Sunday, November 16, 2008

Economic Psychobabble

The New York Magazine is concerned about Kindle:

The ultimate fear is that the Kindle could be a Trojan horse. Right now, Amazon is making little or nothing on Kindle books. Lay down your $359 and you can get most books for $9.99. Publishers list that same Kindle version for about $17.99, though, and—as with all retailers—charge Amazon roughly half that price for it. Which means that Amazon keeps only a dollar on each book, while the publishers make $9.

But Amazon may be offering a sweet deal now in order to undercut publishers later. If their low, low prices succeed in making e-books the dominant medium, they can pay publishers whatever they want. “The concern is they want to corner the market,” explains one books executive, and then force publishers to accept a genuine 50 percent discount. “If they took over as little as 10 to 20 percent of the market,” says an agent, “publishers simply would not be able to exist.”

Seriously, this "fear" is completely asinine. Let's assume, just for the moment, that Amazon is successful in making the e-book the dominant medium. Do you really think that no other company will realize this movement is going on, create their own Kindle-esque product, and compete with Amazon? Of course not...Borders or Barnes and Noble or Apple will have one long before Amazon can use their market power to "exploit" publishers. And what this competition will do is force the e-book makers to offer publishers higher prices for their products--if Amazon tries to tell a publisher that they will only pay them (say) $5 for a book, Apple will come along and offer $7, and the publisher won't sell to Amazon.

Publishing houses have absolutely nothing to worry about with regards to e-books--in fact, they should relish the e-book and embrace it.

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