Smashwords Moves to Agency Model

[lilac_jive]

Originally Posted by BearMountainBooks

When Under Witch Moon goes live at Kobo, I can try testing that coupon. But I don't know when that will be. It's been "shipped" but hasn't appeared yet. Hopefully soon.

I always enjoy your posts, and now I'm mad at myself for not thinking of you when I made my most recent purchase at Smashwords. Got a coupon for any of your offerings, or a particular recommendation?

I had a nice cocktail at dinner, so my choosing skills are pretty minimal right now...

[John Carroll]

As an author, I like Smashwords. I appreciate the fact that they're trying to provide me with the best deal I can get. They also convert my file into all formats.

I don't begrudge anyone a profit, especially if they provide a service. I will say that I like the fact that I can set my price and have it honored. I think I'd be okay with retailers setting different prices and competing with my books as long as I received the same price for each sale.

Right now, the industry is in chaos. ebooks and independent authors are adding new ingredients into the mix and the current publishers are rushing around like angry ants trying to cope. It's only going to get crazier over the next few years.

When the dust settles, I think the consumer is going to be the real winner with an extraordinary number of new options and much more reasonable prices on good stories.

[BearMountainBooks]

Originally Posted by lilac_jive

I always enjoy your posts, and now I'm mad at myself for not thinking of you when I made my most recent purchase at Smashwords. Got a coupon for any of your offerings, or a particular recommendation?

I had a nice cocktail at dinner, so my choosing skills are pretty minimal right now...

I've seen you post on the "what are you reading..." and if I recall you like cozies?

Or for that matter, just pick one that you'd like to try and I'll create a coupon for you.

Here's my smashwords page:

https://www.smashwords.com/profile/v...rMountainBooks

I'm guessing, but I think you'd probably like

Executive Lunch (the first in the Sedona O'Hala series; cozy mystery)
https://www.smashwords.com/books/view/5791

Let me know if you see something you like and I'll create a coupon for you and anyone else paying attention.

[leebase]

Originally Posted by John Carroll

I don't begrudge anyone a profit, especially if they provide a service. I will say that I like the fact that I can set my price and have it honored. I think I'd be okay with retailers setting different prices and competing with my books as long as I received the same price for each sale.

This is a good place to start. Sounds perfectly reasonable that as long as you get to determine the money that comes to you -- you're perfectly fine with a retailer putting your books on sale -- maybe even choosing to use your book as a loss leader by loosing money on selling your book in order for the retailer to gain in some other way.

Ok. So we have a principle here -- you do care about what the retailer does IF it impacts your own income.

Well, now lets extend your interest to not only your books, but all the books that a large publisher is concerned about. If you have a retailer with huge marketshare -- setting a price point so low that you KNOW if such pricing is allowed to stand -- then your business will be hurt financially even while the retailer pays your wholesale price.

BING0 -- now you know why the "Agency 5" stood up for themselves against Amazon. It is the SAME self preservation that an individual author wishes to exercise.

Lee

[BearMountainBooks]

Originally Posted by leebase

This is a good place to start. Sounds perfectly reasonable that as long as you get to determine the money that comes to you -- you're perfectly fine with a retailer putting your books on sale -- maybe even choosing to use your book as a loss leader by loosing money on selling your book in order for the retailer to gain in some other way.

Ok. So we have a principle here -- you do care about what the retailer does IF it impacts your own income.

Well, now lets extend your interest to not only your books, but all the books that a large publisher is concerned about. If you have a retailer with huge marketshare -- setting a price point so low that you KNOW if such pricing is allowed to stand -- then your business will be hurt financially even while the retailer pays your wholesale price.

BING0 -- now you know why the "Agency 5" stood up for themselves against Amazon. It is the SAME self preservation that an individual author wishes to exercise.

Lee

Except that from what we could glean, Amazon was taking the hit financially, not the author or the publisher. That's the part I don't get. In the 35 percent model (under $1.99) if Amazon puts a book on sale, they take the hit--even if they put the book for free. So it doesn't particularly bother me. But in the 70 percent model (2.99 and up to 9.99) I take the hit. I can managed that by pricing higher or pricing differently, so it's still a workable model--it's just more of a pain in the rear and requires more attention. A publisher with many books isn't going to want to manage that and either has to price high going in or keep an eye on "sales."

