If I remember anything from microeconomics class--and it's by no means certain I do--it's that, in an efficient marketplace, the price of an item should be equal to the marginal cost of producing that item. OK, that may not be right, but I do remember that price does relate very closely to marginal cost. And that raises the question of how price is determined when marginal cost is essentially zero.
A recent Justice Department lawsuit accused a group of publishers of price-fixing. Mainly because they were fixing prices. To be precise, the publishers were taking advantage of a new(ish) device platform--the iPad--to allow themselves to set prices for e-books. Pricing was always something of a publisher's prerogative, but this has been challenged by Amazon.com's dominance in the e-book retailing field. Amazon has reduced the upper-level price of most books to $9.99, and publishers fear this will irreparably damage their profitability. Moreover, while consumers may at first appreciate the lower prices enforced by Amazon, they may not be so happy if such a pricing strategies eliminates competition and leaves Amazon as the sole arbiter of how much books should cost.
But how much should books cost? Particularly e-books, for which the marginal cost of "printing" another copy is effectively nothing?
I believe firmly in the principle of paying the writer. So, to the extent that authors are paid by publishing houses, I don't want publishers to go out of business. Publishers also provide vital services to authors beyond the paying of advances and royalties, and these services cost money. Some of these costs will likely decrease as we move firmly into the age of electronic publishing: Books won't necessarily need to be printed or bound in large quantities, nor will massive shipments need to be delivered across the country and world. Other costs, of course, will still remain: Even e-books need to be edited and promoted, for example.
But do these services depend on the existence of large publishing houses? Publishing is moving more and more towards becoming what it perhaps should always have been: a completely author-driven process. People can already self-publish their books through Amazon or other sites. And if Joe Schmo, who has devoted his life to the study of boomerangs, can find his readership--small though it may be--why would any author need a large publisher. Presumably "name brand" authors could set up "subscription services." Pay $5 a month to have unlimited access to "JKRowling.com": Read the latest chapters of your favorite authors' newest work as it's produced. Free-lance online editors and marketers would assume the tasks previously concentrated in the big publishing houses.
Amazon may pose a huge challenge to the traditional model, but that doesn't mean the model must be preserved. Ultimately, as much as the internet is a threat to the "standard" model of literary distribution (and, indeed, the distribution of artistic production in general), this could turn out to be a time of great opportunity for these industries. And if the real producers--the writers and other artists--take proper advantage of these opportunities, the internet could prove the greatest boon to literary production since the printing press.
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