Death of the agency model?

[Andrew H.]

Reuters reports:

The Justice Department could reach a settlement in the next few weeks with Apple Inc (AAPL.O) and some of the major publishers suspected of colluding to push up electronic book prices, according to two people close to the negotiations.

While negotiations are still fluid, the settlement is expected to eliminate Apple's so-called "most favored nation" status, which had prevented the publishers from selling lower-priced e-books through rival retailers such as Amazon.com Inc (AMZN.O) or Barnes & Noble Inc (BKS.N), the people said.

The deal could also force a shift, at least temporarily, in pricing control from publishers to retailers, one of the people said.

Such a move to a "wholesale model" would not only benefit consumers but also Amazon, which had been the leading bargain e-book retailer with its Kindle reader.

From: http://www.reuters.com/article/2012/...82T19620120330

[Skydog]

Dismantling the current Agency Model will certainly be cause for celebration if this does indeed happen. With respect to the article, I thought the publishers never did sell "lower-priced ebooks" to retailers -- it was the retailers who were lowering their prices to the consumer.

[JD Gumby]

Originally Posted by Skydog

Dismantling the current Agency Model will certainly be cause for celebration if this does indeed happen. With respect to the article, I thought the publishers never did sell "lower-priced ebooks" to retailers -- it was the retailers who were lowering their prices to the consumer.

It was. Like with physical books, they were paying a wholesale price (half the MSRP, I guess, is standard) to the publisher and then charging whatever they wanted.

[vaughnmr]

Maybe this will help the agency publishers move into this century, I'm tired of trying to prop up the old business model. Now maybe we can start having frank talks about drm, personal lending, geo-restrictions, libraries, author percentages...

Well, I doubt it. They will ride the tail as long as they can.

[Daithi]

I'm not a fan of the agency model, but I doubt that getting rid of agency pricing is going to matter much.

When Amazon was selling books at $9.99 they were trying to aggressively grow the market for their new device, so they were willing to take a loss. They're now making 30% on all those bestsellers. I doubt they'll want to go back to taking a loss.

I also doubt the publishers will be too heartbroken about being forced to abandon the agency model. They actually make more money having Amazon pay 50% of MSRP of the hardcover than 70% of the ebook price. The publishers just didn't like the $9.99 price point, and that is gone and is unlikely to come back (see point 1), so in that respect the publishers won the war. The battle over agency pricing or wholesale pricing is meaningless at this point.

I do wonder what will happen to authors who are publishing directly through Amazon. Will they too have to kiss their 70% goodbye? I mean, if Amazon can scrap the 30/70 split with big publishers then why would they maintain it with small or self-publishers?

Lastly, if the agency pricing model is gone it doesn't mean haggling over pricing is finished. It's probably just starting at square one again. So, can we look forward to publishers again doing things like releasing ebooks months after the hardcovers? Probably.

[darryl]

There are two mechanisms I can think of immediately which I suspect will operate to keep prices from getting too out of hand.

1. There is and will continue to be plenty of good fiction available for under $10, both from Indie Authors and a gradually increasing number of more established authors. And readers are becoming increasingly willing to give new authors a go.

2. The ease of piracy and the real difficulty in preventing it.

[scrapking]

It's widely stated that the agency model weakened Amazon's marketshare. I'm not sure this was a primary mover of that. Most of Amazon's lost marketshare seems to have been driven by:

- brick-and-mortar counterattacks (Nook pushing into the #2 spot in the U.S. thanks to B&N, Kobo becoming #1 in Canada on the retail strength of Chapters/Indigo, etc.), and

- device alternatives (iBooks' success was device driven, not agency driven, IMO).

Michael Serbinis of Kobo argued more passionately and persuasively against the agency model than anyone else I read on the subject (those editorials still available on Kobo's blog), so they didn't seem to see anythiing positive for them in agency.

