Author Earnings sheds light on ebook Agency redux

[fjtorres]

Author Earnings.com just dropped their quarterly "state of the US ebook market" report.

http://authorearnings.com/report/may...rnings-report/

As usual, the source has clear, very large charts and the raw data. Plus lots of analysis and insight.
Well worth the trip there.

Summary:

Publishers fought hard to take back control of ebook pricing from Amazon. This was a stated intent by Hachette to its investors in 2014, and it was touted as the end result of their lengthy negotiations. What has that control brought?

By our data, which matches industry reports, this control has brought higher prices to consumers, lower sales for publishers, and less earnings for their authors. It has also brought greater market share for self-published authors, which is why many were pulling for publishers to get their way during negotiations with Amazon.

If it seems unlikely that publishers would have fought so hard for such disastrous results, it might help to be reminded that it isn’t the first time. In the lawsuit against publishers for conspiring to raise ebook prices in 2009, it was shown that the agreement they fought to win with Apple resulted in a reduction of profits per ebook sold (pg 53). Lawyers were also successful in showing at trial that a move to agency pricing resulted in a sudden and drastic shift upward in ebook prices, harming consumers, but also harming publishers (pg 94).

One does not need to theorize on why publishers would make these decisions. One CEO of a Big 5 publisher wrote in a note to herself that higher prices would slow ebook adoption and casual purchasers, protecting retailers (pg 47). So speculation is not required. This was the same conclusion reached by the judge in the collusion case, whose reading of Big 5 CEO emails showed a willingness to erode Amazon’s market share at any cost, even to themselves.

Key numbers:

BPH prices up 17% over the last 15 months.
BPH unit market share over the last 3 months down 18% (interesting number--sounds like a tipping point was crossed).
BPH titles in ebook bestseller lists down 26%.
BPH reader spend ($-based market share) down 7% over the last 3 months. They now command less than half of gross ebook sales.

Interesting factoid:

Market share of other tradpubs (small/medium publisher, Amazon Publishing) has remained constant. The net shift has been BPH to Indies.

Ominous note:

Barnes & Noble’s Nook store’s well-covered collapse appears to be accelerating. It is now possible to hit the overall Top 50 Best Seller list on Nook.com with fewer than 100 sales per day from a standing start. It takes around 1,500 sales per day to hit the same benchmark on Amazon.com. We currently calculate B&N’s ebook market to be in the single digits, perhaps even the low single digits. No author should be happy with this development, as the more healthy markets that exist for our works, the better.

[Barcey]

Very interesting. I was waiting to see this report after I read about the AAP numbers. I suspected that it was a loss of market share rather than a decline in ebook purchases and this data seems to support that.

[fjtorres]

The randy penguin still accounts for half the BPH sales and they haven't gone agency redux. So the losses for the small four may be higher than 7% and 18%.

It'll be interesting if the house of penguins stays out of agency and reaps the rewards again or if HQ (again) forces them over the same cliff.

[Anthem]

Geez.

[murg]

Originally Posted by Anthem

Geez.

Geez.

[Purple Lady]

Originally Posted by fjtorres

The randy penguin still accounts for half the BPH sales and they haven't gone agency redux. So the losses for the small four may be higher than 7% and 18%.

It'll be interesting if the house of penguins stays out of agency and reaps the rewards again or if HQ (again) forces them over the same cliff.

Random House was not part of the original price fixing and I would search for Random House books because of this. I didn't buy more that a couple of books from the other publishers because I refused to pay the higher prices. Since Random House is now part of Penguin I wonder if that along with the losses will convince them to try going without agency.

[fjtorres]

Originally Posted by Purple Lady

Random House was not part of the original price fixing and I would search for Random House books because of this. I didn't buy more that a couple of books from the other publishers because I refused to pay the higher prices. Since Random House is now part of Penguin I wonder if that along with the losses will convince them to try going without agency.

I suspect that if it were up to RH US, they would stay as is and reap the benefits of size and retailer discounting now that the other BPHs are locked into agency for the next few years. The perks of going last...
...but...
Penguin was a ringleader of the conspiracy (they lobbied B&N to force RH to join in) and Bertlesmann believes in price fixing as much as Hachette so I expect the RH execs will be told to join in with the new normal.

(Shrug.)

If raising consumer prices is so important to them they're willing to lose profits and market share, they can live with the consequences. As long as they didn't leave evidence of collusion lying around thus time. If they did, then they are truly idiots and deserve what they'll get.

