In books, what looks like death is really progress

Ed here: Steve Pearlstein almost always finds an interesting angle on publishing news. Here's a excerpt from his column today:


Steve Pearlstein from The Washington Post 3 Feb 2010

Last weekend, a noisy little melodrama in the book publishing world involving Amazon.com and Macmillan provided a wonderful case study of the radical transformation taking place all across the economy as a result of the digital revolution.

In books, what looks like death is really progress.

Wednesday, Feb. 3 at 11:00am EST: Pearlstein: How the iPad impacts new media business models
In the book business, that transformation has been led by Amazon's Jeff Bezos, who has been a master at using the Internet to cut out the middlemen that stand between the author and the reader, delivering books to consumers at lower prices. This process of "disintermediation" started about 15 years ago, when Bezos figured out how to cut out bricks-and-mortar retailers by shipping books directly to consumers' homes from his company's warehouses. But the real breakthrough came when Amazon introduced the Kindle reader and began using wireless phone networks to deliver digital books for $9.99 a pop.

Amazon's business model was, in fact, the reverse of the one used so successfully by Gillette, selling razors at little or no profit but making it up on high-margin razor blades. In this case, the $9.99 retail price for the books (the blades) was actually less than the $12 to $14 "wholesale" price Amazon paid to publishers. That loss, however, was made up for by the high profit margins on the Kindles (the razors), which sell for $260 to $490.

for the rest go here:

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/02/AR2010020203910.html?hpid=artslot