[DiapDealer]

I don't like the Agency pricing model, so I'd be happy to see it go for that reason alone. But like someone already mentioned, I don't think getting rid of it is going to change much at this point... between Big Publishing and Big Retail, that is (with the exception that if retailers start undercutting the price of the hardback release with their ebook pricing, we'll be right back where we started and BPHs will probably delay all ebook releases to retaliate).

Where I think the elimination of the Agency Model might make a slight difference is with small retailers. Being allowed to devise their own special discounting programs, promos and customer-loyalty credit-accrual programs, MAY... just may, allow them to eke out an existence.

We'll see. Interesting times and happenings for sure.

[Phogg]

Originally Posted by darryl

There are two mechanisms I can think of immediately which I suspect will operate to keep prices from getting too out of hand.

1. There is and will continue to be plenty of good fiction available for under $10, both from Indie Authors and a gradually increasing number of more established authors. And readers are becoming increasingly willing to give new authors a go.

2. The ease of piracy and the real difficulty in preventing it.

Actually, there is a whole lot of good fiction for under $2.50.
And people like me promoting it to new readers at our local independant library.
New books for frugal readers.
It would take draconian legislation and enforcement to stop well written indies from eventually prevailing.

[J. Strnad]

I'm pretty much over the whole debate. Even at $9.99 (ebooks subsidized by Amazon) I thought the price was too high, and I started looking around. I now have a TBR list that'll keep me going for weeks with new books appearing all the time. The big publishers have become all but irrelevant to me as a reader.

[HarryT]

Originally Posted by J. Strnad

I'm pretty much over the whole debate. Even at $9.99 (ebooks subsidized by Amazon) I thought the price was too high, and I started looking around. I now have a TBR list that'll keep me going for weeks with new books appearing all the time. The big publishers have become all but irrelevant to me as a reader.

I, on the other hand, consider agency prices to be entirely reasonably, and buy almost all my books from agency publishers. E-book sales appear to be booming; I'm evidently not the only person who has no issue with current pricing levels.

[stonetools]

Frankly, it's early days yet. The fact that it comes from two sources indicates that A deal really is in the works, but there is confusion as to the details. What does" control of the prices shifting temporarily to the retailers" mean? Are we talking about some sort of hybrid -wholesale model? Also, too, they are talking about a deal with "some publishers." does that mean that the rest are going to trial?

I can see Apple's MFN status going away without any problems. But anything else is going to require a major rethink on how the publishers are going to do ebooks. I don't think they'll be going back to the old wholesale model, for reasons discussed earlier.

[pwalker8]

Originally Posted by HarryT

I, on the other hand, consider agency prices to be entirely reasonably, and buy almost all my books from agency publishers. E-book sales appear to be booming; I'm evidently not the only person who has no issue with current pricing levels.

I tend to agree with you. I personally feel that if I want to keep reading new books, then I need to encourage authors to write more books, which means they have to make enough money that it's worth their while to write. I figure that the more money authors make with ebooks, the more likely authors or the right holders will make the effort to move a book that I may want to ebook format. Of course, when I was a teenager, I use to spend my lunch money on books. Of course, they only cost 75 cents way back when I first started buying books.

[HarryT]

Yes, that's precisely the point. Although I as an individual would like books to cost £1, £1 books are not economically viable. I have no problem with paying £5 for a nicely-produced ebook. (for comparison, paperbacks in the UK typically cost £7.99)

[Boston]

My problem with agency pricing is that the e-book is often more or close to the price of a discounted paper back. (I only rarely bought hardbacks).

I have the mental roadblock where the e-book needs to be at least $1 less than what I can get for new paper (which I can share and pass along).

As a result, my buying of current agency books is way down (from a few a week to maybe one a month). Unless its a "must-read" for me, I just wait to see if it shows up at the library (or there is a price drop).

But clearly I am not the mass market who seem to have accepted the model. (And to be honest, if I hadn't been an early adopter, I may have as well)