At the roll out of the iPad, our old friend Walt Mossberg of the Wall Street Journal chatted up Steve, and when asking about the pricing of buying books from the iBookstore, Walt was told that the price would be the same as Amazon. Amazon currently charges $9.99 for most books, which, according to AppleInsider, means that Amazon is losing $4.50 per book to keep its leadership position in the eBook market and keep Kindles selling. This strategy is similar to the loss-leader marketing popularized by Gillette who sold razors at a loss in the hopes of more than making up for it in the sales of blades.
Apple proposes prices that would actually be profitable, wanting to position best sellers between $12.99 and $14.99. AppleInsider notes that Apple's plan is a similar one to the App Store where the publisher takes 70% and Apple takes a 30% cut. Under the Amazon plan, including the $4.50 Amazon subsidy, book publishers are currently being paid $14.50 while under Apple's model, the publisher of a bestseller would only make $10.49 per copy.
The idea of Amazon subsidizing books is unsustainable in any competitive market and with more than one big razor in town, or at least one showing up soon, the market will inevitably settle on one method or the other.
[via AppleInsider and WSJ]