Could Google Editions break the agency model?

[Bookbee]

Hey there,

Anyone want to hazard a guess as to how Google Editions will work? With publishers selling their books (as Google Editions) on their sites, in competition with Google selling the same books through Google sites??

In Australia, Google has started hiring ahead of Google Editions, but if the big G goes with the agency model, I can't see how it will work. Here's my best guess (from Bookbee.com.au): =>

It was widely reported that Google’s manager for strategic partner development Chris Palma announced that Google Editions – the search giant’s foray into browser-based ebooks – will be launching in “late June or July” this year. Estimates as to how many titles they will launch with have been between 500,000 and 2 million (paid) mark, with another 2 million free titles on top of that.

The service is touted by Google as being a more “open ecosystem” than that of Apple’s iBooks, and will allow publishers to sell their own books on their websites using Google’s software platform. It will also enable third parties – i.e. independent bookshops – to use the Google platform to sell books.

It’s a serious foray into a seriously growing market – and they’re hiring in Australia (see below), presumably to get bodies on the ground to do deals with all the local publishers, as REDgroup has/is doing.

Sadly, even with all their web clout, it’s likely Google will adopt the broken “agency” pricing model, in my view an anti-competitive pricing structure that allows publishers to fix book prices across all web retailers.

Interestingly, the Google Editions platform may be where the “agency model” is most easily shown to be flawed and anti-competitive.

Google says the pricing structure will work in this way:

1. When a book is sold by Google, publishers get 63%, Google keeps 37%.

2. When a book is sold by a third-party site, publishers gets 45%, the third party gets 55%, minus a small fee (5%?) to Google.

3. No details are available on what the breakdown is if a publisher sells their own Google Edition on their site. Presumably, they would get upwards of 80%. That’s just my guess, but with Google doing little of the heavy lifting in this scenario, the cut would be somewhere between the 63% of example 1 and the 95% of example 2 (if you assume the publisher and third party are one and the same).

So how would this work in the real world? Here’s an example (all prices in fictitious US bucks).

Barnes & Schuster (a very underrated pretend publisher) fixes the price of Bestseller2010 at $10.

You buy it from Google – publisher gets $6.30.

You buy it from Bookbee.com.au (or other third party) – publisher gets $4.50.

You buy it from Barnes&Schuster.com – publisher gets, say, $8-9 (see example 3).

In effect, publishers are going to want to sell through their own sites to keep a bigger slice of the sale, but they’re virtually competing with Google for sales. And with Google’s clout (and search-based sales channel via Google Book Search), I back Google to win that one.

So what can the publishers do to attract more sales? They can’t lower prices, can they? If they could, they could offer Bestseller2010 for, say $9 and still keep between $7.20-$8.10 (an 80-90% cut, from example 3). So they get lots more sales (the book is cheaper) and they still keep more than they’d get if Google sold the book.

But they can’t lower the book’s price, can they? Remember the agency model? And if they do, doesn’t the agency model break down?

We’re entering strange waters here, folks…

What do you think about this brave, crazy pricing system? Has anyone considered the consumer at any point?

[quoted]
Via Bookseller+Publisher

Mark Tanner has been appointed to the newly created position of strategic partner development manager for Google Books in Australia and New Zealand.

Tanner is currently the Australian manager of publishing services company ReadHowYouWant.

The specifics of his new role aren’t yet clear, but Tanner was able to tell the Weekly Book Newsletter that he would be acting as ‘Google Books’ man on the ground for the region’, backed up by ‘a big team from Google internationally’ and that he will be speaking both with local publishers about making their content available on Google Books and to retailers and resellers about selling Google’s offering to consumers.

Tanner will be leaving ReadHowYouWant on Thursday 17 June and starting with Google on Monday 21 June. ReadHowYouWant will announce his replacement shortly.

[Blue Tyson]

Given google blocks book access and the see inside type features here when they want, I'd guess Google Editions here will be about as good as all the others - that is, not very.

[L.J. Sellers]

The Google entry to this market is indeed the strangest development. As a novelist, it's one more opportunity for me to gain sales, but for my publisher it's another logistic consideration that's hard to calculate. The formatting alone for various digital venues is a huge time suck for them. But to compete, they have to have their books everywhere.
L.J.

[Kali Yuga]

Originally Posted by Bookbee

Anyone want to hazard a guess as to how Google Editions will work?

IIRC it's already outlined, and it's basically the agency model. That was the plan since at least last summer, when Google started talking about Editions.

Originally Posted by Bookbee

In effect, publishers are going to want to sell through their own sites to keep a bigger slice of the sale, but they’re virtually competing with Google for sales....

Not many publishers sell directly to the public; those that do are in a thoroughly defined niche, e.g. sci-fi / fantasy, romance, technical manuals.

Even in the ebook age, publishers need retailers. Most people have absolutely no idea which publisher puts out a specific book; ergo when you're browsing, you are 100x more likely to think of Amazon or some other site than Penguin or Harcourt-Brace or what have you.

