The Agency Model about to disappear?

[I. J. Parker]

Jude Hardin posted a link to a Huffington Post article on Joe Konrath's blog:  http://www.huffingtonpost.com/2012/03/31/e-books-settlement-apple-j...

that makes fascinating reading, especially in the analysis of how this will affect not only e-book prices, but also hardcovers.  Take note also of the 5 big publishing houses involved in the suit.

[Brian Hoffman]

Thanks I.J. this is a complicated issue, but it looks like the customer might win after all.

[Eric Christopherson]

I would prefer that the agency model continue, that the Big Six keep putting out overpriced ebooks so mine look cheaper by comparison, that Amazon wasn't positioned better by the DOJ to take over the publishing universe because sooner or later they'll come for all their suppliers and squeeze authors too by lowering royalty rates.

[I. J. Parker]

Well, I can't worry about what Amazon might do.  They are not the only game in town, though they are the best. I think they will continue to treat authors well.  We are their bread and butter.  I do know that I've been ripped off horribly by publishers and won't allow that to happen again. There is a lot of room between 8 to 15 percent vs. 70 percent.

[Benjamin Sobieck]

I'm not sure I understand this now. If I'm on KDP, how does this affect me?

[Jude Hardin]

I'm not sure I understand this now. If I'm on KDP, how does this affect me?

Once the agency model disappears, retailers like Amazon and B&N will be able to sell ebooks at a loss if they want to. The publishers will still get their wholesale price tag, and will actually end up making more money on ebooks than they're making now through the agency model. The publishers don't like this, however, because it's going to hasten the demise of paper books, and paper books are where the publishers still have a major distribution advantage.

So, if retailers start selling ebooks from all those bestsellers you see on the grocery store stands at heavily discounted prices, it might make it harder for many self-published authors to maintain the only marketplace advantage they have now, which is low price.

[John McFetridge]

And publishers know that Amazon will not continue to sell at a loss forever so either the wholesale price will have to be reduced or the retail cost will have to be increased. Amazon isn't going to budge on price (as they showed with IPG, and is the current business model, really, the same way Wal-Mart keeps prices low).

Do publishers really care if books are ebooks or paper? Probably not, but they do care about margins.

There's a lot of potential here for small presses and self-publishing which can operate on the smaller margins they'll get from Amazon. Amazon starting its own imprints does complicate things when it comes to anti-trust but as long as they offer the same distribution deal to other publishers that they do to their own imprints it shouldn't be a problem.

 

[I. J. Parker]

It was my impression that under the agency model Amazon guaranteed the publisher a price.  If they sold lower, they assumed the difference.  That's not a very good business model, but it helped Amazon's sales.  I think publishers will find that Amazon will no longer pay publishers more than the book sold for. 

 

It makes more sense for publishers to set their prices and assume the costs of promotions.  Though in actuality it's the authors who will assume those costs.

 

It shouldn't affect self-published titles.

[Benjamin Sobieck]

Much clearer now, thanks, Jude.

[Jude Hardin]

Do publishers really care if books are ebooks or paper?

I think they do. With paper, they still have a lock on distribution. Not so with ebooks. I can self-publish an ebook and have access to the same distribution channels as Random House, only I can charge $2.99 for my book and still make money. That's huge.

[Jude Hardin]

It was my impression that under the agency model Amazon guaranteed the publisher a price.

Under the agency model, which is what they're using now (soon to change, maybe, according the Huffington Post article), the publisher sets the price. It's like the Hershey company telling Walmart how much to charge for a candy bar. That's crazy. Retailers should always be the ones setting the prices. That's why we have things like 50% off! sales at JC Penney or wherever. Can you imagine if all stores were forced to sell everything at the MSRP? That would suck.

[I. J. Parker]

If you apply that to all delivery systems, then book stores would order the books, and what they can't sell would go on a sale table rather than be returned to the publisher.  The store would take the loss if any.  But Amazon doesn't do returns, and what's the point for electronic books anyway?  They just cancel the sale and sell it again.

I'm still not sure that this will impact self-published e-books.

[John McFetridge]

Yes, that's just it, the book business hasn't been retail for a long time - bookstores are consignment shops.

e-books certainly change that. Now, it's true, publishers being capitalists prefer a system that is easier for companies with a lot of capital to have an advantage, so in that way they like printed books. Still, they can find another way for their capital to give them an advantage - marketing and publicity.

Publishers were very slow to get into e-books, but it's still too early to count them out entirely.