The great ebook price swindle – The Guardian – Dan Gillmor

Publishers have two major distribution methods. One is traditional wholesaling: sell the book to a middleman, who typically adds a mark-up to customers, but sometimes discounts a book below cost as a “loss leader” to attract more business for items that aren’t discounted in this way.

The other model is called the “agency” system. In this case, publishers set the price and the bookstore merely handles the sale to the ultimate customer, for a set fee or percentage of the transaction.

The “big six” US publishers all sell their physical books via the wholesale model. After years of wholesaling digital editions as well, they moved to the agency model for ebooks, with Random House becoming the final publisher to switch early last year.

…An ebook priced like a physical book is a terrible deal for the customer. Among other drawbacks, you can’t resell – or even give away – an ebook in most cases. You don’t really own an ebook; you’re just renting it, even if the company you rent from says you can keep it, because that depends on the life span of the seller.

Read on to see why “publishers are facing an uncertain time in the digital world – but increasing the prices of their ebooks is a retrograde step.”