Random House adopts agency pricing March 1st

[CleverClothe]

Originally Posted by Kali Yuga

We did?!? Seems to me like lots of MR readers would've eviscerated you for saying as much in late 2009.

To be more specific, there was a great deal of concern over Amazon's attempts to -- wait for it -- control the market and reveal its anti-competitive streak. People were actually lauding Sony -- Sony!!! -- as a potential savior of the freedom of the ebook market. (You know you're really up a creek when you're hoping that Sony will protect your digital rights....)

Publishers were also terrified that their margins were going to go down the tubes, with authors on one hand ramping up to demand higher royalties while retailers (especially Amazon) was likely to demand lower wholesale prices.

Erm, most people LOVED Amazon's pricing. A very few were afraid that Amazon may jack up prices once they had a monopoly, but most loved what Amazon was doing. The pricing boycotts that you linked to so thoroughly prove that.

Now, what people were often angry about was Amazon's walled garden (gee, where have we heard about that recently?).

[Marseille]

Originally Posted by Kali Yuga

We did?!? Seems to me like lots of MR readers would've eviscerated you for saying as much in late 2009.

Yes. My entire ebook library, going back to 2003, cost me about 50% of the retail for pbook versions. To wit, there were a variety of pricing options. You could go to an everyday low price outlet like Amazon, or go to a big periodic sale places like eReader, or big rewards/membership places like fictionwise. It was very democratic. Those choices are gone, as is the representative function served by the retailers that drew particular types of consumers into the market.

Healthy markets ebb and flow. The creation of a completely new market wasn't without growing pains, but as I said, there was a strong voice for content producers and a strong voice for consumers that was shaping that market, and now one of those voices has been silenced. The long term ramifications of that will be worse than just higher prices.

[Giggleton]

Originally Posted by David Marseilles

Why can't you state your opinion for yourself instead of trying to presume or demand universal agreement? I can respect that you don't value what retailers add to the equation (which for me equaled a savings of about 50% off retail for my entire elibrary), and I'd be happy for you to have the right to overpay for books as much as you'd like, so what makes it so hard for you to respect that I do value retailer expertise and practices and prefer to get the most bang for my buck?

The idea of MSRP is archaic. Amazon is a marketing facade, connecting readers to authors, with some webstorage and a few algorithms for recommending content. Prices, these are set by the creator. And if you are of the opinion that publishers "sell" books to Amazon, allowing Amazon to resell these books, then where are these first sale rights for the rest of us?

[bgalbrecht]

It looks like Random House titles are disappearing from Fictionwise now. Several books I bought within the last month no longer show up in searches.

[pdurrant]

Originally Posted by bgalbrecht

It looks like Random House titles are disappearing from Fictionwise now. Several books I bought within the last month no longer show up in searches.

That's because Fictionwise can't sell agency books. They have too many buywise club members who expect a 15% discount which Fictionwise can't give on agency priced books.

[kennyc]

Originally Posted by Kali Yuga

Thanks!

I suspect everyone else posting in this thread died a little inside when they read your post, though.

No, I held my head in shame the moment it was announced last year. It's un-American, anti-free market, and wrong for the consumer. It's one more attempt at corporate control of the American people, the government and the the economy.

<music>When will they ever learn, when will they ever learn</music>

[Kali Yuga]

Originally Posted by CleverClothe

Erm, most people LOVED Amazon's pricing. A very few were afraid that Amazon may jack up prices once they had a monopoly, but most loved what Amazon was doing. The pricing boycotts that you linked to so thoroughly prove that.

To be clear, I do accept that many people are deeply upset about agency pricing and want it removed.

I also agree that Amazon offered the lowest pricing of the major retailers, that people prefer lower pricing, and that lower prices were one of many factors that gave Amazon a commanding lead for a few years.

So that said, my points to David are:

• I do not agree that windowing offers more positives than negatives, for anyone.
• I do not believe that anyone wants to go back to windowing.
• There was still a lot of discontent about numerous aspects of the market pre-agency.
• There was a great deal of concern over Amazon locking up the ebook market and its actions (DRM, vendor lock-in, author exclusives, privacy issues, monopolistic goals).

Even if you believe that retailer pricing is superior to agency pricing, that does not necessarily prove that the ebook market itself in 2009 was a Garden of Eden, despoiled by the publishers. Pricing is an important component of a healthy market, but far from the whole picture.

