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Old 05-31-2012, 01:47 AM   #1
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Amazon/B&N/Kobo can once again discount ebooks from the 3 Publishers starting June 10

The 3 major publishers that settled are: Simon & Schuster, Hachette and HarperCollins


http://paidcontent.org/2012/04/16/wh...r-readers-now/

No changes until June at the earliest

Quote:
Simon & Schuster, Hachette and HarperCollins agreed to settle with Justice. If the settlement is approved — following a 60-day comment period — those three publishers must terminate existing agreements with Apple’s iBookstore within seven days. In addition, as the Competitive Impact Statement on the settlement explains, the three settling publishers must terminate contracts with other retailers (like Amazon and Barnes & Noble) that contain any “restrictions on an e-book retailer’s ability to set the retail price of any e-book” and any most favored nation clauses. Those MFN clauses — which can be found in all agency publishers’ contracts with retailers, not just the contracts with Apple — state that no other retailer can charge a lower e-book price.

Publishers must terminate the contracts with retailers other than Apple “as soon as each contract permits” — i.e., when the contract expires — but the retailers also have the option to terminate the contracts “on just 30 days notice.” After the original contracts are terminated, the settling publishers may enter into new agreements with retailers (including Apple).

Under those new agreements, for the next two years, retailers may set, change or lower e-book prices and may offer discounts and other promotions “to encourage consumers to purchase one or more e-books.”

After two years, the settling publishers may once again enter into agency pricing agreements that restrict retailers from setting, changing, or lowering e-book prices. However, price MFN clauses are prohibited for five years.
Simon & Schuster, Hachette and HarperCollins agreed to settle on April 11, 2012.

+ 60-day comment period

= June 10, 2012 (at the earliest) when the settlement is approved.



The big question is that will Random House switch back from agency model to wholesale.

Random house will make more money from wholesale. In addition, Random House will be at a disadvantage if best sellers from Simon & Schuster, Hachette and HarperCollins are discounted to $9.99 while Random House best sellers continue at $12.99 or $14.99. If you're Random House CEO, what would you do?

In addition, the publishers that didn't settle (Penguin, Macmillan) will also be at the same disadvantage. Less money on agency pricing and higher prices on best sellers ebooks.





--------------------something to ponder-----------------

Big 6 = 60% of the ebook market
the other 2000 publishers + self-publishers = 40% of the ebook market

if Random House switch back to wholesale, it will be a lost cause for Penguin and Macmillian to fight on. By themselves, Penguin and Macmillian make up about 17-18% of the market. The other 82% will all be on wholesale.

If Random House sticks with agency pricing, it will be about 30% under agency pricing and 70% wholesale. Random House is the biggest publisher in term of market share.

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Old 05-31-2012, 01:59 AM   #2
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Numerous reports that Publishers make less money on agency pricing compare to wholesale.

Macmillian CEO even admit this:

http://blog.authorsguild.org/2012/04...ceo-macmillan/

Quote:
When Macmillan changed to the agency model we did so knowing we would make less money on our e book business.

For example, wholesale, a $25 recommended retail price meant Amazon paid $12.50 for the ebook. Under agency, that same book is priced at $12.99. The publishers get 70% or $9.093

Wholesale: $12.50 to the publishers
Agency: $9.093 to the publishers

These publishers must have felt that making less money on ebook is a worthy tradeoff in protecting their print business.
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Old 05-31-2012, 06:55 AM   #3
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Quote:
Originally Posted by Top100EbooksRank View Post
The big question is that will Random House switch back from agency model to wholesale.

Random house will make more money from wholesale. In addition, Random House will be at a disadvantage if best sellers from Simon & Schuster, Hachette and HarperCollins are discounted to $9.99 while Random House best sellers continue at $12.99 or $14.99. If you're Random House CEO, what would you do?

In addition, the publishers that didn't settle (Penguin, Macmillan) will also be at the same disadvantage. Less money on agency pricing and higher prices on best sellers ebooks.
Why would the others be at a disadvantage?

