Today's Financial Times has an interesting feature about the impact of e-books on publishing – the major publishers are complaining that Amazon is charging $9.99 for new titles, well under the cost of a new hardback. You have to register to read the whole article. The gist of it is that Hachette, the world's number 2 publishing company by turnover, thinks customers will not want to pay more than twice as much for hardbacks in future.

It's rather wonderful in a way to see yet another corporate titan follow the path already well-trodden by the big record companies. The market power of these giants has for years insulated them from any need to make their prices reflect marginal costs. Publishing is dominated by extremely large multinationals who are shocked – shocked! – that the technological innovations are undermining their market power in favour of consumers.

It is a manifestation of market power that price discrimination has for so long been so successful in publishing – the hardback, the trade paperback, the mass market paperback, the spoken word version, the 'adult' and 'child' covers, the reissue of parts of books, the different editions in different countries  – enormously successful at extracting the maximum possible consumer surplus in different markets. When I was on the Competition Commission inquiry into the merger of the Waterstones and Ottakars bookstore chains in the UK (we cleared the merger), it was fascinating to listen to the big publishers talk about their pricing and discounting policies. Cost didn't feature. The main factor was the bargaining power of the retailer. One publisher said, I seem to recall, that it had been a mistake to cut book prices at all because it made the product seem too cheap to consumers, who were getting a bit too demanding about what they would pay.

I'm very unconvinced that the technology for reading e-books is actually ready for mass market penetration – but then, I love books, the physical products. It is clear, though, that the e-readers are ripe enough to start undercutting the business model of the publishing giants, and eating into their margins. It is certainly encouraging publishing innovation – I've posted here before on one example, Open Book Publishing. Incidentally, I see they have forthcoming this autumn a collection of essays on the history of copyright, which might interest readers of this blog. Looking at the pricing of printing on demand, it seems pretty clear to me that hardback and trade paperback prices will have to fall. Good for readers – bad for Hachette and their ilk.