Publishers Weekly: Will the Agency Model Survive?

[Top100EbooksRank]

http://www.publishersweekly.com/pw/b...l-survive.html

Of course, if the publishers still believe in a no-discount, straight agency model for e-books, they can keep it. And they have some leverage. Despite the pain of suits, the 2010 agency switch succeeded in bringing Apple into the e-book game. And, the agency model also enjoys support from other retailers who are not eager to return to a permanent price war with Amazon—Barnes & Noble, Kobo, and Google are either happy with agency pricing or indifferent to it.

Unless one believes Amazon is prepared to dump each of the Big Five publishers, all the publishers have to do, in theory, is maintain their resolve, take the short-term pain, and, one by one, hold the agency line.

But will they? The short-term pain could be considerable, given Amazon’s share of both digital and print sales.

Only time will tell whether there is enough industrywide resolve to back up those words. For now, Hachette is a bellwether: potentially the first publisher to decide, postsettlement, whether to hold the line on e-book agency pricing, and to endure the stick of Amazon’s retaliation without knowing whether the publishers after it will reach for the carrot.

If Amazon caved like it did with Macmillan a few years back, ebook sellling will be back to agency model. No discount.

Macmillan back then had the colluded backing of the other 4 publishers thanks to Apple anti-trust violation. This time, Hachette will have to go at it alone.

[bgalbrecht]

Both Apple and B&N believe that it's to their advantage if ebooks are sold via agency model pricing. I know that most of the large publishers don't allow coupons at Kobo, I don't know whether it's Kobo's decision or the publishers.

[AnemicOak]

Originally Posted by bgalbrecht

Both Apple and B&N believe that it's to their advantage if ebooks are sold via agency model pricing. I know that most of the large publishers don't allow coupons at Kobo, I don't know whether it's Kobo's decision or the publishers.

Kobo's a fan of Agency as well.

As far as former Agency and coupons at Kobo they did allow them for a short while after Agency ended, but then stopped again. I wonder if it has to do with the requirement that a store make an overall profit on each publishers books and if Kobo was afraid that they might run into problems with people using high value coupons on lots of books.

[Ninjalawyer]

Originally Posted by AnemicOak

Kobo's a fan of Agency as well.

As far as former Agency and coupons at Kobo they did allow them for a short while after Agency ended, but then stopped again. I wonder if it has to do with the requirement that a store make an overall profit on each publishers books and if Kobo was afraid that they might run into problems with people using high value coupons on lots of books.

Without the coupons working for most books, Kobo's profit from me has been zero over the last year. If the publishers goal was to drive me back to paperbacks and the library, mission accomplished I guess. Of course, they might be raking in way more cash with the agency model overall.

[fjtorres]

One problem with this cozy little scenario: the DOJ is monitoring contract negotiations. And they have veto power over any contract. For at least three more years.

Any hint of coordination between the BPHs and they'll be back in court.

One of the points that got them in hot water during the conspiracy was the way the negotiated with Amazon: as soon as one of them got tentative agreement on a new concession, the others promptly demanded the same, even though the negotiations were supposed to be private. One of the reasons the BPHs (and their apologists) swear Amazon sic'ed the DOJ on them is that when the feds came calling, they turned over all the documents proving they'd colluded during the supposedly private and confidential negotiations.

This time, Hachette thinks they can achieve the same by negotiating in public and using the publishing press to coordinate.

Aside from the dubious legality of their goals (horizontal price fixing is illegal, regardless of how it is imposed) their biggest challenge is they have very little leverage on Amazon. (Last I heard) Amazon doesn't do pbook returns--they buy them outright--so they can't threaten to refuse returns, like they did to Borders, and Amazon doesn't need their payola--they routinely offer to give it up in return for lower wholesale pricing. And, to top it off, unlike 2010 Amazon makes at least as much money from their own titles and Indie titles as they do from the BPHs, combined. And books are, of course, a tiny part of their income (Right now, AWS is Amazon's cash cow, followed by the affiliated merchants) so a boycott won't hurt them.

And finally, even if the BPHs get agency back, they won't be hurting Amazon any. As the fallout from the conspiracy has proven, yet again, price fixing protects incumbents. And Amazon is the top incumbent so removing price competition simply changes the discussion to all the other ways Amazon outclasses their competitors.
All price fixing does is freeze movement across the various walled gardens when it comes to BPH titles. But BPH titles aren't anywhere near the totality of the book universe and it is, in fact, a shrinking part of the total market.

