Effects of Apple’s Entry Into The e-Book Market

There is a lot of notion going on out there in the eBook market that the launch of Apple’s iSlate (a.k.a Tablet) that is expected to launch in couple of days will bring a huge shift in the entire paradigm of how the ebook/publishing market operates.

Here is why this could happen: Apparently as per sources publishers have worked out an agreement with Apple to shift from the existing wholesale model to an agency model for their ebook sales. Let me explain the difference between the two models: In the wholesale model the publisher sells the book to an intermediary based on the established retail price and the discount terms(which usually ranges between 50-55%). The purchaser then re-sells the ebook at whatever  price they wish to sell it for. When publishers offered discounts that were the same as the physical world discounts, they partially subsidized retailers who wanted to offer much lower ebook prices to consumers.

In the agency model on the other hand the publishers sets the price and any agent that gets the deal for the publisher gets commission from the publisher. Since Apple’s normal share that they have set is 30% and the usual range of discounts from publishers have been 50% off the established retail price, publishers can actually keep back some of the margins even if they don’t get Apple to concede anything from the 30%.

So this change in the entire pricing model could actually accomplish three major things for the publishers:

1) Greater control over the ebook pricing as compared to the print book pricing

2) Ability to re-design the revenue share and supply chain splits of the sales dollars

3) Last but not the least gaining an almost permanent edge over some of the smaller publishers on the margins.

That said, it surely indicates that Apple’s entry into the eBook market might have a huge impact on the future of the ebook market.  But what is more interesting here is what will happen when Google Editions launches-will that again change the paradign of the eBook market?

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