It's possible that publishers worked under two or more pricing structures with Amazon, but I find it a little suspect that they would have been allowing Amazon or any other retailer to discount and push the financial liability back to the publisher. And if they were doing so, it would seem reasonable to assume that in those cases, Amazon was getting the small percentage just as we are with the under $2.99. But no one is going to tell us for sure one way or the other.

[lilac_jive]

Originally Posted by BearMountainBooks

I've seen you post on the "what are you reading..." and if I recall you like cozies?

Or for that matter, just pick one that you'd like to try and I'll create a coupon for you.

Here's my smashwords page:

https://www.smashwords.com/profile/v...rMountainBooks

I'm guessing, but I think you'd probably like

Executive Lunch (the first in the Sedona O'Hala series; cozy mystery)
https://www.smashwords.com/books/view/5791

Let me know if you see something you like and I'll create a coupon for you and anyone else paying attention.

I do love cozies!!! Thank you so much!!!

[L.J. Sellers]

Originally Posted by abookreader

I'd appreciate it if somebody could tell me why this would be a thing for authors to cheer over?

I've always been under the impression that Authors were ecstatic when they'd wake up one morning and find out that Amazon had discounted their book.

Discounting can be very problematic for authors. If I list my e-book at Amazon at $2.99 and Amazon discounts it to $2.84 because Borders discounted it to $2.84, then my royalty at Amazon drops from 70% to 35%. This represents a huge loss for me, because I sell way more books at Amazon than I do at Borders. This recently happened, with Borders violating its contract with my distributor.

I had no choice but to pull my books from Borders. When they go back up, it'll be at a higher price, so I don't get screwed by their discounting. Ultimately, Kobo readers end up paying more for indie books because of this. Same is true with Sony.
L.J.

[BearMountainBooks]

Originally Posted by lilac_jive

I do love cozies!!! Thank you so much!!!

Here's 10 percent off Lunch -- Good for the next two days:

WH56V

Another cozy (stand alone) Catch an Honest Thief:

CS44N


20 percent off Under Witch Moon:

VY89K

Note: There will be a giveaway for Under Witch Moon next week. Two e-copies will be given away at: http://fictionfordessert.blogspot.com/ Entry to the contest is usually pretty challenging and consists of "leave a comment on the blog." This is my latest novel and the first in a series, so on this one the price does vary from time to time as I run specials. I'll post a reminder about the giveaway on my thread in the promo area when it starts (I think Wed).

If I missed something you want, (or anyone else who expresses interest) let me know here or PM (don't want to OT this thread!!!). I'm traveling this week so my responses might be delayed. PMs always welcome if you think I missed a question or post.

Lilac--thank you for your interest and for being so nice!

Maria

[DMcCunney]

Originally Posted by leebase

BING0 -- now you know why the "Agency 5" stood up for themselves against Amazon. It is the SAME self preservation that an individual author wishes to exercise.

Indeed. Amazon is not a good guy, and "good guys vs bad guys" is meaningless in this context.

Amazon is the world's largest catalog retailer. They are working turf pioneered by Sears, Roebuck and Co., who defined themselves as the retailer to rural America. Back when Sears started, a lot more of America was rural, and people who lived there had a problem. If you wanted something, it either had to be stocked at your local general store, or you had to travel a possibly long distance to get it. Sears carried everything, and published a catalog with what they offered. You could select it from the catalog, order it from Sears, and have it delivered to you. Sears became huge in consequence.

Amazon moved the catalog to the web and dispensed with retail outlets. Order from the web, and Amazon ships to you. When Amazon started out, they hired supply chain experts and distribution experts from major retailers and shippers to help them build out warehouses and distribution capability.

Amazon wants market share, and uses price, selection, and convenience to get it. In the case of ebooks, they want to be your only supplier, and the ecosystem based around the Kindle and Kindle apps is tailored to making that happen. While Amazon uses the ebook format created by Mobipocket (who they bought) for Kindle books, they use a modified form of Mobi's DRM. The intent isn't to prevent piracy: it's to lock you in to Amazon as the vendor. Want to buy an ebook to read on your Kindle/Kindle app? You have to buy from Amazon, and give them a cut of the take.

