The publishing industry has a problem. The old guard haven't innovated. And neither their business models nor their products embrace the digital books revolution.
Take the ongoing and complicated spat between Apple and the Justice Department over the agency pricing model and alleged collusion which ended up with consumers being forced to spend more than they needed to. The battle may expand internationally, in fact. Apple tried to expand its 30% revenue share model, which has done very well in the billion-dollar app economy, into books. It also pushed publishers to agree to a very different way of selling their products: Instead of buying books traditionally, at a pre-agreed wholesale price and then pricing them as Apple saw fit in the iBookstore, it would let the publishers set their own price and extract its usual fixed share of the income ... as long as the publishers wouldn't sell e-books elsewhere.
It was a bold move, and one that could and did shake up the industry a bit. Amazon, the publishers contend, had established a monopoly on e-books, and was selling their wares at overly discounted prices. With Apple's model they could choose to price e-books lower than physical books cost (appeasing consumers who expect to pay less for a non-physical product), and yet extract more money due to the cost-savings of e-publishing.
The DOJ disagreed, and says Apple's deal meant consumers ended up spending much more than they needed to, hence its action against Apple and a laundry list of the bigger U.S. publishers. Amazon is now free to renegotiate deals with these publishers and push cover prices lower, which will save consumers cash but may both eat into publisher's profits and, ultimately, author's payments.
As such, it's not a wholly well-received decision as Scott Turow, president of the Author's Guild, recently noted: "Today's low Kindle book prices will last only as long as it takes Amazon to re-establish its monopoly. It is hard to believe that the Justice Department has somehow persuaded itself that this solution fosters competition or is good for readers in the long run." Because when Amazon does re-establish its monopoly, and nudges prices upward, it'll be operating on the wholesale model—with the extra money sunk into its coffers, not the author's or the publisher's.
But as novelist Barry Eisler notes in the Guardian newspaper, there is actually a glimmer of hope in the DOJ's decision. Amazon could, by sheer pressure of business, force a breakup of the old guard of publishers in the U.S., and make them adapt to the new digital realities or face extinction. In short, they'll have to radically adjust their business models, and also embrace writers who can deliver new rich-media books, if they're to keep the book-buying public enthralled and thus make money. Amazon's quick-growing self-publishing enterprise is an example of how the publishing business may evolve without them if they don't do this.
And what do we, the book-buying public, want? Cheaper prices, as ever, but we're also all expecting books to move beyond dead text and into something much more dynamic, something loaded with rich media, something that makes use of the color and graphics of our tablet screens, and perhaps the social networking powers they also sport as apps. Because those kinds of books sure as heck aren't in Amazon's top-selling Kindle list right now.
Update: The New York Times has a story today that shows just how fraught with ridiculousness (in terms of sensible business practice) the ebooks game currently is. Author Buzz Bissinger recently had a shock when Starbucks chose to promote his $2.99 book "After Friday Night Lights" as a Pick of The Week promotion via Apple's iTunes. Customers taking part in the promotion got the book for free, but Bissinger still got $1.50 in royalties from the loss-leading promo. But Amazon then automatically slashed his book price to $0 in reaction to the promotion. And that prompted his publishers, Byline, to pull the title from Amazon because it would've lost money, and because it thought it would damage the author's reputation (Byliner noted it was to "protect the author's interest".) Amazon have since responded, saying their price deal protects consumers when a price is lower elsewhere, but it still doesn't seem fair to gamble with a writer's income in this way.