"Publishers (often) earn more with wholesale than agency

[Top100EbooksRank]

http://www.publishersweekly.com/pw/b...-argument.html

Don Linn, president of Firebrand Associates, offered the paradox concerning the wholesale vs. agency discussion running through publishing circles: "Publishers (often) earn more with wholesale than agency--so what's all the fuss about Amazon?"

And according to a publishing CEO,

http://www.idealog.com/blog/aulettas...-the-doj-case/

He quoted a CEO who estimated that $100 million was the aggregate hit to profits in a year.

If the 5 "agency" Publishers were on Wholesale, they would be making "MORE" money. So why did they want to make less money?

Some have argue is that the publishers know that "physical distribution" is their CORE competency. They want to slow down ebook. The best way to slow down ebook is high prices.

Even if high prices mean 1) lower revenue 2) lower profits

[Lynx-lynx]

Where is this info applicable to? Which countries?

Is this relevant only to North America?

I'm wondering if what they're saying/doing has purchase in Europe, UK and elsewhere?

Anyone know what they're doing in Japan re ebook sales and the wholesale versus agency arena?

[charlesatan]

Originally Posted by Lynx-lynx

Where is this info applicable to? Which countries?

Is this relevant only to North America?

I'm wondering if what they're saying/doing has purchase in Europe, UK and elsewhere?

Anyone know what they're doing in Japan re ebook sales and the wholesale versus agency arena?

It's mostly relevant to North America (and perhaps UK) because depending on which country we're talking about, eBook might not necessarily have impacted the country. Here in the Philippines for example, Amazon is charging us $2.00 extra for every eBook, and if you purchase an eBook here, the publisher only gets 35% royalties (as opposed to 70% when it's between $2.99 ~ $9.99). Other popular stores won't even sell eBooks to us, which is what prompted the company I work for to setup our own eBook store.

For Japan, don't know whether they're using the wholesale method or agency, but outside of manga/comics, the rest of their eBook industry doesn't seem to be booming as some make it out to be. Here's the latest article I think: http://www.teleread.com/paul-biba/wa...-robin-birtle/

I also can't find a link now but there was a power point presentation before presented in a Japanese seminar and the graphs showed that their eBooks were more expensive than their print counterparts.

[Lynx-lynx]

Thanks Charlesatan.

I did an internet search last week for figures re Australia's ebook figures, across any category really - and apparently there are no public stats.

The only stats that are regularly published are those pertaining to paper books.

It's all a bit like secret white fella business here .... so I reckon it means they're scared - what precisely of is another question!!!

The price of ebooks here is somewhat comparative to Canada and the US - some are dearer, but I don't reckon many would be cheaper.

Absolutely beats me why the publishing industry in any part of the world is scared, blimey they could make a lot more money by selling ebooks, with far less outlay, eg no distribution costs, just format the book once etc.

Not saying they should do away with paper books, just saying let go of the scaredy cat hold on the release and sale of ebooks.

[Kumabjorn]

Originally Posted by Lynx-lynx

Anyone know what they're doing in Japan re ebook sales and the wholesale versus agency arena?

I have only purchased eBooks through Sony's online store. Those have been in line with Tankobon (small sized paperbacks, designed to fit in a pocket). For DTB the publisher sets the price, printed on the book, and the bookseller receives a percentage. Large scale bookseller receives larger percentages. The market is very much controlled by a few very large publishing houses.

[Kali Yuga]

This is old news.

We've known from the start that under agency pricing, retailers get a bigger cut, and publishers take a smaller portion of the pie.

Publishers have pushed for this for a few reasons.
• They assert that heavy discounts are undercutting the value of their products.

• The "fuss about Amazon" is that they were subsidizing lower prices, and it is likely that once they establish a solid monopoly on ebooks, they will be able to make increasingly stringent demands on the publishers. Agency pricing flattens the playing field, preserves competition, and hopefully curbs some of Amazon's heavy-handed behavior.

• They want to be able to work with demand-based pricing. I.e. when something is brand-new and demand is high, and with no limit on supply, prices should be higher. When demand slackens, you lower the prices to continue sales.

In the past this was seen as "protecting hardcover sales," but that analysis ignores the fact that higher prices on hardcovers are basically a physical excuse for demand-based pricing. (It certainly doesn't cost $10 more to make a hardcover than it does a paperback.)

I'd also assume this was intended as an incentive to the retailers; in exchange for the loss of the ability to set prices, their margins go up.

[fjtorres]

The phrase the BPH execs have used in public is "protecting the perceived value" of their product.

They dislike the idea that prevalent discounting might get consumers *used* to cheap prices and then start demanding them. Can't have that.

Better to pay $100 million or so to foster the image that each book is a priceless and rare jewel. Each and every one of the 3 million different books published last year. (To say nothing of the estimated 15 million coming this year.)
http://ptbertram.wordpress.com/2012/...e-for-a-shock/

Concepts like supply and demand and price elasticity don't factor into it.
It is all about maintaining the perception of value.