[Kali Yuga]

Originally Posted by David Marseilles

....It was very democratic. Those choices are gone, as is the representative function served by the retailers that drew particular types of consumers into the market.

Have the number of ebook retailers drastically dropped off, specifically because of agency pricing?

Fictionwise did get blasted, but they were also bought out before agency pricing went into effect -- and were almost certainly going to meet the same fate as Mobipocket after Amazon bought them. Apple and Google -- both of whom actually asked for agency pricing -- entered the market.

Plus, as I pointed out to JSWolf, it is possible that the ultra-low-cost ebook retailers did not have a sustainable business model. Nor was Fictionwise very popular; again, they apparently sold 7.5 million ebooks between 2000 and 2009, while Apple customers (all agency, when purchased) downloaded 100 million ebooks in one year.

In fact -- and as I pointed out early on in this thread -- one benefit to competition is that agency pricing levels the playing field for the ebook retailers. Amazon will have a much harder time pressuring Penguin into giving them a better deal on wholesale prices than Kobo, for example. The ability of the larger companies to demand lower wholesale prices undoubtedly contributed to the demise of the indie bookstores, which shrank to 1/3 of their number between 1993 and 2009.

Originally Posted by David Marseilles

Healthy markets ebb and flow.

I see. Well, publishers have set the prices for paper books in many countries in the EU since the 1980s; has it been an unhealthy market?

By some measures, the ebook market doubled under agency pricing. Does that indicate whether we are in a healthy or unhealthy market?

With ebooks, the pricing is far more dynamic, and can change to reflect conditions, and apparently does follow demand-based pricing. Does that not qualify as "ebb and flow?"

Agency pricing also helped Apple establish itself without getting into a bloody price war with Amazon. Is it a bad thing that Amazon's quest for a monopolistic standing was halted?

Retailers are pressing ahead with empowering self-publishers and small publishers to present their works with fewer intermediaries -- a process that is actually both dependent upon and expecting the self- and small-publisher to set prices. E.g. it's entirely plausible that any day now, a popular established author could eschew a standard contract in exchange for self-publishing simultaneously via CreateSpace, Smashwords, PubIt and his/her own website. Would that not be another example of the market, and the various power relations therein, ebbing and flowing?

Originally Posted by David Marseilles

The creation of a completely new market wasn't without growing pains, but as I said, there was a strong voice for content producers and a strong voice for consumers that was shaping that market, and now one of those voices has been silenced. The long term ramifications of that will be worse than just higher prices.

Yeah, no, I can't quite get on board with that.

It's extremely difficult to evaluate the long-term effects -- in part because it's just too easy to imagine counterfactuals that support a divergence of views. E.g. you imagine an "agency pricing crippled ebooks" scenario, I dream up a "discounters went out of business" scenario. The former may well seem more plausible to you, the latter to me.

So, if we stick to the present: Readers are still shaping the market and have the exact same tools at their disposal as before. They can still choose not to purchase books that are too expensive; they can still boycott a retailer, publisher or both; they can express their opinions publicly. None of that was taken away.

I fully agree that a strong voice got choked, though -- specifically the voice of Amazon. As much as I respect their business acumen, though, let's not confuse "what's best for Amazon" with "what's best for readers" -- or, if you prefer, "Amazon's agenda" with "the best interests of readers."

[wyndslash]

kali is so persuasive she's almost pulling me over to her side

still, i go with whoever offers the lowest prices, as i'm sure everyone else here does

[rhadin]

Originally Posted by kennyc

<music>When will they ever learn, when will they ever learn</music>

They certainly haven't gone to my blog -- for your amusement see my blog post Where Have All the Publishers Gone?

[kennyc]

Originally Posted by rhadin

They certainly haven't gone to my blog -- for your amusement see my blog post Where Have All the Publishers Gone?

Love it!

[Marseille]

Originally Posted by Kali Yuga

I see. Well, publishers have set the prices for paper books in many countries in the EU since the 1980s; has it been an unhealthy market?

Ah yes, Europe. That bastion of free market capitalism. Just because something functions doesn't make it healthy.

By some measures, the ebook market doubled under agency pricing. Does that indicate whether we are in a healthy or unhealthy market?

