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  • Have you ever wondered why some ebooks are more expensive than paperbacks despite being cheaper to make?

  • Well, it's because ebooks are sold using a completely different pricing system.

  • When retailers like Barnes & Noble sell a paperback, they're allowed to set the price which usually results in cheaper books, since each store is competing for customers.

  • Also, shelf space is limited, so it's common for stores to lower prices on older books so they can make room for new releases.

  • Either way, publishers like Simon & Schuster have no control over these price changes and they don't like that because if a store charges less, the publisher makes less.

  • When ebooks became popular, publishers saw an opportunity to create a more favorable pricing system and they teamed up with Apple to make it happen.

  • This resulted in what's called the agency model, which gave publishers control over ebook prices, instead of retailers.

  • You might assume stores were upset by this change, but they actually welcomed it.

  • Apple wouldn't have to worry about Amazon undercutting them and vice versa.

  • Ebook prices would remain high, earning retailers more money and because digital stores have unlimited shelf space, there was no pressure to discount older ebooks.

  • And of course, publishers were happy. They'd make more profit per book, not only because they could keep prices high, but because their costs were even lower than before since ebooks are digital and cheaper to produce.

  • But there was one group of people that didn't benefit from this change, the customers who pay a higher price for ebooks today than they did 10 years ago.

  • The problem with this whole scheme was its legality.

  • By colluding with book publishers to manipulate the price of ebooks, Apple violated section one of the Sherman Act that earned them a lawsuit from the US government where Apple was forced to pay $450 million in damages.

  • But they didn't have to change the way they did business.

  • So despite the successful lawsuit, the agency model is still used in the ebook industry, which means we're unlikely to see the average ebook price fall anytime soon.

  • This is Greg with Apple Explained and if you want to learn how I make videos like these, let me know by tapping the link in the comments.

Have you ever wondered why some ebooks are more expensive than paperbacks despite being cheaper to make?

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