It's the same thing with physical books. Penguin et al could sell direct to the public and net a bigger share of the profits, but a) they'd still have to pay for all the fulfillment and infrastructure, and b) it won't put the books in front of the buying public.

[Elfwreck]

Charming. Agency prices for ebooks you can't (legitimately) download. Agency prices for a *viewing window*. Yeah, that'll go over real well. Especially after someone does something stupid and gets their Google account shut down, and loses access to their books.

I suppose it'll be nice to see the surge of stream-capture/download-and-crack software that'll come out of it.

The big publishers are working *very very hard* to pretend that the internet isn't really going to change the business model they've been using for the last hundred years or so. (The agency model is not actually a big change; commission-only sales are well-established business practices. It's not something publishers used before, but it doesn't require a big shift in corporate thought processes.)

The lawsuits that challenge the whole ebooks-as-licenses concept are likely to come out of something like Googlebooks--not so much because customers are likely to insist "I bought property, not a usage license," but because some clever person playing tax games is likely to attempt to put license-purchases into a different tax bracket from property purchases. A library might want to categorize license-purchases differently from book purchases, based on its funding/tax arrangements; the IRS might have an interest in insisting those are book purchases instead.

I'm expecting the next few years to be full of *fascinating* legal claims about intellectual property & sales terms.

[Kali Yuga]

Originally Posted by Elfwreck

Charming. Agency prices for ebooks you can't (legitimately) download. Agency prices for a *viewing window*. Yeah, that'll go over real well.

Considering that you will be able to read your books on almost any device that has a web browser (even when offline), and given that more and more data is moving into "the cloud," it might do OK.

Originally Posted by Elfwreck

The big publishers are working *very very hard* to pretend that the internet isn't really going to change the business model they've been using for the last hundred years or so....

Actually, it was Google that came up with this distribution and payment method, not the publishers. You sure this is an instance of publishers having their head in the sand?

Originally Posted by Elfwreck

The lawsuits that challenge the whole ebooks-as-licenses concept are likely to come out of something like Googlebooks--not so much because customers are likely to insist "I bought property, not a usage license," but because some clever person playing tax games is likely to attempt to put license-purchases into a different tax bracket from property purchases.

Yeah, I doubt it.

If you are a sole proprietor or a business, it doesn't really matter if you are renting or buying an ebook; it's an expense. I can't imagine that too many freelancers or businesses are really purchasing enough ebooks for the IRS to even notice it. Or to put it another way: If you're a sole proprietor and you list $1.5 million in ebook purchases as a business expense, the IRS probably isn't going to ask you whether they were licensed or purchased when they audit you.

Also, the overwhelming majority of libraries in the US are municipal. There could be some accounting questions, but I don't think your city library has to pay federal taxes....

[DawnFalcon]

Given their viewing model, I'd pay roughly 10% of paperback price for books via "Editions".

[Elfwreck]

Originally Posted by Kali Yuga

Considering that you will be able to read your books on almost any device that has a web browser (even when offline), and given that more and more data is moving into "the cloud," it might do OK.

It might. Or it might work for a while, and then start falling apart as people realize the restrictions on it, especially if they advertise "read your ebooks on any device connected to the net," without mentioning, "...that supports javascript/except for certain IP ranges/not applicable to dialup," or whatever other limitations might apply.

I suspect they'll do fine at first no matter what the model is; it's going to be highly visible and lots of people will try it out. The hassles will start when people start asking, "how do I read my Google ebooks on my Sony Pocket Edition?" (And, of course, they can't, and if they'd paid attention when they purchased them, they'd know that. But they didn't pay attention; they clicked on "buy ebook now," and they want to put the ebook on their "ebook reader," and don't care about filetypes and all that "techie geekspeak.")

Actually, it was Google that came up with this distribution and payment method, not the publishers. You sure this is an instance of publishers having their head in the sand?

Google came up with the agency model? With the notion of the distributor working as interface between provider and actual end-user, and dealing with all the information-gathering in the transaction?

Also, the overwhelming majority of libraries in the US are municipal. There could be some accounting questions, but I don't think your city library has to pay federal taxes....

City libraries probably don't pay taxes. Other nonprofit org libraries might, or have to account for their expenses. And depending on who's funding them, gov't or not, they may be allowed different amounts of funding for "licenses" and "purchases."

For-profit businesses may have entirely different tax arrangements for "license" expenses vs "purchase" expenses, having to do with depreciation and/or resale ability.

It's a bit of a stretch--but there are plenty of business accountants who make fortunes finding tax loopholes that are more than a bit of a stretch. If any aspect of tax, contract, or business licensing laws treats "licenses" substantially different from "purchases," someone's going to find a way to exploit that difference.

I suspect it's more likely that Vernor v Autodesk will get brought up, and some judge will have to rule that you *can* resell ebooks, and it's not the law's problem to figure out how to remove unauthorized additional copies, any more than it's the law's problem to search your house for copies of VCR tapes when you sell one of those.