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 isnโ€™t being a moron, I donโ€™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.

โ˜… Monday, 15 July 2013

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