If the Mobi format book isn't protected by DRM, you can side load and read it. If it is, and it's not from Amazon, you have to strip the DRM. Most folks don't know how to do that, and may not want to bother if they do know.

Kindle/Kindle app users have the selection they like at a price they are willing to pay, and don't see this as an imposition...now. What happens if Amazon does obtain a monopoly on ebook sales (or even a strong majority of the market? Want to bet they won't raise prices, because you don't have an alternative and they can, if they think they need to?

If you don't think they would, tell me where to get some of what you're smoking. Amazon is a Fortune 500 company with a strong P/E ratio and a healthy stock price. Their overriding goal is to maintain that position, and they will do what they think they have to in service of that goal.

Amazon is a retailer. The resell things others produce. Amazon set a default price of $9.99 for ebooks and conditioned a large number of folks to think that was what ebooks should be priced at. They did not talk to the producers (the publishers) of the ebooks they sold about this move.

The precipitating problem was that Amazon was selling Kindle editions of hardcover best sellers at the default $9.99 rate. Hardcover best sellers are the publishing industry's crown jewels. They generate the most revenue and profit, and often make the difference between whether a publisher makes money or shows a loss on the year. Enough folks were buying the Kindle edition that publishers were seeing sales drop on hardcovers.

What they initially pressed Amazon to do was delay the availability of the ebook version to give the hardcover time to sell, for the same reason there is a year delay between the hardcover and the mass market paperback release. Amazon declined, and even dropped the price of some Kindle editions to $7.99 in a node thumb at the publishers. The "Agency 5" response was to change the terms under which they did business with Amazon to require higher prices. It was essentially "You want to offer the ebooks at the same time as the hardcover? Fine. Charge more for it, and give us a higher cut of the take, top compensate for what we lose in not selling the hardcover."

Amazon cried crocodile tears. They probably make more all told under the Agency model, but can point at the publishers as the bad guys in the price rise.

This is actually a facet of a larger battle, as Amazon had peen pressing for even higher discounts on paper books. The standard wholesale discount on books is 40% (and is what libraries pay). Amazon's is more like 50% or higher, and Amazon wanted even greater ones. With greater discounts, Amazon has more pricing flexibility, and can gain even greater market share. The question becomes "At what point does the producer stop making money on sales to that retailer, because the discount is so high?" There's some evidence things were reaching that point.

The publishers aren't bad guys. They are trying to survive. To survive they must make money, and what their costs are and how much they have to make to remain in business will determine the prices they charge. The big question now is can a major trade publisher produce ebooks at the low price people would like to see and stay in business? The answer may well be "No. They can't."

A fair number of folks here seem to feel "Screw 'em. Let them go out of business! I'll buy direct from the author, and we'll all be happy!"

Be careful what you wish for. You might get it. I don't think you'll be happy if you do.
_______
Dennis

[rhadin]

Dennis is exactly correct.

Originally Posted by DMcCunney

Amazon wants market share, and uses price, selection, and convenience to get it. In the case of ebooks, they want to be your only supplier, and the ecosystem based around the Kindle and Kindle apps is tailored to making that happen. While Amazon uses the ebook format created by Mobipocket (who they bought) for Kindle books, they use a modified form of Mobi's DRM. The intent isn't to prevent piracy: it's to lock you in to Amazon as the vendor. Want to buy an ebook to read on your Kindle/Kindle app? You have to buy from Amazon, and give them a cut of the take.

. . .

Kindle/Kindle app users have the selection they like at a price they are willing to pay, and don't see this as an imposition...now. What happens if Amazon does obtain a monopoly on ebook sales (or even a strong majority of the market? Want to bet they won't raise prices, because you don't have an alternative and they can, if they think they need to?

If you don't think they would, tell me where to get some of what you're smoking. Amazon is a Fortune 500 company with a strong P/E ratio and a healthy stock price. Their overriding goal is to maintain that position, and they will do what they think they have to in service of that goal. . . .

And this is why I prefer to support other vendors than Amazon.

[khalleron]

The only thing wrong with that argument, DMcCunney, is that if the publishers didn't want ebooks to compete with hardcovers, then they should just not have released the ebook at the same time.

They wanted to have their cake and eat it, too - sell ebooks alongside hardcovers at the same price as hardcovers.

