With the industry intently focused on Amazon and its further expansion into the digital reading space—see accompanying story for more on the release of the Kindle DX—the price for e-books and how profits on them are broken down continues to be a hot topic among publishers, authors and agents.

Currently, publishers make as much money on Kindle editions as print editions, since Amazon, the largest e-book retailer, pays the same discount for e-book editions as it does for print—off the same list price, whether bound book or e-book. (An Amazon spokesperson would not comment on the discount issue, but a number of publishers confirmed that Amazon pays the standard discount—which is, with some fluctuation among houses, about 50% off list price—for Kindle editions.)

Amazon, which sets the price for everything it sells, is, as many people interviewed point out, losing money on a majority of Kindle editions. Although the price point for Kindle editions varies, the dominant one for hardcover bestsellers is $9.99, a price one publisher called “a killer.” (The e-tailer is pricing some of its Kindle bestsellers even more aggressively, with titles like Stephenie Meyer's New Moon, currently #4 on the Kindle bestseller list, at $6.04.) At $9.99 Amazon is selling its Kindle editions at, generally, a 60% discount; Amazon sells its print bestsellers at, on average, a 45% discount. The reigning price point in the Sony e-book store, with variations, is $11.99.

That Amazon is currently treating the bulk of Kindle editions as loss leaders—items it either breaks even on or loses on to build market share in e-book sales and to fuel the growth of the Kindle—is one of the worrisome aspects of the current system. The concern among publishers is that, at some point, when Amazon sells both the bulk of the digital reading devices and the bulk of digital books, it will refuse to pay the same discount on Kindle editions, forcing publishers to a lower price for digital editions. This scenario, the head of one of the major houses said, poses a major problem. “Right now the entire economic model for book publishing, shaky as it is, is in jeopardy from this low pricing,” he said. In this publisher's view, lower digital prices will put pressure on publishers to increase royalty rates despite the fact that “there are no margins to do so.” Another option would be for publishers to drastically lower advances, something that would enrage authors and agents, who aren't happy with the current split of e-book sales.

Paul Aiken, executive director of the Authors Guild, said that royalties on e-books generally run in “two flavors,” with authors receiving either 15% of sales off the list price or 25% of net receipts. (In many cases this means that an author will often earn the same from Kindle sales—since the list price is the price of the print book—as print sales.) However, as one agent pointed out, it's not a fair breakdown when the publisher's take is scrutinized. This agent noted that, because publishers aren't paying for printing and shipping costs with digital editions, some houses are keeping up to 75% of the net receipts on Kindle sales, thereby making “far more money per copy” than on print books. Publishers counter that printing and shipping is only a small part of the overall cost of producing a book. “The pricing in publishing has very little to do with manufacturing costs and most to do with the cost of author talent. That does not go away when you sell an e-book,” the head of one house asserted.