Amazon Wants To Be Your Friend. Again.copy on his blog, along with his thoughts.)
Which means it's time for a standard round of "Remember who you're dealing with."
Amazon is following Wal*Mart's business model.
Their interests are not yours. They will never be yours. And there's one key phrase in the letter that illustrates that more than anything:
Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99.This makes two huge mistakes.
First, it assumes that all ebooks are perfect substitutes. Oh, sure from Amazon's point of view this is absolutely true. But there are some authors that I'll buy for over $10, some that I will buy at $5, and some I'll never buy, even at $0.99. And from my own anecdata, there's plenty of folks who are now very wary of the low end of the price-pool.
Second, it assumes that greater sales means greater profits for the creators of the work. And that's simply not true. This was demonstrated quite succinctly by Tobias Buckell over three years ago.
So what's the point of this letter? Why is it trying to get indie authors to be on Amazon's side?
Amazon doesn't want to be seen as the bad guy.
Amazon plays hardball - VERY hard ball - and there's nothing inherently good or bad about that. They're a corporation. That's what they do.
But they want to be seen as your friend at the same time. They want to be seen as being good to "book culture"... and they can't do that while simultaneously screwing with a major publisher.
Remember, you can't rely on the public backlash without having it.
And Amazon knows it.