I thought people paid agency pricing because it was the only way to get their favorite authors.

What's so magical about wholesale pricing from a Big 6 publisher vs wholesale pricing from a smaller publisher when your favorite authors aren't available on any of them?

I don't see this as an issue.
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Old 05-31-2012, 08:33 AM   #4
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Quote:
Originally Posted by tubemonkey View Post
Why would the others be at a disadvantage?

I thought people paid agency pricing because it was the only way to get their favorite authors.

What's so magical about wholesale pricing from a Big 6 publisher vs wholesale pricing from a smaller publisher when your favorite authors aren't available on any of them?

I don't see this as an issue.
Advantage #1:

A best seller from Random House priced at $9.99 (wholesale - retailer discount) will sell more than THE SAME bestseller from Random House that is priced at $12.99 or $14.99 (agency).

Advantage #2:

Wholesale a book with a RRP at $25 will result in $12.50 for the publishers.
Agency pricing a book with the price of $12.99 will result in $9.093 for the publishers.

That's why Random House might be tempted to switch back to wholesale.
The downside: it will speed up the adoption of ebook, which is bad for Random House since it wants to protect its print hard cover business.

The one who will be disadvantage are those who are on agency (Penguin, Macmillan).
If all 6 are on agency, then it's a level playing field. But if 3 or 4 are on wholesale and 2 or 3 on agency, it tilts the balance toward those who are on wholesale.

The whole point of collusion was to get at least 4-5 Big Publishers to switch to agency. If only 1 did, it would be at a huge disadvantage.

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Old 05-31-2012, 08:38 AM   #5
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http://www.teleread.com/chris-meadow...e-fixing-suit/


There’s some fascinating stuff here. For example, from pages 30-31 of the ruling, the judge explains why collusion is so probable. It’s a classic “prisoner’s dilemma” scenario: if each individual publisher hadn’t known it could count on most of its competitors to move to agency pricing as well, it would have made little sense for it to do so alone:

------"The costs of such a unilateral switch to the agency model would be substantial. The publisher would be selling its eBooks at a higher price than its competitors and would therefore be losing market share. This loss in market share would in all likelihood have been large. Random House gained significant market share from the Publisher Defendants during the months between their adoption of the agency model and Random House’s capitulation. The eBook sales by Random House increased 250 percent in 2010 as it continued to sell them at $9.99. At the same time that an individual publisher would be losing market share, it would be taking in less revenue per sale because of Apple’s 30 percent commission. In addition, the publisher would probably lack the leverage to force Amazon to accept the agency model. Potentially, then, this publisher would be barred from selling its eBooks to Amazon."-------------





Basically, if 2 Publishers are pricing books at $12.99 and $14.99 (agency) and the other 4 Publishers's books are priced at $9.99 (wholesale), guess which publishers will gain market share and which will lose marketshare. That's why the publishers who are on agency will be at a disadvantage.

When the settlement takes place on June 10, it will be

Penguin, Macmillan, and Random House*: agency pricing
Simon & Schuster, Hachette and HarperCollins: wholesale pricing

*Random House can switch to wholesale if it wants (not part of DOJ lawsuit or settlement).

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Old 05-31-2012, 09:17 AM   #6
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Quote:
Originally Posted by tubemonkey View Post
Why would the others be at a disadvantage?

I thought people paid agency pricing because it was the only way to get their favorite authors.

What's so magical about wholesale pricing from a Big 6 publisher vs wholesale pricing from a smaller publisher when your favorite authors aren't available on any of them?