[murg]

Originally Posted by fjtorres

I suspect that if it were up to RH US, they would stay as is and reap the benefits of size and retailer discounting now that the other BPHs are locked into agency for the next few years.

The BPHs aren't locked into agency, Amazon is.

The BPHs can change their pricing at any moment, simply by allowing discounting.

[dickloraine]

Until they renegotiate they are locked in it on the biggest eBook platform: amazon and of course any other platform where they have similar contracts. A contract affects both sides.

[pwalker8]

Originally Posted by dickloraine

Until they renegotiate they are locked in it on the biggest eBook platform: amazon and of course any other platform where they have similar contracts. A contract affects both sides.

I suspect what he means is that the publishers can discount all they want. All agency means is that the publishers set the price, not Amazon. No more, no less. Price fixing is simply the posters personal prejudice. Agency does not equate to price fixing.

[darryl]

Originally Posted by pwalker8

I suspect what he means is that the publishers can discount all they want. All agency means is that the publishers set the price, not Amazon. No more, no less. Price fixing is simply the posters personal prejudice. Agency does not equate to price fixing.

No, agency does not equate to price fixing. However, in practice, giving control of retail prices to publishers has served to eliminate any competition at the retail level on Big 5 books. There is no mystery on the thinking of the Big 5 in this regard. Their executives views were exposed in the Apple litigation. There is no reason to believe that these views have changed since, and in fact ample reason to believe otherwise. And if this is not enough the increase in prices speaks to this very eloquently.

It saddens me that large publishers obsession with preserving the declining but profitable print book business by attempting to slow ebook adoption is being pursued at the expense of not only readers but of their authors.

[fjtorres]

Originally Posted by murg

The BPHs aren't locked into agency, Amazon is.

The BPHs can change their pricing at any moment, simply by allowing discounting.

As the report points out, under agency any discounting reduces the publishers' revenue and profit--under wholesale, any discounting comes out of Amazon's pocket. Big difference.

If the BPHs now want to improve their competitive positioning via discounting, they'll be paying for 70% of the discount. Their call, their profit loss.

And price fixing is by legal definition preventing retail level competition via discounting. Illegal price fixing is conspiring to fix prices. As pointed out repeatedly, the publishers admitted conspiring to achieve their goal. This time they negotiated. Again, big difference.

[fjtorres]

Originally Posted by murg

The BPHs aren't locked into agency, Amazon is.

The BPHs can change their pricing at any moment, simply by allowing discounting.

As the report points out, under agency any discounting reduces the publishers' revenue and profit--under wholesale, any discounting comes out of Amazon's pocket. Big difference.

If the BPHs now want to improve their competitive positioning via discounting, they'll be paying for 70% of the discount. Their call, their profits.

And price fixing is by definition preventing retail level competition via discounting. Illegal price fixing is conspiring to fix prices. As pointed out repeatedly, the publishers admitted conspiring to achieve their goal. This time they negotiated. Again, big difference.

[crossi]

If I was an author I would be very unhappy with any publishing house that insisted on Agency pricing. Imagine having my book selling at 3/4th the price but getting PAID like they were sold at full price AND selling more books, then having that cash bonanza taken away by my publisher. Enough to make me want to take my books and leave.

[pwalker8]

Originally Posted by fjtorres

As the report points out, under agency any discounting reduces the publishers' revenue and profit--under wholesale, any discounting comes out of Amazon's pocket. Big difference.

If the BPHs now want to improve their competitive positioning via discounting, they'll be paying for 70% of the discount. Their call, their profits.

And price fixing is by definition preventing retail level competition via discounting. Illegal price fixing is conspiring to fix prices. As pointed out repeatedly, the publishers admitted conspiring to achieve their goal. This time they negotiated. Again, big difference.

No, the legal definition of price fixing is when multiple competitors come together to decide on a price that everyone will charge. So price fixing is when two or more publishers come together and say we are going to charge X dollars for our books. Agency pricing is _NOT_ price fixing and has been upheld by the courts as perfectly legal, even if that doesn't follow the evil publishers narrative that some are so fond of pushing. The publishers have never admitted to conspiring to price fixing. They have never been charged with price fixing. They were charged with anti-trust on the charge that they got together to insist on agency pricing. They settled the case without admitting guilt.