So over here at Teleread they’re calling for badly rating books online due to their costs:

maybe “˜hurting’ the authors is what we actually need to do for awhile. I don’t mean “˜hurt’ them through piracy or anything ridiculous like that. But we have to get someone to see that this fear of all things digital is costing authors actual sales from people who want to spend legitimate money. If a spate of 1-star Amazon reviews is what it will take to send panicked authors running to their agents and publishers demanding change for us, I say Power to the People.

Okay, suppose Teleread and the 9.99 crowd win.

Congratulations. All eBooks will be $9.99. Maybe even a set price. But at least close to it. Because older books are going to remain higher to offset the lower price of the new release.

Before this Amazon.com sold my eBooks that were out in paperback for $7.99. Now Amazon was paying my publisher $3.99 per backlist book that was out in paperback, making a $4 profit per copy sold.

Notice that phrase: Amazon was making a $4 profit everytime you purchased Crystal Rain or Ragamuffin.

My book Sly Mongoose is out in hardcover. $26.95, so Amazon paid half that for the book: $13.75 per book. They sold it at $12.50. Obviously the consumer is happy to get Amazon paying $1.25 in subsidies per book to sell it lower.

Notice, though, that Amazon wasn’t selling my book for $9.99 like it was others. Why is that? Because I’m a midlist writer, not some bestseller.

So why does Amazon subsidize bestsellers so hard?

One is that Amazon isn’t as interested in people who already have a Kindle and people reading backlist: they’re committed readers already. Amazon is trying to get people onto the Kindle. So it makes simple business sense for them to attract new Kindle buyers with a savings guarantee: buy a book with us and you’ll save over buying in print, so that the really high cost of buying the device actually saves you money after X number of books purchased.

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But that doesn’t lower all book prices. Amazon chooses to price backlist titles and make a decent profit off of them.

OMG, Amazon is in this for profit! I thought all they did was stand up for the consumer!

No, Amazon made a promise implicit to it’s Kindle buyers: buy this device for $300 or so, and you’ll save $5 or so per new release. Most of the $9.99 crowd feels entitled because Amazon told them they should be. They’re very much wedded to that promise. As they should be, it was a smart marketing move.

Incidentally, despite people asking, one reason I don’t own a Kindle was because I read books on the Kindle App on my iPhone. I purchased my iPhone because it was a cool device I wanted on its own merits. I buy books, usually under $9.99, as that’s a psychological pressure point price, but sometimes from authors I like for more than that price. I don’t have to factor in the fact that I spent $300 on a device just for reading. The iPhone does a bunch of other stuff (as will the iPad by the way).

But now Apple has a released a device, and no one who buys an iPad will do it because Steve Jobs made an implicit promise, but either it will sell well on consumer desire for it or not.

So, Amazon could have just as easily done the following:

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If Amazon had chosen a method where it added a small amount of profit over the wholesale price it paid per book, consumers would have had $4.99 books. But this alters consumer behaviour. It would jack up backlist sales and slow down new release sales over the current situation, but with books under the psychological price point of $5, a lot of sales would result. You can buy 2 backlist books for the price of 1 $9.99 new release!

Even better, if Amazon had wanted to, not subsidize and distort the market, but offer books at exactly what they cost and take no profit, they could have launched the Kindle saying “$3.99 for any currently out in paperback book.”

But make no mistake, Amazon is a company, like my publisher, making a PROFIT off of consumers. This is the way markets and capitalism work. It’s bloody brilliant.

Amazon, however, chose, instead of rewarding readers of any kind in its store, to keep the price on backend level with paperback prices to make a profit, thus narrowing the range of consumer price for ebooks. If you ever purchased a book for $7.99 for the Kindle Amazon made $4. And they had every right to.

If Amazon were a selfless champion of the reader, and only cared about passing costs down to you, you would have been paying nearly half for backlist eBooks.

But you aren’t. And we’re here. Because Amazon wants to sell Kindles. And to get new people on a Kindle, it needs an advertising message. And its aimed at new releases.

Those of you who love books in general, well, you have the two charts above. Take a close look at them.

Now, if Amazon wins the $9.99 price war, you will continue getting cheaper new releases, but publishers will keep the backlist price high, as Amazon has already set the precedent of doing.

As to everyone who says the publishers will keep them high because they’re greedy bastards, think about the following: when Apple created the App Store app prices had been historically high. I remember paying $60 for a word processing app for one of my smartphones. But Apple didn’t set an app store limit on price, they opened it up and let the market battle it out. Some apps are free, others paid, some are really expensive. People keep comparing books to music, but it’s an odd comparison, in part due to a comment my agent, Joshua Bilmes made, “A book isn’t like a music album where people like one song. No one buys your book because they like one chapter. Comparing the two just confuses the whole argument.” And I think Apple realized that when they asked publishers to sell their books much like they sell apps.

And the app store has been a pretty damn big success.

If Amazon wins, my three novels, Crystal Rain, Ragamuffin, and Sly Mongoose will, yes, probably be for sale for $9.99.

If my publisher wins, they will be on sale for a range of $5.99-$14.99. Crystal Rain and Ragamuffin are backlist, I’m told they’d be for sale in the cheaper realm. Sly Mongoose is still in hardcover, it would be sale for $9.99-$14.99 depending on what the beancounters think.

Teleread is asking consumers to voluntarily pay more for books that came out more than 6 months ago or so, so that everyone can subsidize and continue to subsidize new Kindle owners, and their desire to save money on the latest books.

Keep up the campaign, guys!

But if it happens, and I’m still paying $7.99 and $9.99 for books out in paperback to subsidize new releases like I am now when I buy a Kindle book, I’ll remember who championed this.

So I understand the rage of Kindle owners. They were offered what they thought was an implicit guarantee: that their device would be subsidized, and now that damn iPad is changing the game, and Amazon is losing its fight to keep that promise.