the board. I’m still waiting for all those 69 cent songs I was promised.
Okay, so we lose but what about publishers. They’re bitterly complaining about Amazon and it’s terrible prices that devalue books. So they must make out? Well, actually, no. As the article points out, Amazon pays them half the cover price of a digital book, which in most cases is more than the $9.99 retail price Amazon charges its customers. Say the hardcover price is $24 — Amazon pays the publisher $12. Amazon is subsidizing the ebooks, losing money on most of those sales. But Apple is only to pay publishers 70% of the two price points I mentioned, which means they get $9.09 0r $10.49.
So why would they do that? The Journal coimes up with this nonsensical rationale:
But there is nevertheless a strong draw: In adopting the Apple model, the balance of power would shift at least partly back to publishers, which regain control of pricing. In setting higher prices, they could provide a level playing field for all e-book retailers. The potential for publishers is that the device may generate greater volume for e-book sales.
Now, publishers could generate a greater volume of sales to tablet users through the existing crop of ereader apps, if they wanted to. They don’t need Apple for that. But how would the “balance of power” shift to them on pricing? As the article already noted, Jobs is pushing two retail price points and a fixed 70% payout. It’s also very unclear how this results in a “level playing field” for ebook sellers. In fact, publishers would be charging Apple less than they get from Amazon, Sony and Barnes & Noble. It’s a sweet heart deal that benefits…you guess it, Apple.
If I had to put a stake in the ground, I’d predict that this poorly thought-out pricing model ignores what customers want and does little to help the publishing industry. It will get vast amounts of attention and hype but will end up a dud in the marketplace.