Well, they got their way, but I don't think you can argue pure self-defense against the big bad wolf in this case.

A publishing cartel controlling prices for almost all books published is a far cry from an individual author trying to control the price for their handful, or less, of books.

[andrewburt]

Originally Posted by DMcCunney

Amazon wants market share, and uses price, selection, and convenience to get it. In the case of ebooks, they want to be your only supplier, and the ecosystem based around the Kindle and Kindle apps is tailored to making that happen.

Except that consumers aren't generally loyal in the face of higher prices. The wonderful thing about the free market is that someone else can play in the ebook space and yank market share from Amazon if they do it better. Look at browsers: First it was Mosaic and Netscape, the Microsoft took it over with Explorer, and now that's losing ground to Firefox, Safari, Chrome, etc. Anyone remember the search engine Alta Vista? It was the hot site of the day, then Google popped in with a better mouse trap, and now nobody uses Alta Vista. Bing is taking market share from Google now.

Amazon did have the first-to-market lock on ebooks, until B&N -- now the Nook is grabbing market share. Apple is trying. You can bet that Google ebooks will start to do likewise, especially if they get a better app for the android platform.

While the Kindle can only read MOBI format files (easily, unless you convert them with something like Calibre), many other readers can read Kindle, epubs, etc. I mean, an iPad can read any format, a netbook can, most smartphones can (I've been reading on my blackberry for many many years now), and so on.

Any other bookseller can sell .MOBI files too -- such as Smashwords (or anyone) and they load right into your Kindle right from the Kindle's web browser. (We have a Kindle WiFi. Click on .mobi, loads right in.)

Amazon can't lord it over anyone, except by offering good content at good prices.

If the Mobi format book isn't protected by DRM, you can side load and read it. If it is, and it's not from Amazon, you have to strip the DRM. Most folks don't know how to do that, and may not want to bother if they do know.

I suspect a lot of people who are heavy readers know about Calibre, though. DRM is a whole other topic, but (in my experience as, e.g., VP of the Science Fiction & Fantasy Writers of America) ultimately it costs you readers. Piracy isn't a problem worth worrying about so long as you have the legitimate product easily available at a fair price.

Kindle/Kindle app users have the selection they like at a price they are willing to pay, and don't see this as an imposition...now. What happens if Amazon does obtain a monopoly on ebook sales (or even a strong majority of the market? Want to bet they won't raise prices, because you don't have an alternative and they can, if they think they need to?

I don't think they can gain a monopoly on it. Waaaaay too easy to produce and sell ebooks.

If you don't think they would, tell me where to get some of what you're smoking. Amazon is a Fortune 500 company with a strong P/E ratio and a healthy stock price. Their overriding goal is to maintain that position, and they will do what they think they have to in service of that goal.

Bingo. They have to remain competitive.

Amazon is a retailer. The resell things others produce. Amazon set a default price of $9.99 for ebooks and conditioned a large number of folks to think that was what ebooks should be priced at.

Well, not so fast thar, pardna. They couldn't have pegged it at $99.99 and "conditioned" people that was good. Wouldn't work. They had to pick a price that the market would bear. To maximize profit, they might price it higher in exchange for selling fewer units (elasticity of demand), but that's what businesses do. And if some other business can do it better, they will.

They did not talk to the producers (the publishers) of the ebooks they sold about this move.

I'll give you that Amazon is aggressive. I've dealt with them at the corporate level, and yes, they are savvy and aggressive. I would like for them to have done a number of things differently, but in the end it really won't matter, because of competition. (Or potential for competition; Amazon can't slip up, or the alligators will eat them.)

On the other hand, as an author and former VP of a major author's group, I can say that the publishers generally never talked to us about their moves either.

I think Amazon realizes that if ebooks become the dominant format for books, publishers' days are numbered. Or if not numbered, what they do changes dramatically.

This relates to our discussion over on the other thread:
http://newnewforum.com/viewtopic.php...8&p=1287#p1287
so I won't repeat all that long thing here.

The publishers aren't bad guys. They are trying to survive. To survive they must make money, and what their costs are and how much they have to make to remain in business will determine the prices they charge. The big question now is can a major trade publisher produce ebooks at the low price people would like to see and stay in business? The answer may well be "No. They can't."