It indicates momentum that has been building towards the ebook market for a long time, aided by a healthy marketplace that hasn't been completely undone overnight -- in part because publishers are doubtless taking into account information already gleaned from retailers over the past many years, info that will no longer be forthcoming as publishers won't engage in the full selection of practices retailers engaged in. Selection of reading devices and the amount of promotion both professional and word of mouth are having their expected effect, building on momentum that resulted from early-on healthy discounting. As to price sensitivity, you can't be sensitive to price if you're ignorant of what the former prices are, which so many new customers are, because they are new.

All your cite means is that publishers/Apple picked the best possible moment to pull a switcheroo.

With ebooks, the pricing is far more dynamic, and can change to reflect conditions, and apparently does follow demand-based pricing. Does that not qualify as "ebb and flow?"

Sure. My ebb and flow comment had to do with the creation of the ebook market being uneven. Not pricing. That publishers haven't set prices and forgotten them doesn't mean that they aren't more insensitive to consumers than many different retailers who all had different consumers with different behaviours and an understanding of how to draw them in. As time goes on, the distance publishers have from the market will become more and more apparent.

Agency pricing also helped Apple establish itself without getting into a bloody price war with Amazon. Is it a bad thing that Amazon's quest for a monopolistic standing was halted?

I think B&N (who is growing quite nicely) and Sony already had that covered. To wit, if Amazon had acquired a 'monopoly', they might have been the only retailer in a position to do what Apply did for music -- free it from DRM (note Amazon has done a fine job cutting into Apple's former music monopoly). As DRM's primary purpose is to lock someone into your store, the chances that any major retailer will attempt to strongarm publishers into giving it up (much less succeed given less than full market power) while they are neck-and-neck with competitors is unlikely.

Also, a bloody price war would have been incredibly good for customers, and probably accelerated the market at large. Certainly better than Apple making deals with publishers so it wouldn't have compete on price. <--- There is no universe in which that type of collusion, while I'm sure technically legal since they didn't agree on a price, simply agreed who the setter (incentivized to end retailer discounting and thus the need for Apple to compete with Amazon et al) would be. Apple's music quasi-monopoly didn't turn into a permanent one and did help customers. I think Amazon's would have too, because it wasn't a monopoly based on force (no more than was present at every other retailer), but on merit. People bought from Amazon because of what Amazon added to the market, and if it had backpedaled and added less, they would have lost customers.

In real free markets, you're allowed to win by doing performing better than everyone else. Apple liked that when they were doing better than everyone, and didn't when missed the ebook boat almost completely.

It's extremely difficult to evaluate the long-term effects -- in part because it's just too easy to imagine counterfactuals that support a divergence of views. E.g. you imagine an "agency pricing crippled ebooks" scenario, I dream up a "discounters went out of business" scenario. The former may well seem more plausible to you, the latter to me.

Hmmm. I guess it depends on what you mean by crippled. A functioning market can be crippled. Most people manage to get their broken bones mended, but almost no one thinks US Healthcare is a healthy market. Liberals want to centralize (see concept: single-payer), Conservatives want to undermine insurance companies (see concept: health-savings accounts). Both hate what the US has now.

I don't think agency pricing means the end of all things, or even that overall sales will slow (it's easier to screw with a market that's already set to explode than a static one -- your justifications echo what publishers will say while they are setting prices and illustrate my points pretty well). But it is a blow to the market.

So, if we stick to the present: Readers are still shaping the market and have the exact same tools at their disposal as before.

No they don't have the same tools. They used to be able to purchase books that were too expensive on sale at discounters, thus strengthening the argument for lower prices and getting them from other retailers who notice people like sales (something retailers are very good at noticing). As it is, in the ivory tower at publishers, a non-buy can mean a variety of things. People don't like reading. The author sucks. Pisces is rising in full something or the other.

I fully agree that a strong voice got choked, though -- specifically the voice of Amazon. As much as I respect their business acumen, though, let's not confuse "what's best for Amazon" with "what's best for readers" -- or, if you prefer, "Amazon's agenda" with "the best interests of readers."

My "strong voice" included all discounting retailers, not just Amazon. And I still believe that the retailer, closest to the customer, bring an extraordinary level of expertise as well as a much larger incentive to create sale pricing than any publisher does. Because of their market incentives, they end up representing consumers in the market place the same way publishers represent content producers. We still have strong content-producer representation, but weak consumer representation. And long term, the market will suffer for that.

