Why The World’s Biggest Book Publisher Is Avoiding The iPad

Why The World’s Biggest Book Publisher Is Avoiding The iPad

You’ll notice a major publisher is missing from this slide: Random House; the biggest one in the world, actually.

That’s because it’s afraid of an ebook price war, apparently. Which is kinda strange, actually, since it’s sitting pretty on the Kindle, and most of the big publishers are clamouring to move from the Amazon model of selling ebooks to Apple’s, precisely for that reason, despite serious retribution from Amazon.

To recap, under Apple’s pricing scheme, publishers set the book’s selling price, and Apple takes a 30 per cent cut – which is known as the agency model. (Apple reportedly reserves some power to cut prices to match other retailers though.) Under Amazon’s, Amazon pays a wholesale price – $US7 or $US9 or maybe $US15, whatever the publisher sells it to Amazon for – and Amazon sells the book for whatever price it wants, which, in the case of many bestsellers, has been $US9.99 (and sometimes Amazon even takes a loss to set that price). The reason the big publishers have been flipping to Apple’s side, and asking Amazon to use that same pricing scheme – despite making less money per book under the agency model – is because they want to control their own pricing, and they’re deeply afraid of $US9.99 becoming what people consider the “standard” price of a book the same way that 99 US cents is the standard price of a song.

So, it’s pretty weird that Random House doesn’t want to be on the iPad, when it would theoretically have more control over the price of its books, and like MacMillan, be able to use the competitive threat as leverage against Amazon to extract more favourable terms. It seems particularly backward when you consider just how radically some big publishers – like Penguin – are reconsidering what a “book” really is in the context of the iPad.

But I have the feeling when (or if, to be more conservative) the money starts pouring in, so will Random House titles. [FT]