The New York Times had a piece yesterday on ebook pricing, which I have written about before. Interestingly, the piece simply states and doesn’t question that an ebook retailer such as Apple should be entitled to a 30% fee.
What will Apple provide? There would seem to be four separate functions: discovery, payment, delivery and DRM. Let’s start with payment. The fraud rate for ebooks is likely to be very low and the cost to process a payment at scale should be no more than 25 cents (and hopefully even less in the future if companies such as Square succeed even). Delivery is essentially free, as most ebooks are a couple of MB big at best. Discovery is something that Apple does well for music with Genius, but by far does not have a monopoly on with music blogs and services such as last.fm and Pandora. For books the same is likely to be true. Apple may have roll out a Genius feature for those also, but there are many other places to discover books such as Goodreads or DailyLit. With a lot of competition for discovery it seems to me that it should not command more than 50 cents to $1 per book.
Now at 30% on a $12.99 book, Apple is getting almost $3.90 per book, which after subtracting my estimates for payment, discovery and delivery leaves over $2.50 for DRM and Apple profit. That does not seem either reasonable or sustainable to me in the long run.
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