Edible Apple

With only a few days before the iPad hits store shelves, Random House, the worlds largest book publisher in terms of sales, has yet to ink a deal with Apple to make its content available on the iPad. While other big name publishers such as Simon & Schuster, Harper-Collins, and Penguin are all on board the iPad train, Random House is apprehensive about striking a deal with Apple due to concerns over Apple’s pricing scheme and how that will affect their bottom line in the long run.

The Financial Times writes:

… the absence of the book market leader would prove a blow to Apple. Markus Dohle, Random House chief executive, did not exclude the possibility of reaching a deal before the iPad goes on sale on April 3, but said he was treading carefully, as Apple’s pricing regime could erode established publishing practices.

Apple of course is planning to apply its tried and true 30/70 revenue split that proved to be so successful on the iTunes App Store to e-books. In the non e-book world, retailers purchase books from publishers and sell them at a profit. But under Apple’s model, publishers will set the selling price of books themselves and receive a 70% cut in the process. Random House, though, is concerned that e-book pricing on Apple’s iBook Store will get competitive to the extent that price wars result, thus driving down revenue and profitability in the long run.