I don't see this as an issue.
But if I have, say, 10 favorite authors from the Big 6, I'll be likely to buy the discounted books first, immediately upon publication, and maybe wait for a price drop on the others.
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Old 05-31-2012, 09:41 AM   #7
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I have over 400 books on my wish list, most because the price was higher than I wanted, from a variety of publishers. I'll buy the ones whose price drops first. If there was only one book I wanted and no other to read, yeah I'd just have to suck up the price and buy it, but I have a book a day habit so I'm not so picky about which I read next.
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Old 05-31-2012, 09:43 AM   #8
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Quote:
Originally Posted by Catlady View Post
But if I have, say, 10 favorite authors from the Big 6, I'll be likely to buy the discounted books first, immediately upon publication, and maybe wait for a price drop on the others.
Did you buy any of them under Agency pricing?
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Old 05-31-2012, 09:51 AM   #9
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Random House on why it switched to agency:

Quote:
Random House, Inc., the last of the big six houses still using the wholesale model for e-book sales, announced plans to adopt the agency model effective March 1 and the company has begun implementing the switch with accounts today. A Random House spokesperson said the company is making the change now because it is the right time. The adoption of the agency model is "part commercial motivation for our customers; part investment in their digital sales growth and ours; part ensuring our authors that their e-books will be even more widely available anywhere anytime," the spokesperson said.



Because it had not been using the agency model, Random's titles were not directly available through the iBookstore, although there were a number of apps available that allowed its e-books to be purchased through the store. Random had no comment on whether it will now be selling its titles through the iBookstore, although all signs point in that direction. In its prepared statement issued Monday, Random noted that “The agency model guarantees a higher margin for retailers than did our previous sales terms. We are making this change both as an investment in the successful digital transition of our existing partners and in order to give us the opportunity to forge new retail relationships.” “We are looking forward to continuing to work with all our retail partners—both digital and physical—on our joint mission to connect our authors with as many readers as possible, in whatever format they prefer.”
PER PUBLISHERS WEEKLY

Bottom line: RH switched to help out retailers who couldn't make it on lower margins (read: everyone but Amazon).
Will RH stay with agency ? My guess is most likely, because RH is looking to establish its own sales channel, jointly with other publishers-Anobii and Bookish. You'll hear more about those two ventures shortly, IMO.
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Old 05-31-2012, 01:26 PM   #10
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Quote:
Originally Posted by tubemonkey View Post
Did you buy any of them under Agency pricing?
Yes. Price was removed as the deciding factor for the books I was interested in purchasing, so I applied other subjective criteria. But I didn't in any way boycott the Agency books.
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Old 05-31-2012, 04:51 PM   #11
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Let me know when Haruki Murakami ebooks are cheaper.
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Old 06-01-2012, 07:50 AM   #12
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Quote:
Originally Posted by stonetools View Post
Random House on why it switched to agency:



PER PUBLISHERS WEEKLY

Bottom line: RH switched to help out retailers who couldn't make it on lower margins (read: everyone but Amazon).
Will RH stay with agency ? My guess is most likely, because RH is looking to establish its own sales channel, jointly with other publishers-Anobii and Bookish. You'll hear more about those two ventures shortly, IMO.
or maybe Random House switched because

1) similar to the other publishers, they want to slow down the adoption of ebook in order to protect their print business DESPITE gaining marketshare

2) Barnes and Noble decide "not to feature Random House in any future advertising" as punishment for not switching to agency pricing.


http://dearauthor.com/features/indus...mes-important/

Quote:
The CEO of Barnes & Noble emailed Sargent to let him know that B&N had Macmillan’s back. ”Barnes & Noble would ‘go to the mat’ for Macmillan. In an attempt to assist Macmillan during the negotiation process, B&N moved its titles to the top of its merchandizing pods & search results on the Nook.”

Amazon learned that five of the six publishers agreed to the Agency model and that these five accounted for about half of Amazon’s ebook business and thus Amazon caved to Macmillan. (In Judge Cote’s decision we find out that Amazon was presented with this information on the same day (Jan 20) by four different publishers)

When Random House refused to move to Agency, David Shanks of Penguin went to Barnes & Noble “I would hope that [Barnes & Noble] would be equally brutal to Publishers who have thrown in with your competition [Amazon] with obvious disdain for your welfare.” B&N continued to promote RH titles and so Shanks went back to B&N. ”Following this contact, B&N’s management decided not to feature Random House in any future advertising.”
Random House eventually caves.
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Old 06-01-2012, 07:59 AM   #13
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basically, wholesale will favor the settling Publishers Simon & Schuster, Hachette and HarperCollins.

