Price Wars and Book Industry Illegal Activities

This has been a huge issue lately. To better understand it, let me describe a couple of different pricing models or customs which are at the heart of this controversy.

Wholesale Model: The publisher establishes a book’s recommended price and sells it to the booksellers for a percentage off that price. The bookseller can then sell the book for whatever price (sometimes higher) that he wants to.

Agency Model: The publisher sets a price for the book and then discounts it 30% to the reseller, who must agree to sell the book at the price the publisher establishes and cannot discount. The result has been for the publishers to push up the prices of their books because they can.

Impact on E-books: This has pushed up the price of E-books and has resulted in a major conflict between some of the major publishers and Amazon, who wants to keep the prices low for their Kindle market. In their efforts to control the situation in their favor, the major publishers began allegedly sneaking around in a variety of price-fixing activities. Ooops, they got caught at those and the following cover-up attempts. This brought the Federal Department of Justice into the fray with an anti-trust suit against five publishers and Apple. In the meanwhile, E-book distributor Mark Coker of SmashWords has come on record that he prefers the Agency Model because it allows the authors and the publishers to control the prices. This levels the playing field for smaller book retailers and preventing large retailers from loss-leadering their small competitors to death.

All these recent activities are pushing down E-book prices and tying the hands of the major publishers, which may hasten their demise.

Bottom Line: The forces of greed and control battles point to the obvious solution of self-publishing. Once a pariah in the book industry, self-publishing is becoming acceptable, as long as the author does a professional job of publishing his books. The legal fight has an indirect impact on self-publishers in terms of common price ranges. It all points to a much different business model.



This is a cross-posting from Bob Spear‘s Book Trends blog.

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