In a classic case of ‘Be Careful What You Wish For,’ book publishers retrieved their pricing power from the hands of Amazon.com (NASDAQ: AMZN), and instead of seeing a boost in revenues from the higher prices they charged for e-books, the publishers experienced a decline in revenues.

Here’s the short story as reported by The Wall Street Journal:

Industrywide, for the first five months of 2015, publisher e-book revenue for adult, children’s and young adult titles fell 10.4% to $583 million compared with the same time in 2014, according to the Association of American Publishers’ monthly StatShot report, which collects sales data from 1,200 publishers in the U.S.

When Amazon started selling books for its Kindle e-readers, it often charged its customers less than the company paid to the publishers for the e-book rights. Under the so-called “warehouse” model Amazon paid whatever price it negotiated with the publishers, but retained the right to sell the e-book at a price it set.

Publishers thought that this model restricted competition from other potential online e-book sellers that would not be as willing as Amazon to lose money in exchange for market share. The publishers also believed that the warehouse model diminished the value of the books they were selling.

That warehouse model was upset in 2012 when Apple Inc. (NASDAQ: AAPL) struck a deal with the publishers to adopt a new “agency” model, where the publisher set the price and received 70% of the value for each sale. The U.S. Department of Justice sued Apple and the publishers, charging them with collusion to set higher prices.

Apple and the publishers lost in court, and the publishers settled. Apple has lost one appeal and has not yet indicated whether or not it will appeal to a higher court.

The agency model does not appear to be working out as expected at Amazon because customers seem unwilling to pay more than $9.99 and the publishers have been charging higher prices. The WSJ gives the example of the new novel by Jonathan Franzen, “Purity,” which sells on Amazon as an e-book for $14.99 and as a hardcover book for $15.10.

Some publishers have said that the higher e-book prices have boosted sales of physical books, but it seems unlikely that the gains are going to be large enough and sustainable enough to offset lost sales of the pricier e-books, except in the case of a new book with massive appeal by someone like J.K. Rowling or Stephen King.

Book publishers, like movie producers and music labels, rise and fall on the basis of their latest blockbuster title. A book that sells millions of physical copies forgives a lot of sins. Until the next one of those blockbusters comes along, though, higher prices for, and lower sales of, e-books do not appear to be the answer.

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