08/21/2012 02:21 pm ET Updated Oct 21, 2012

The Broken World of Book Publishing

A friend recommended a book to me. He normally has very strong opinions, on just about everything. But he said that this book changed his views, and that was perhaps the best endorsement he could have made. I wanted to read that book.

So I did what any 21st-century consumer would do: I looked it up on Amazon. And that's when I started to realize just how bad the state of book publishing has become.

My first preference would have been to get the electronic version of the book to read on my iPad. Never mind that war between Apple and Amazon means that I have to go to my PC to order a Kindle e-book to download to my iPad. (Or go to Safari on the iPad, which is even more of a pain). What I discovered is that the e-book version, priced at $14.99, was just a dollar less than Amazon wanted for the hard cover.

Now wait, you would say, there is shipping. But if I order a second $10 anything from Amazon, I can get free shipping. So, I normally wait until I have more than $25 worth of stuff I want to buy from Amazon, and then order. Of course, this delays revenue for everyone, but it is what the price signals tell me to do.

Still, knowing that the e-book version has virtually no distribution cost, no production cost (paper, printing, ink, etc.), and no inventory risk, it strikes me as highway robbery that the e-book costs just about as much as the 400-year-old technology version. Electronics are supposed to win, but not when surrounded by a brain-dead business model!

In looking further, I found that Amazon conveniently listed a number of partner retailers who offered new and used versions of the very same book. Naturally, I picked the vendor with the lowest price, about $5, plus $3 shipping. The vendor turned out to be a charity that devotes all of its profit to literacy causes, so I felt extra good about going with the low bidder.

The problem with this scenario is that everyone involved loses. Well, maybe the charity wins, but only at the expense of all the other parties.

As the famous television "defective detective" Adrian Monk would say, "Here's what happened." The publisher printed far more copies than they really could sell, in order to "stuff" the distribution channels and sell as many as possible at full price. However, the retailers have the right to return unsold copies for full credit. In other words, the publisher takes all of the inventory risk.

The publisher dumped the unsold copies wherever it could. This likely included just giving a bunch to the charity. So the publisher is out the cost of paper, ink, printing, and freight both ways. And the author is out the royalties.

But wait, you say, Amazon still gets something for the transaction with the charity. True, but only a tiny fraction of what they would have received if it made sense to me to buy either the hardcover or the e-book from Amazon.

So instead of dipping into the book, I am writing this blog post while waiting for the hardcover book to arrive by snail mail.

In a better ordered world, Amazon would charge half of their $14.99 for the e-book. That $7.50 would undercut the price from the charity after shipping. They should split the loot three ways: $2.50 to the author, $2.50 to the publisher, and $2.50 to the distributor (Amazon).

Then everyone would win. And, I'd be seeing what my friend found so persuasive instead of telling you what's wrong with the publishing business.