Discussing the real issue with the agency model of eBook pricing

There has been a lot of buzz lately with the US Department of Justice probing the agreement between Apple and five top US book publishers as to whether there are anti-trust issues at play.

The history of this situation, is that Apple signed an agreement with Simon & Schuster, Macmillan, Harper Collins, Penguin, and Hachette Books for an “agency style” model which would enable them to set their eBook prices and not leave that to Apple. So long as Apple could get their 30% of the proceeds. Amazon buys books from publishers on a the wholesale model, which allows booksellers to sell the books at prices of their own choosing. Amazon is notorious for marking down the prices of their eBooks in a bid to promote the Kindle platform.

Salman Rushdie responded to this news by saying that the Justice Department was out to “destroy the world of books” and that “Anyone who thinks that fair pricing that allows authors to make a living is a cabal or cartel system is deep in the grip of Napsterism – the belief (fostered by Napster in the music world) that it’s OK to acquire people’s work for almost nothing.” ( Guardian.co.uk, 2012 )

Now while I agree that an agency model in is not in itself a bad idea, at this time, it is inherently flawed. Those of you who are, like me, frequent eBook buyers on either Barnes and Noble or Amazon.com will know that eBook prices set by publishers are often more expensive than their hardcover or paperback counterparts.

Take, for example, a book a twitter colleague of mine linked to this morning – Dune. The Kindle price is $14.99, and the paperback is $12.24. I’d like to know the logic that is used to explain why the electronic version of a book is more expensive than the physical version? It would seem to me that paper, ink, packaging, shipping, and storage costs would certainly outweigh the costs of a few megabytes (if that).

Don’t get me wrong. I am one of those people who agree that paying extra for my convenience at the expense of the convenience of others is perfectly acceptable. I willingly pay for convenience when I know it takes that extra effort on the part of the person providing me with the service or product. However, producing an electronic book does not seem to me to be in that category at all. In fact, it gives me the impression that book pricing is not set based on cost + profit at all, but set on the basis of the basis of greed alone.

I could be wrong and am perfectly willing to accept that. If so, I look forward to hearing from you in the comments.

In the meantime, I am hoping this probe is the beginning of a process to set some standards that will rid us of hiked prices (Apple) or discounted ones (Amazon) for corporate purposes.

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