Amazon sold more Kindles in 73 days of this year’s Christmas season than it did in the whole of 2009. It’s a massive success, and appears to have cornered the ebook market. There’s a problem, though – agency pricing.

Normally retailers, be they online or high-street stores, set their own prices. Distributors and manufacturers can ‘suggest’ prices (MSRP), but retailers can ignore these if they so choose. It’s called competition, and it’s a good thing.

Until recently this was the case with ebooks, and Amazon had been selling them at prices slightly below hardback and paperback versions. As you don’t get a physical copy, just a digital file, this makes perfect sense.

Then ‘agency pricing’ came along. This is when publishers set the price. Big publishing names (such as Macmillan and Penguin) have catalogues large enough to make them powerful and they’ve demanded to set the prices. Unfortunately they’re high – too high.

Putting a price on convenience

A glance at Amazon’s bestsellers list is revealing. Some top-selling titles are set ridiculously high. For instance, ebook biographies from Stephen Fry (prices pictured below) and Michael McIntrye both sell for £12.99 – around £4 more than the paperback and hardback versions.

These are two extreme examples – there are still plenty of books unaffected by such practices, but look hard enough and you’ll find many ebooks, old and new, with unrealistically high prices.

So are the publishers to blame? Yes and no. Yes, the publishers are clearly using strong arm tactics here – they know Amazon wants ebooks to be successful, so have used this against them. However, Amazon isn’t totally innocent either.

It’s been the dominant player in book retailing for a long time, and by many accounts has misused this power in the past by demanding greater and greater discounts.

It looks increasingly likely that Amazon and the Kindle have corned the market in the same way that iTunes and iPod have with digital music. So it’s understandable the publishers are afraid of its power, even if their response is short-sighted.

The consumer is the loser

While Amazon, publishers and other ebooks stores (among them Waterstones and The Book Depository) squabble, it’s consumers who are losing out – doubly so given the restrictions put on ebooks. It’s conceivable the market will decide – Amazon insists affected ebooks have seen lower sales since the change – but it’s anyone’s guess how long this will take.

There are also legitimate arguments and discussions to be had about the future of publishing, and how to protect the income of authors.

One thing is for certain, though: agency pricing is not the answer.