Publishers are now under 2 investigations about price-fixing of eBooks (just investigations - no proof so far that anyone has done anything illegal). Whatever happens, the episode raises some interesting points about how publishers, wholesalers and customers do businesss.
Until recently, publishers typically sold by the Wolesale model. The publisher and wholesaler agree a price and a number of printed books to be shipped to the wholesaler. It is then the wholesaler's business to decide what price to charge their customer. Since the collapse of the Net Book Agreement in the 1990s, a UK publisher has had no legal right to dictate retail prices. Probably that has resulted in a lot of books that I have bought since then have been cheaper for me as a consumer. But it has caused some discomfort in the publishing industry, and probably not just moaning about having to work harder to survive in an industry that has become more competitive.
Critics of the wholesale model say that it leads towards monopolies in book-selling. A wholesaler doing large volume can arm-wrestle better with publishers over terms, and then gain competitive advantage from that lower price. That can drive up market share, enabling the seller to get better terms out of the publisher next time. And so it goes. Moreover, sellers with enough volume can afford to sell some titles as a loss-leader (i.e. making a loss on every copy sold but hoping to make up in other ways). Later Harry Potter novels famously were used as loss-leaders, with stories of small bookshops buying stock from supermarkets and reselling, as they could get a better price there than from the publisher or their usual wholesaler. Only those with deep pockets can loss-lead, and trade magazines at the time had a lot of copy about the fairness of all this.
Perhaps because of these problems, a number of publishers are using the Agency model for eBooks. In this, the publisher and wholesaler agree a price and a percentage commission that the wholesaler gets. With eBooks, it would not be necessary to agree a quantity of copies - the agent could sell what they can and the publisher could find out how things went from the sales data the seller provides. Apple use this model for iTunes, for example.
But once publishers are again able to set prices (nowadays without legal cover from the Net Book Agreeement) publishers have to be very careful what they discuss with each other, lest they move into cartel land.
It is a confusing time for the industry - I recently was discussing the fate of fiction publishing with my friend the author and lecturer Anthony Nanson. We couldn't decide whether a combination of price-cutting and piracy would render today's publishing models mostly un-economic, or whether there would be a new golden age.
