The key component of the dust-up between Amazon and book publisher Macmillan (who has since been joined by Hachette Books and HarperCollins) is the pricing model used to sell electronic books. Amazon wants to set a fixed price with a fixed dollar amount going to the publishers. Publishers don’t like this because it cannibalizes their hardcover sales and (they believe) over the long haul, devalues books in general, especially new releases.

Teresa Nielsen Hayden over at Making Light has posted a very informative post about the “agency model” that the publishers would like to use.

Here is a key point she’s trying to make:

The difference between the agency model and Amazon’s plan for world domination is that Amazon wants to license* the ebooks in its Kindle program, control their content, and set their prices. That is: it wants to be the publisher, not a distributor or seller. This might be doable if Amazon were out there negotiating to buy rights at market prices. It isn’t. Amazon expects to have the rights just handed over, as though it were doing the conventional publishers a favor.

In the long run, the Amazon model turns publishers into unfunded R&D labs that are obliged to turn over everything they develop to other companies at rock-bottom prices. It isn’t viable, and it’s not author-friendly in six different ways. Have you ever seen a discussion of how badly messed-up Kindle texts are? Amazon’s business isn’t about books and authors; it’s about selling units at a discount.

There’s a lot more, so I encourage you to head on over and check it out. (It’s a few days old but I’ve been incredibly under the weather and just stumbled over it today.)