E-Book Smackdown: Who Should Control Pricing—Publishers Or Amazon?

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A couple of years ago, with Amazon steadily pushing down the prices of e-books, the fortunes of the big book publishers were sinking fast. Then Apple (NSDQ: AAPL) came along and helped enable publishers to set their own prices for their e-books across platforms. That model, known as agency pricing, has helped keep big publishers afloat in a time of major transition. But it’s also sparked controversy and legal battles, including threats this week of a lawsuit by the Department of Justice against Apple and its publishing partners. So who should be able to set e-book prices—the major publishing houses or retailers like Amazon? (NSDQ: AMZN)

SEE ALSO: The U.S. Threat To Sue Apple And Publishers: What It Means

Well, there’s been some debate on that question this week among our own ranks, with two of our writers taking opposite sides. So we decided to let them thrash it out on the site! Below, Mathew Ingram and Laura Owen debate the merits of the agency-pricing model.

Mathew Ingram [MI]: To me, the debate boils down to whether agency pricing is a justifiable and/or sensible approach by publishers to what is happening in their industry. In a nutshell, I would argue that while it might be understandable—in the sense that the Big Six are afraid of Amazon’s growing power in the book business, and want to protect their book margins as much as possible—it is neither justifiable nor (in the long term at least) sensible or advisable.

There’s no question that being a major player in a market that is in the process of being disrupted is not pleasant. Amazon is doing everything it can to not just drive down e-book prices but to disintermediate publishers in a number of other ways, including signing up authors to its own imprint. If you are a giant corporation that is used to controlling the marketplace to a large extent—both in terms of supply and in terms of pricing—then watching a new competitor wrest some of that control away from you is hard to do.

That said, I think agency pricing is unwise—and not just because it has attracted antitrust attention from the U.S. government and the European Union, among others, but because it isn’t in the long-term interests of either readers or (I would argue) of publishers themselves. There is a growing body of evidence that lower prices can boost sales of books by orders of magnitude—which suggests that publishers might actually be shooting themselves in the foot by trying to hang on to higher prices.
Laura Owen [LO]: I think agency pricing actually is in the interest of any reader who supports a vibrant book-buying marketplace that is not dominated by one company—i.e., Amazon.
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