Amazon will price their bestsellers at $9.99. I expect Nook, KOBO to compete and lower their prices too.

Simon & Schuster bestsellers: $9.99 (Amazon pays $12.50)
Hachette bestsellers : $9.99 (Amazon pays $12.50)
HarperCollins bestsellers: $9.99 (Amazon pays $12.50)

Penguin bestsellers: $12.99 (70% agency cut = $9.093)
Macmillan bestsellers: $12.99 (70% agency cut = $9.093)
Random House bestsellers: $12.99 (70% agency cut = $9.093)


Higher prices will result in less books purchased (relatively). OUCH #1
Agency will also mean $9.093 revenue per book instead of $12.50. OUCH #2

The $1 million question: What will Random House do?

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Old 06-01-2012, 09:49 AM   #14
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There is no doubt that the Settling Publishers gain an advantage vis-a-vis RH-while the settlement lasts. However, the long term effects of giving Amazon a monopsonistic hold on the market are right where they have always been . Steve Jobs was right: eventually, Amazon is going to say: Give us your books at 70% of $9.90 =$6.93 or we'll take our business elsewhere." And $6.93 is a lot less than $9.93.
Now consumer advocates tend to ignore the possibility of this happening because they don't understand (or want to understand) the problem this poses for publishers, but publishers would be incompetent not to want to guard against such a scenario. They guard against such a scenario by :


1. Encouraging as broad and diverse a group of retailers as possible ( that's the intent of agency pricing).
2. Establishing their own sales channels . In the UK, RH is investing in Anobii LINK Anobii isn't off the ground yet,but its CEO is on record as promoting direct marketing to consumers from the publisher.Anobii sets out their vision HERE:

Quote:
In a similar way, Pottermore transformed Amazon from a fierce ebook retailer into a tame ebook shop window. Pottermore uses Amazon (and all other ebook retailers online) as an affiliate which attracts customers to their ebook store in exchange for a finder’s fee. Thus, Pottermore gains direct access to the end user details (alongside Amazon as both companies know that the user has purchased the ebook).

This ‘charm’ is really transformative as it really shifts the power from the retailer to the publisher. The publisher gains are significant:

•they gain direct access to the user/reader for marketing purposes
•they have total and final control on the price of their ebooks as they are the only place where the ebooks can be purchased (they own the ‘check-out gateway’)
•this approach does not affect the retailers as they could still earn healthy ‘introduction fees’ and also retain data on the user (they know who they are sending to the publisher and if the transaction has taken place)
•the publisher controls how much they pay the retailer who has procured the customer in a sort of ‘extreme agency’ model without the legal implications of the current agency structure (this is an affiliate scheme!)
•they build a customer base which is going to be extremely valuable when trying to attract new authors (this also helps answering the difficult question of what’s the role of a publisher in the future)
•they gather invaluable user data for statistics and future planning
These are all pretty valuable points but the most important one is that by gaining control of the relationship with the people who read their ebooks, publishers are going to be in a much stronger position in the future. The two biggest risks for publishers in the future are the lack of control on how much their ebooks will cost and the inability to attract authors.
So what will RH do? They MAY go back to wholesale-short term. BUt in my mind, there is no question they'll go back to agency pricing and direct sales-long term. They'd be short-sighted idiots not to.

Last edited by stonetools; 06-01-2012 at 10:07 AM.
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Old 06-01-2012, 10:01 AM   #15
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So what will RH do? They MAY go back to wholesale-short term. BUt in my mind, there is no question they'll go back to agency pricing and direct sales-long term. They'd be short-sighted idiots not to.
Actually... there's quite a bit of historical (albeit anecdotal) evidence to support the idea that short-sightedness (especially as it pertains to ebooks) may actually be one of their (and all of BPHs') superpowers.

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