A fair number of folks here seem to feel "Screw 'em. Let them go out of business! I'll buy direct from the author, and we'll all be happy!"

Be careful what you wish for. You might get it. I don't think you'll be happy if you do.
_______
Dennis

And I'm sure supporters of blacksmiths around the turn of the century used to say, "Man, blacksmiths aren't bad guys, they're just trying to survive." But we switched to cars and don't need shoes for horses any more. This is predicated on whether ebooks will replace paper. If not, and paper remains dominant by consumer choice, then ebook prices are irrelevant. But a lot of signs are pointing to digital books replacing paper, so this is germaine.

Just curious, are you in the publishing business?

As for what happens to publishers, that's the subject of my reply to your other post, http://newnewforum.com/viewtopic.php...8&p=1287#p1287 so I'll just point to that (warning: long). Basically an analysis of what will happen to publishers in a mostly-ebook world, how they'll have to adapt (or be replaced) since they're losing their golden goose.

--Andrew Burt
My ebooks

[DMcCunney]

Originally Posted by khalleron

The only thing wrong with that argument, DMcCunney, is that if the publishers didn't want ebooks to compete with hardcovers, then they should just not have released the ebook at the same time.

Did you not read what I wrote? Amazon released it.

They asked Amazon to delay the ebook release. Amazon refused, and cut prices on selected titles in a thumb of the note at the publishers.

At that point, they did in fact withhold content from Amazon. Amazon was forced to a compromise, and the compromise was the Agency Model.

See http://www.bostonreview.net/BR35.6/r...i.php#c5t_form for a look at the background.

They wanted to have their cake and eat it, too - sell ebooks alongside hardcovers at the same price as hardcovers.

No, they wanted to make as much money on ebooks released at the same time as the hardcover as they did on the corresponding hardcover sale. That's not the same thing.

When the dust settles, you can expect to see two tiered pricing. If you want the ebook cheap, you can wait for it, the same way you now wait for the paperback instead of buying the hardcover. If you want to read the ebook now, at the same time the hardcover is on sale, expect to pay a premium for early access.

Well, they got their way, but I don't think you can argue pure self-defense against the big bad wolf in this case.

Under the circumstances, I can.

But I don't see Amazon as the Big Bad Wolf, nor see the Agency Model publishers as villains. Amazon is trying to increase it's market share at the expense of other retailers. Publishers are trying to survive in a changing environment.

Businesses are just like individuals. They all behave in what they believe to be their own best interests. These best interests often clash, just as individual's best interests do. Our economy is a dynamic tension of such competing interests.

A publishing cartel controlling prices for almost all books published is a far cry from an individual author trying to control the price for their handful, or less, of books.

They aren't a cartel in the legal sense of the word (you may assume their legal staffs burned the midnight oil to be sure that was true.) They are a group of publishers who agreed to change the terms under which they sold content to Amazon, in a fashion that gave them more control over the retail price.

This is not uncommon. Look around, and see what sorts of discounts you find offered on Apple or Nintendo products. Both companies police their retail channels, because both sell through retailers. They want a broad base of retailers, and don't want any particular retailer using cut throat pricing to expand its market share at the expense of others, possibly putting other retailers out of business. That potentially harms them as producers.

So it is with the Agency 5 and Amazon.

See my earlier questions about what happens if Amazon "wins" and becomes the dominant ebook retailer.
______
Dennis

[Fbone]

Originally Posted by L.J. Sellers

I had no choice but to pull my books from Borders. When they go back up, it'll be at a higher price, so I don't get screwed by their discounting. Ultimately, Kobo readers end up paying more for indie books because of this. Same is true with Sony.
L.J.

I'm sorry to hear this.

To be honest this is what we (including myself) have been saying that indie prices will increase.

Amazon apparently has now taken control of the indies also.

[leebase]

Originally Posted by BearMountainBooks

Except that from what we could glean, Amazon was taking the hit financially, not the author or the publisher. .

The publishers saw the hurt coming and acted to head it off. The make money selling books for $25. Amazon was putting their customers out of business with their $9.99 price. Once Amazon put the competition out of business, destroys the market for hard back books, you think Amazon was going to continue giving publishers $12.50 for books they sell for $9.99?

No, Amazon would then say that the publishers would get $7 or so, and there'd be now way to stop them.

Lee