Less kindly, one might sale "propping up the illusion" of value.
But that might be redundant; popping illusions is the proper role of competitive markets.

[Ninjalawyer]

A VP from the game maker EA said that EA's online store would not be running huge discount sales like its competitors (i.e., Valve's Steam store) because those sales hurt the perceived value of their products. Of course, real value to game developers comes from money made, not some "luxury factor", and EA's competitors have shown that massive discounts can lead to huge profits.

All of that to say that the idea of propping up the value of a digital good is fairly common in some execs. Personally, I'd rather publishers and game companies like EA add real value to their products, but that's hard hard work.

[stonetools]

Cosign everything Kali Yuga said.

I think the perceived value thing people get excited about here is much less important to the publishers than this:

The "fuss about Amazon" is that they were subsidizing lower prices, and it is likely that once they establish a solid monopoly on ebooks, they will be able to make increasingly stringent demands on the publishers. Agency pricing flattens the playing field, preserves competition, and hopefully curbs some of Amazon's heavy-handed behavior.

That's why the publishers are willing to sacrifice money NOW. They want to guard against this:

In a note to a publishing executive nervous about sticking it to Amazon (AMZN), Jobs wrote:

As I see it, [Conspiring Publisher] has the following choices:

1. Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.

2. Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.

3. Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them. This will be the start of piracy and once started, there will be no stopping it. Trust me, I've seen this happen with my own eyes.

Maybe I'm missing something, but I don't see any other alternatives. Do you?

This convinced one publisher. Just about everyone on these forums skips over this, but really for publishers, there WOULD be no other alternatives-except setting up their own sales channels (which they are planning to do as well).

[ScalyFreak]

Originally Posted by Ninjalawyer

A VP from the game maker EA said that EA's online store would not be running huge discount sales like its competitors (i.e., Valve's Steam store) because those sales hurt the perceived value of their products. Of course, real value to game developers comes from money made, not some "luxury factor", and EA's competitors have shown that massive discounts can lead to huge profits.

Obviously no one told them that Valve has proven that last part over and over...

Besides, everyone knows that most EA Games aren't worth more than $2.99 these days anyway.

[crossi]

Sure there is an alternative. Sell mobi format books without DRM at Barnes & Noble.

[fjtorres]

Originally Posted by crossi

Sure there is an alternative. Sell mobi format books without DRM at Barnes & Noble.

Or Fictionwise or Powells or BAM or all of the above and more.
There is more to bookselling than protecting B&N's hide.

[crossi]

Originally Posted by fjtorres

Or Fictionwise or Powells or BAM or all of the above and more.
There is more to bookselling than protecting B&N's hide.

Very true. Even if 80 or 90% of all ebook owners had Kindles the publishers could still sell their books to kindle owners without Amazon by simply dropping their insistance on DRM and making their books in all formats available everywhere. If they insist on enabling vendor lock-in I have no sympathy. The cure is up to them and doesn't include illegal collusion to fix prices.

[Top100EbooksRank]

You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.

Amazon is paying $12.50 (for a $25 hardcover).

Amazon is demanding to pay only $6.99 (70% of 9.99 quoted above).

How likely is that going to happen from $12.50 to just $6.99?

The publishers are not without strength. They could tell Amazon to "**** off" and withhold all their books. The publishers then sell the DRM free mobi format to every other stores other than Amazon.

B&N
Googleplay
KOBO
Sony
Facebook
the author website

etc...

[stonetools]

Originally Posted by crossi

Very true. Even if 80 or 90% of all ebook owners had Kindles the publishers could still sell their books to kindle owners without Amazon by simply dropping their insistance on DRM and making their books in all formats available everywhere. If they insist on enabling vendor lock-in I have no sympathy. The cure is up to them and doesn't include illegal collusion to fix prices.

Well, this has been discussed too. Amazon's hold on the market haas little to DRM. Or rather DRM lockin is only a minor factor in Amazon's hold on the market . 99 per cent of Amazon's customers haven't even heard of DRM. Rather, Amazon's hold on the market has to do with first user advantage, marketing, pricing , convenience, customer service, device lockin, and format lockin . Even if th publishers gave up DRM, those advantages would still remain. Giving up DRM would not be cost free either ( There would be more file sharing).
Macmillan has moved toward DRM free on one of its lines ( Tor.com). Notably, Tor.com is also opening up its own store. That,s a direct channel to the consumer. THAT'S the answer to breaking Amazon's Hold on the ebook market.

I think that inevitably publishers are going to implement direct to consumer sales while Amazon is going to ( continue) to move into publishing. The ebook market 10 years from now will be one of several companies- BPHs , Amazon, and maybe Apple and Google- offering books that they publish and sell direct to consumers.