Digital Directions: The iPad Impact
The iPad launch and Amazon's Toucho acquisition may well signal the beginning of the end for electronic ink as an e-book standard, although it may continue to be used for some niche markets. This is good news for publishers, as e-books will be delivered on the same platform as other media. And there is an added bonus: Publishers will have a robust display technology for which they can design e-books with the same artistry and differentiation as they do on the printed page.
The End of the Wholesale Model
Another industry practice advanced by the Kindle program is the use of the wholesale sales model for e-books. In the wholesale model, publishers sell books to retailers at an established price, typically 50 percent of retail. Retailers can sell the title at whatever prices they like. Amazon used the wholesale model to try to drive both Kindle device and e-book sales by pricing e-book titles at $9.99, even if that was less than the wholesale price Amazon paid to the publisher. Amazon subsidized the marketplace. This tactic indeed proved successful in the short-run at driving sales and giving a kick-start to the Kindle program and the e-book marketplace.
The wholesale model is a cause of concern in the long term, however. By setting e-books at a standardized and arbitrarily low price point, it signals to the marketplace that these offerings are less differentiated and of less value. In addition, the lower price point e-books threatened hardcover sales for simultaneous e-book/hardcover releases. This has the potential to become a downward spiral of reduced e-book expectations in terms of availability, quality and revenue. The wholesale model compromises the long-term prospects of this marketplace.
More ominously, Amazon could, at any point, decide to stop subsidizing the e-book market, and offer to pay the publisher only $5 on a $10 sale.