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New e-book pricing scheme a surprising assault on the wallet

Emmanuel Dunand / AFP - Getty Images

The Amazon Kindle Fire tablet.

New versions of e-readers from Amazon.com and Barnes & Noble will no doubt grace Americans with their now-more-affordable presence beneath Christmas trees this holiday season.

But what happens when the price of the e-books to be read on a Nook or Kindle suddenly shoots up, making the whole arrangement a lot less affordable than previously thought?

The problem of so-called "e-book sticker shock" is becoming a reality ever since six of the top book publishers banded together and agreed to set prices for the electronic books they sell, according to a story in The Wall Street Journal. In some cases the price for the e-version of a book is actually higher than the physical version, the article said.

Retailers have been selling e-books for around $9.99, or sometimes less, making the ownership of an e-reader look like a value proposition when compared with the double-digit price of buying a new hardcover book.

But the new pricing agreement among publishers effectively prevents retailers from discounting e-books without a publisher's permission, and no such agreement exists when it comes to printed books, according to the story.

That means retailers can still slash the price for physical books as much as they please in order to entice readers to buy, but they'll have to comply with the new, higher prices for e-books set by the publishers. The wholesale price charged by the big publishers for both e-books and hardcover books was $12.50, meaning that before the agreement, Amazon.com was losing money by selling e-books at $9.99, books, according to the Journal, but the low price encouraged consumers to get in the e-reader game.

The Journal story goes on to explain the reasoning behind the change:

 “Under the new pricing model, a $25 hardcover is often priced at $12.99 for the e-book. And because publishers receive 70% of the e-book retail price -- while retailers retain 30% -- that means publishers receive only $9.09. Publishers were willing to accept the lower profits because they felt the new arrangement preserved the value of books and encouraged other retailers to enter the e-book market. Indeed, the new arrangement means guaranteed profits on best-selling titles for retailers like Barnes & Noble Inc., which today claims about 27% of the digital books market, as well as Amazon.”

The whole agreement was actually launched at the behest of Apple’s Steve Jobs, who had wanted to create an e-bookstore for the iPad but didn’t want to compete with Amazon.com’s cheap titles, according to the story. And now the Justice Department is looking into whether Apple and book publishers improperly colluded to prevent price discounts, the Journal said.

Some examples of these pricing snafus? Well, the WSJ cites Ken Follett's 985-page novel "Fall of Giants," which costs $18.99 as an e-book, but can be purchased in paperback for $16.50 on Amazon.com

And while e-books do offer advantages -- such as portability, convenience, and the ability to highlight and take notes, which might account for an elevated price -- comments on the Journal's story showed readers were less than thrilled by the new prices of e-books.

Reader Melanie Premo, for example, wrote:

“I bought a Kindle when ebooks cost 9.99. Since Amazon raised the prices for ebooks, my Kindle mostly sits, unused. If I'm going to pay 15 bucks for a book, I want to be able to loan it out or give it away when I'm done with it.”