Your link is to this article. But, I did a search for John Scalzi (who I hadn’t heard of before), and found this post on his “Whatever” blog:

Amazon’s Latest Volley

Having read it, I can certainly dismiss it – because his arguments are wrong. Let’s take a look:

If you entertain the notion that Amazon is just 30% of the market and that publishers have other retailers to consider — and that authors have other income streams than Amazon — then the math falls apart. Amazon’s assumptions don’t include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell.

The plain fact is that most people are moving towards e-books no matter what. Physical sales are going down, because the demand is going down, regardless of e-book prices. On the other hand, those who buy physical copies will likely pay more for them anyway – they’re already paying more than they would for an e-book, even if prices remain exactly the same as they are now.

In other words, the gulf in prices is not what would drive down sales of paper copies. So the only question is how much money authors want to make from the dominant format, meaning e-books. And by Amazon’s own data (which is backed up by basic economic principles widely known for many decades), lower prices will result in higher profits.

Incidentally, Amazon may be only 30% of the book market, but e-books in general have a far, far higher market share than that. In nearly all book categories (and all fiction categories other than graphic novels), e-books have a much larger share of book sales than paper copies. (See e.g. BISG Report – A Few More Ebook Stats.) If Amazon doesn’t lower their prices, then Kobo, Sony, Apple, and Barnes & Noble eventually will, for exactly the reasons that Amazon said.

Amazon’s math of “you will sell 1.74 times as many books at $9.99 than at $14.99” is also suspect, because it appears to come with the ground assumption that books are interchangable units of entertainment, each equally as salable as the next, and that pricing is the only thing consumers react to.

Except Amazon is not making that assumption. In fact, they say exactly the opposite: “So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99.”

This is how basic price elasticity works, and basic economics predicts that goods that are less necessities will be more elastic. This has been shown to be true for many, many years. It is in total agreement with data collected across other artistic industries, such as the video game industry.

This is where many people decide to opine that the cost of eBooks should reflect the cost of production in some way that allows them to say that whatever price point they prefer is the naturally correct one. This is where I say: You know what, if you’ve ever paid more than twenty cents for a soda at a fast food restaurant, or have ever bought bottled water at a store, then I feel perfectly justified in considering your cost of production position vis a vis publishing as entirely hypocritical.

Ironically, this goes against his point. The production costs associated with the fountain sodas or bottled water are much higher than they are for e-books. The costs of the products themselves are much higher – both for fixed costs (factories, land, bottling machinery) and per-unit costs (shipping, labor, packaging, etc). And people pay for these things because they are convenience; and unlike convenience on the Internet (which is essentially free), that convenience also has higher costs (store rents, labor costs, etc). Yet people pay far, far less for a soda at a fast food restaurant, or for bottled water at a store.

Unless he’s ever paid $14.99 for a soda at a fast food restaurant, or more than $9.99 for a bottle of water at a store, then I feel perfectly justified in considering his cost of production position vis a vis publishing as entirely hypocritical.

I’ve said this before and I’ll say it again: I think it’s very likely that if $9.99 becomes the upper bound for pricing on eBooks, then you are going to find $9.99 becomes the standard price for eBooks, period, because publishers who lose money up at the top of the pricing scale will need to recoup that money somewhere else, and the bottom of the pricing scale is a fine place to do it.

First: if he’d have paid attention, he would have noticed that publishers would make money “up at the top of the pricing scale.” So his whole assumption is invalid.

Second: publishers that price books at “the bottom of the pricing scale” are doing so precisely because the bottom is where they make the most money regardless. If publishers could make more money by raising prices at “the bottom,” they would have done so already. So that argument is also invalid.

Third: Amazon explicitly said that they don’t think $9.99 should be the upper bound. From their forum announcement: “Is it Amazon’s position that all e-books should be $9.99 or less? No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99.”

I think Amazon taking a moment to opine that authors should get 35% of net revenues from publishers for their eBooks is a nice bit of trying to rally authors to their point of view by drawing their attention away from Amazon’s attempt to standardize all eBook pricing at a price point that benefits Amazon’s business goals first and authors secondarily, if at all.

Or, it could be Amazon drawing attention to the fact that authors blame Amazon for low payouts, while the actual reason is that the publishers keep the money that Amazon gives them. (This is essentially how it works in the music biz.)

And it’s really hard to argue that higher sales don’t benefit Amazon and authors equally, if both make their money as a share of the income (which is the case). If you earn 35% of a hundred thousand in e-book sales, then it makes no difference if you get a hundred thousand from 10,000 sales at $10, or from 100,000 sales at $1. So, if the price elasticity benefits Amazon, it benefits authors as well.

The other type of revenue sharing is a flat per-book fee, like the royalty rates in streaming music. But if that’s the case, then authors would benefit from price elasticity more than Amazon itself would.

Either way, higher sales due to price elasticity benefit authors at least as much as it benefits Amazon.

I will grant you this: his position certainly isn’t “an example of reflexive hatred.” In his other posts, he’s made it clear that he works with Amazon, and doesn’t dislike them in particular. It’s simply an example of being ignorant of basic economics, which unfortunately seems to be endemic to a lot of artists.