The Agency Model (Roundtable: 4/1/10)
The Roundtable is a live, interactive webcast gathering some of the most outspoken industry professionals to debate the hottest publishing issues of the week, as being discussed in traditional media, the blogiverse and on Twitter. From celebrity book deals to eBook rights and pricing to [insert YOUR pet topic here] — if it’s related to books, it’s on the agenda.
Topic: The Agency Model
This episode of The Roundtable was webcast live at 1pm EDT on Thursday, April 1, 2010.
Jason Boog, Editor, Galleycat
Guy LeCharles Gonzalez, Dir. of Programming & Business Development, Digital Book World
We recently signed an “agency” agreement with Hachette and we are working with them to offer their books under these terms in the coming days. This means we will not be selling Hachette ebooks in the interim. Update: Hachette has disallowed the sale of ebooks except on agency terms effective as of 12:01 am this morning. We came to terms late last night but we cannot be operationally ready to sell their ebooks on agency terms until two days from now — April 3 — when we will also cut over for the other publishers that are switching to agency. If we can get a two day extension from Hachette to continue selling their ebooks under the prior terms, we can have the Hachette ebooks promptly back for sale today. If not, then they will be back on April 3.
The distributors’ problem has nothing to do with clinging to old systems. It has everything to do with publishers, desperate for better profits in these hard times, trying to force a change on very short notice. This is a change that increases prices for consumers – many nearly doubling in street price with this change – eliminating by mandate all discounts and rewards programs for the 5 publishers’ titles in an effort to create a somewhat surreal level playing field. Unfortunately, the 5 publishers have chosen as of this writing to push this program through without having the plan fully spelled out. Even if they spelled it out tonight, that still leaves only 5 days for major systems changes and testing.
We’re told this is in order to both meet the deadline for the Apple iPad’s release in early April in order to deliver a message to the two other multi-billion dollar giants that have been selling below cost (Amazon and Barnes & Noble). The iPad, interestingly, is a product that our in-house surveys indicate 90%+ of our customers will never touch because they view it as impractical, incredibly expensive and targeted at the very affluent – unlike 98% of all readers who are working extra hard to make ends meet these days. And why would a typical reader, with household income of less than $60k during these hard times, spend up to $800 to read a $7 eBook?
With agency, the price is the price. We lose most of our ability to issue coupons, promotions, special discounts, kickbacks, buy-X-get-one-free. We could still do it for non-agency titles, but then we end up in a weird situation of “Get $1 off, but only on these books, and definitely not on these other ones.” That’s not fun. And worse, it’s confusing to consumers. We’re sad about that, obviously. Not just because they’re a great way for us to drive sales, but because they help us focus attention on specific great books, reward our loyal customers, and celebrate the launch of new features, apps or services.
But you know, this really isn’t Agency pricing. As noted by the Smashwords pricing outline, Apple is determining a price range for books so publishers aren’t truly able to set their prices independently. What publishers are doing is engaging in retail price maintenance, forcing all retailers to price the books exactly the same. This won’t increase new entrants into the market because small competitors can’t afford host/serve the books themselves which is what they would have to do now that the “Agency 5″ are requiring the digital distributor and the retailer to share in a 30% commission.
Once Apple and Amazon have taken their cut, publishers are likely to make less money on e-books under this new arrangement than under the wholesale one—a price they seem willing to pay in order to limit Amazon’s influence and bolster print sales. Yet there are good reasons to doubt whether this and other strategies, such as delaying the release of electronic versions of new books for several months after the print launch, will halt the creeping commoditisation of books.
Apple, for instance, is rumoured to have kept the option of charging much less for popular e-books if they are being heavily discounted elsewhere. Other firms, including the mighty Google, are likely to enter the fray soon, which will only increase the competitive pressure.
Twitter (as RTd by @DigiBookWorld):
@melissaloder: April Fools Day and Agency Model…coincidence? #dbw
@bakersmark: Amazon playing hardball with small publishers? Will they or won’t they? Will readers pay the ultimate price? #dbw
@eBookNoir: #dbw consumers confused by the agency model due to misinformation, many kindle users are having this conversation.
@bakersmark: Amazon has the direct to consumer relationship that Publishers have always desired. #dbw
@jimhanas: At the moment, Apple is positioning the iPad as the ground for competition, which is a huge contrast with Amazon. #dbw
@kellymcclymer: Will publishers want to get rid of wholesale on print side if they succeed on e-side? #dbw
@Knownhuman: I “love” how Adobe DRM books from B&N and Sony aren’t compatible. Same file format, same DRM, no compat. ?! #DBW
@babetteross: #dbw backlash when fanciest thing about ebooks on ipad is the page turning feature? Also, ePub files MUST be clean.
@AlexandraIntl: #dbw iPad may not be most stable platform at launch — are early adopters going to blame apps/pubs on issues vs platform?