In recent years, books have become increasingly available in electronic format. Amazon.com offers e-books on its Kindle e-readers, and Apple Inc. offer e-books through their iBooks App, which covers several devices. Hundreds of thousands of books are now available as e-books. How has this changed the competitive environment of publishing? Arguably, several costs may have disappeared from e-books as opposed to traditional printed books – publishing and distribution costs in the main. But some other costs have increased, notably the costs imposed on publishers by companies like Amazon and Apple. For example, Apple typically takes 30 per cent of revenues, quite a substantial cost. E-books have not fully replaced printed books, but publishers are seeing an increase in e-book sales annually. At the retail end, some book stores are beginning to stock less paper books, opting instead for a print-on-demand service in store. In this case, books are stored electronically, either on- or offsite.

The factors just mentioned present a new competitive model for the publishing sector. Arguably an e-book is a different product, with differing economic drivers. The competitive concerns revolve around maximizing revenues of those books that are suitable for distribution through digital means. While the costs of an e-book are readily determinable, the revenues are not. Some books may be given away for free in the hope that customers will ‘buy-in’ to a particular store with future paid sales. Another model is ‘payper-view’, which generates less revenue that a downloaded e-book. In addition, although Amazon and Apple are the main players now, it is difficult to prevent new entrants or new business models in the longer term.

Questions 

1 How might e-book sellers generate revenues if publishers and authors over time reduce the cut taken from revenue?

2 What are the barriers to entry for firms trying to enter the e-book market?