Ebook sales have slipped yet again, according to the most recently released figures. So far, 2015 figures have shown a significant drop in sales from 2014 figures. Most pointedly, the big publishers who signed price-setting deals with Amazon have reported declining revenue from ebooks, leading to questions about the wisdom of having made those deals in the first place.
Those deals were meant to stem the tide of Amazon’s price cuts. Before these deals were made, Amazon would regularly slash the cost of ebooks that they had purchased from big publishers. Driven by an effort to win more ebook readers, Amazon would willingly swallow the loss of profits.
Turning the Tables
A few big publishers who were worried about Amazon’s absolute control over prices sought to change the way in which ebook prices were set. The deals they spun created a new practice that would allow them to set their own prices for ebooks. The new price structure, called “agency” pricing, has publishers setting the retail price of ebooks and automatically giving 30 percent of the profits from the sale of the books to Amazon.
Now it seems that the publishers’ innovation is turning the tide against them. With agency pricing, the prices of most publishers’ books are set at above ten dollars. Amazon’s customers, who have grown accustomed to bargain prices, balk at purchasing higher-priced titles. Setting their own prices has led publishers to lose desired revenue.
Overall, publisher ebook revenue has fallen by 10.4 percent since the same period in 2014. Hachette, a big publisher who cut a deal with Amazon, has seen a 7.8 percent drop in revenue due to reduced sales of ebooks. Apparently, curtailing Amazon’s price-dropping practices brought the unwanted side effect of alienating customers.
Big publishers HarperCollins and Simon & Schuster reported similar lackluster ebook sales’ revenue. Industry insiders readily attribute the loss in revenue to the new business model for ebooks. On average, big publishers’ books in the Kindle bookstore cost $10.81. All ebooks on the site from smaller and independent publishers cost an average of $4.95. Consumers, speaking with their wallets, have been choosing to go with the lower-cost titles.
Furthermore, given the ease of perusing Amazon’s website, book browsers are sure to notice that often, publishers’ hardcover books cost nearly the same amount as the electronic versions of those books. That price similarity would be enough to drive away many potential e-buyers.
So far, setting retail prices for ebooks has not worked out well for big publishers. The question remains whether they will opt to drop their prices and perpetuate the very practice they had wanted to snuff out.