Who’s the Bigger Fool: the Fool, or the Fool Who Follows Him?

Mike Cane argues that the evidence in the DOJ/Apple e-book case shows that the big six publishers are stupid:

The math pros of the Big Six crunched the numbers and revealed this agreement would cost all of them money. Yet they still went ahead with it! If that isn’t being a moron, I don’t know what the hell is!

Maybe they are stupid. But on the issue of pricing and near-future profits, I don’t think so. With the wholesale/retail model that was in place, pre-iBooks, they were making more money per book from Amazon, and selling more books at the $9.99 retail price. With the switch to the agency model, retail prices went up, so of course unit sales went down. And, the publishers made less money per book.

But long-term, the publishers were concerned about what would happen if Amazon continued to dominate the e-book market with retail prices at $9.99. Eventually, Amazon might have forced the publishers to lower their wholesale prices dramatically. The big six publishers were willing to sacrifice a slice of their revenue now (17 percent, by their own calculations) in order to regain long-term control over the retail pricing of e-books. You can disagree with that, but it’s not moronic.

Monday, 15 July 2013

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