iPad may reset downward spiral on e-book prices

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iPad may reset downward spiral on e-book prices

Jan 28 2010

Publishers are looking on Apple's iPad as a chance to reset the downward spiral in e-book prices. Yesterday, when Steve Jobs announced the new iPad he also confirmed that five of the six largest publishers have signed on to provide e-book content for the new tablet. Hachette Book Group, HarperCollins Publishers, Macmillan, Penguin and Simon & Schuster are all on board, while a spokesman for Random House, the world's largest publisher of books for consumers, said the company would "look forward to our continuing conversations" with Apple.

Apple and publishers have agreed a business model that gives them more power over the price that customers pay for e-books - control that had been effectively lost with Amazon's Kindle. With Apple, the maximum price of an e-book will be tethered to the print price of the book so that most general fiction and nonfiction titles will be $12.99 to $14.99 with Apple taking 30% and the publishers taking 70%.

In the short term it is likely that authors and publishers will earn less from book sales on the iPad because Amazon subsidizes the low $9.99 price point on the Kindle by paying publishers a higher wholesale price equivalent to what booksellers typically pay for print editions. The worry for all publishers, though, has been that once the $9.99 price point had been firmly established in consumer's minds and Amazon had achieved dominance in the market place, that they would stop subsidizing the $9.99 price point and demand lower digital wholesale prices, which would make it difficult for publishers to make a profit on anything other than the bestselling books.

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