This obsession of the BPHs with agency falls under the heading of "be careful what you wish for...". The first time they imposed it it cost them hundreds of millions in fines above and beyond the reduced income for them and their authors atop the reduced unit market share.

By focusing on reader spend instead of net income for them and their authors they are cutting off their noses to spite their faces. Which will only leave them bloody and ugly while Amazon laughs all the way.

It is simply stupid.

[fjtorres]

BTW, check this:

http://www.hughhowey.com/amazon-and-hachette-go-to-war/

Publishers demand that Amazon charge more for their e-books or limit the discounting, even though it doesn’t impact how much publishers or authors earn. So what you have is a company fighting for lower prices for customers, while keeping the pay for publishers and authors the same, and they are evil. While B&N holds publishers hostage just to rake in more cash to present customers not with what bookstore employees wish to highlight, but what they are paid to highlight. The backwardness of this PR war are baffling to me. Until you look at where it originates: PW is a weekly rag for bookstores. The NYT made their stance known when they stopped including the e-book bestsellers in their Sunday Book Review. The masses get their info from the traditional machine, and so they side with mafia tactics on the one hand and cry out against a distributor trying to keep their prices down.

[fjtorres]

Here's an interesting take:
http://www.digitalbookworld.com/2014...amazon-battle/

Apparently, what Amazon is doing is they only order Hachette books after taking a consumer sales order. So, instead of buying a bunch of their books to cover weeks or months of estimated sales, they are only buying what is actually selling.

Hardly illegal.
Just not doing them any favors whatsoever.

And then there's this:

What do I think should happen? Well first off, publishers have to realize that getting $3 for every $1 that an author makes on ebooks just isn’t fair. Ironically, they are feeling the same pressure from Amazon that they apply to authors—requesting a higher share because they hold a strategic advantage. I’m sure both Amazon and authors look at the publisher’s 52.5% and can’t help but think more should come their way, but unlike Amazon authors are powerless. The big-five publishers are remarkably uniform in paying 25% of net on ebooks, so the author has to either accept that rate or go the route of self-publishing. If I could set the terms, I would suggest 30% to Amazon, 35% to the publishers, and 35% to the author.

[Fbone]

I wonder if Amazon wants more than 30%.

Also, are they wrangling over MFN? I believe that makes it hard for other stores to compete.

[fjtorres]

Originally Posted by Fbone

I wonder if Amazon wants more than 30%.

Also, are they wrangling over MFN? I believe that makes it hard for other stores to compete.

According to the published reports the bone of contention is Hachette wants Amazon to stop discounting ebooks.
So Amazon stopped discounting pbooks.

[speakingtohe]

Originally Posted by fjtorres

Here's an interesting take:
http://www.digitalbookworld.com/2014...amazon-battle/

Apparently, what Amazon is doing is they only order Hachette books after taking a consumer sales order. So, instead of buying a bunch of their books to cover weeks or months of estimated sales, they are only buying what is actually selling.

Hardly illegal.
Just not doing them any favors whatsoever.

And then there's this:

Quote:

What do I think should happen? Well first off, publishers have to realize that getting $3 for every $1 that an author makes on ebooks just isn’t fair. Ironically, they are feeling the same pressure from Amazon that they apply to authors—requesting a higher share because they hold a strategic advantage. I’m sure both Amazon and authors look at the publisher’s 52.5% and can’t help but think more should come their way, but unlike Amazon authors are powerless. The big-five publishers are remarkably uniform in paying 25% of net on ebooks, so the author has to either accept that rate or go the route of self-publishing. If I could set the terms, I would suggest 30% to Amazon, 35% to the publishers, and 35% to the author.

I'm confused by the quote. Are they saying that publishers are making 30% profit for every $1 an author makes? Could be true for ebooks but is it true for pbooks? (And yes I know it explicitly states ebooks in the quote, just trying to see the overall picture)


My understanding, which could be wrong, is that traditionally the B&M stores made 50% of the cover price if selling at that price?


I am not saying that authors were ever fairly paid except for the most popular and prolific, because I do not think that, but I am not sure I can see publishers as any more avaricious than other large businesses or providers of professional services etc.

