The Casual Vacancy, the first and much-buzzed-about book for adults from “Harry Potter” author J.K. Rowling, hits shelves (and the e-readers of those who’ve preordered it) on Thursday. The book, an almost guaranteed bestseller, is likely to be publisher Hachette’s top-selling title this fall or even this year. Many readers will rush to buy it tomorrow — but thanks to the realities of the ebook price fixing settlement, they’ll be paying an unusually high price for it.
That won’t be the case for long. Soon enough, retailers will be able to sell the ebook edition of The Casual Vacancy for $9.99 or whatever price they want. But tomorrow, when the ebook goes on sale, and for several weeks after that, customers will be paying more for it than they would have before the ebook pricing settlement was approved.
Here’s why. The suggested retail price of The Casual Vacancy hardcover is $35. Publishers use wholesale pricing for print books: They set the books’ list price; retailers buy the books at a discount and can then resell them at whatever price they want. That’s why The Casual Vacancy hardcover is $20.90 on Amazon (s AMZN).
For ebooks, things are different. Recall that Hachette is settling with the Department of Justice over allegedly colluding to fix ebook prices. Upon the settlement’s approval, Hachette (and the other two settling publishers, HarperCollins and Simon & Schuster) had seven days to terminate their contracts with Apple (s AAPL). Now Apple’s (s aapl) price bands — which would have stipulated that The Casual Vacancy ebook be priced at a maximum of $16.99, assuming a hardcover price of $35 — are no longer in effect.
The settling publishers have longer to terminate agreements with other retailers, like Amazon: “Starting 30 days after the Court enters the proposed Final Judgment,” they may terminate those contracts “as soon as each contract permits” (i.e., when it expires), or the retailers can terminate the contracts on 30 days’ notice. That adds up to about sixty days of wiggle room. (Thanks to Dear Author blogger and attorney Jane Litte who helped me with some of the math on this.)
The settling publishers can enact new retailer contracts much faster, as HarperCollins did, but they don’t have to if they don’t want to. Hachette CEO David Young told the WSJ on Wednesday that the company hasn’t yet agreed on new contract with retailers.
In the meantime, Hachette’s in a sweet spot where it’s no longer limited by Apple’s price bands, but non-Apple retailers like Amazon also aren’t allowed to discount its books. So if you want The Casual Vacancy tomorrow you’ll be paying $17.99. (A possible caveat: If Apple is now operating under a new contract with Hachette, it seems it could discount The Casual Vacancy if it wants to. At that point, Amazon and other retailers might be able to invoke the most-favored-nation clauses in their own contracts and drop the ebook’s price as well. We’ll see if this happens.)
Note: I’m aware this post is likely to engender a lot of “greedy publishers” comments. The fact is that the ebook pricing settlement incentivizes publishers to set higher ebook list prices. Depending on the new contracts that Hachette works out with retailers, there may be little difference between the money that Hachette gets from Casual Vacancy sales now and the money it gets once those new contracts are enacted.