Helen

[fjtorres]

Originally Posted by speakingtohe

I'm confused by the quote. Are they saying that publishers are making 30% profit for every $1 an author makes? Could be true for ebooks but is it true for pbooks? (And yes I know it explicitly states ebooks in the quote, just trying to see the overall picture)


My understanding, which could be wrong, is that traditionally the B&M stores made 50% of the cover price if selling at that price?


I am not saying that authors were ever fairly paid except for the most popular and prolific, because I do not think that, but I am not sure I can see publishers as any more avaricious than other large businesses or providers of professional services etc.

Helen

What he is saying is that most publishers make 3 *times* what the author makes. At least.

And yes, traditionally, B&M retailers get about a 40-50% discount off list but that's not their profit--that is their gross margin. From that they pay their own costs and decide how much discount to offer buyers. Whatever remains is their profit. For pbooks, the amount of the discount depends on things like volume and whether the books will be returnable if they don't sell in a specified period.

Finally; no, publishers as a whole are not unusually greedy, but some publishers go way beyond the pale in exploiting writers. Their names and their ploys are generally known. Lawsuits are in process even as we speak.

[SteveEisenberg]

Originally Posted by fjtorres

According to the published reports the bone of contention is Hachette wants Amazon to stop discounting ebooks.
So Amazon stopped discounting pbooks.

Not quite.

Take the title Instinct, which is currently the New York Times number one bestseller on their "ADVICE, HOW-TO & MISCELLANEOUS" list.

Hardcover List Price: $25.00
Hardcover Amazon Price: $15.00

Seems like a discount to me.

What Amazon is doing, at this moment, is slapping on a "Usually ships within 3 to 5 weeks" notice. Hachette says that they are shipping promptly. I find it highly plausible Hachette is telling the truth.

Amazon is using its market power to dictate financial terms to a supplier.

Originally Posted by fjtorres

Hardly illegal.

I think you are correct.

I also think that when a discounting merchant gets that much power, they are liable to use it to force down prices, which forces down quality. WalMart does it with clothing. And Amazon is attempting to gain the power that would allow it to do so it with books.

Now, if the decline in quality is more typos and uglier cover art, I don't care much personally. But if the quality decline includes lower advances against book proposals, resulting in fewer highly researched books, that's a problem.

[crossi]

Originally Posted by SteveEisenberg

Not quite.

I also think that when a discounting merchant gets that much power, they are liable to use it to force down prices, which forces down quality. WalMart does it with clothing. And Amazon is attempting to gain the power that would allow it to do so it with books.

Now, if the decline in quality is more typos and uglier cover art, I don't care much personally. But if the quality decline includes lower advances against book proposals, resulting in fewer highly researched books, that's a problem.

Why should Amazon's prefered marketing method force lower quality? In the pre Agency days Amazon paid the publishers whatever they wanted for the book then sold it with a low markup making their profit on volume. After the Agency agreement Amazon actually got more money from each sale, the publishers and authors got less and the public paid more. THAT would force lower quality books not anything Amazon did.

[fjtorres]

Originally Posted by SteveEisenberg

Hachette says that they are shipping promptly.[/url] I find it highly plausible Hachette is telling the truth.

You can believe whoever you prefer to believe but Mr Sullivan's quotes suggests Hachette has a different definition of "promptly" than one might think;

On April 29th, during a phone call with Amazon’s Author Central, the Amazon representative indicated they had more than a dozen purchase orders placed from April 21st – 24th which had not yet shipped. At that time, Hachette was indicating ship dates of May 2nd – May 10th. Hachette has continually assured us all orders were shipping “in a timely manner” and Amazon was to blame for placing small orders. We’ve asked for copies of the purchase orders and confirmation of the shipment dates from my publisher but have been told, “It is not information we would like to be shared with any third party at the current time.” Hachette would be foolish to delay orders while simultaneously accusing Amazon of doing exactly that, but perhaps their definition of “in a timely manner” is not the same as it was before the dispute.

http://www.digitalbookworld.com/2014...amazon-battle/

[Fbone]

Mr Sullivan's titles are available at B&N for immediate pickup or delivery within 24 hours at a 25% discount.

If Mr Sullivan's Amazon customers wish to wait the clearly stated 3 to 5 weeks and pay full retail, then that is their choice.