For the record, I haven't bought a single ebook from Amazon - you might it sound like I'm their man. I was an eReader man. And discounters like ereader had a very different market from Amazon, just like Amazon had a different market from Sony. Retailers tailored the behaviors to particular groups of consumers. Publishers now force retailers to treat all of them the same. That's great if you're really, REALLY late to to the show and prefer not to have to compete in an open market, but it's really bad if you've invested your entire company in drawing in one type of consumers and you can no longer offer them anything different than anyone else. Even Amazon was a late-comer to ebooks, and even it to some extent stood on the shoulders of the discounters who Apple killed so it wouldn't have to be sensitive to consumer price concerns. I would have very much liked to have Apple on the side of consumers the same way they were in the music business, and mark my words, publishers should sleep with one eye open, because if Apple ever gets powerful enough in the market to gut them, odds are good they will.

We had a healthier market before agency pricing. I don't think I can make a better case than that ^, so go ahead and take the last word as to our discussion.

[tompe]

Originally Posted by David Marseilles

Ah yes, Europe. That bastion of free market capitalism. Just because something functions doesn't make it healthy.

And just because something is called capitalism it doesn't make it healthy. So what was your point?

In real free markets, you're allowed to win by doing performing better than everyone else. Apple liked that when they were doing better than everyone, and didn't when missed the ebook boat almost completely.

Can you give some examples of real free markets and some examples of non-real free markets? And how do you define "better" here without using a circular definition?

[Marseille]

Originally Posted by tompe

And just because something is called capitalism it doesn't make it healthy. So what was your point?

My point is Europe has a far more profound distrust of free and open markets than the US does, though we are getting closer to one another. And yes, capitalism defines what a healthy "free market" is even though it certainly doesn't define what a healthy liver or forest is.

Can you give some examples of real free markets and some examples of non-real free markets?

A healthy market has strong voices on both sides of a transaction or the unfettered potential for such. My description of markets ebbing and flowing was that even in a healthy market someone occasionally gets an upper hand (e.g., Apple in music) but that doesn't mean they keep it forever. So long as their mechanism for keeping it is continuing to provide services/goods that people want, there's no harm.

Public utilities are a great example of a non-free market. Government-granted monopolies. You get your power from them whether there is a better choice or not. Prices may be regulated, but government regulators and their formulas aren't that hard to manipulate. However, there's no reason you cannot create the same imbalance through contract that can be created through government granted monopoly. If enough people on side of the table collude to limit the other side's options, the result is the same.

And how do you define "better" [in "In real free markets, you're allowed to win by doing performing better than everyone else."] without using a circular definition?

I'm not sure what the ambiguity is. I don't like government created monopolies, however, should a company make something that people want to buy more than anything else, and they end up with a huge marketshare because of it, labeled by some as a monopoly, I'm not offended by that, and I don't believe free and healthy markets are typically harmed by that. You need something more than just success in attracting customers to have a bad monopoly.

For example, you might have collusion with partners through contract to unbalance one side of the negotiating table and leave consumers without an alternative price to seek goods out at.

I really am done and willing to let my above argument stand for itself, just thought it would be polite to answer your questions.

[tompe]

Originally Posted by David Marseilles

My point is Europe has a far more profound distrust of free and open markets than the US does, though we are getting closer to one another. And yes, capitalism defines what a healthy "free market" is even though it certainly doesn't define what a healthy liver or forest is.

But that makes your argument about book selling irrelevant. We have a functioning book selling market but just becuase it does not satisfy your capitalistic-healthy property you call it not healthy. Of course it is healthy in a general sense if it is working and is working in a sustained way.

A healthy market has strong voices on both sides of a transaction or the unfettered potential for such. My description of markets ebbing and flowing was that even in a healthy market someone occasionally gets an upper hand (e.g., Apple in music) but that doesn't mean they keep it forever. So long as their mechanism for keeping it is continuing to provide services/goods that people want, there's no harm.

Public utilities are a great example of a non-free market. Government-granted monopolies. You get your power from them whether there is a better choice or not. Prices may be regulated, but government regulators and their formulas aren't that hard to manipulate. However, there's no reason you cannot create the same imbalance through contract that can be created through government granted monopoly. If enough people on side of the table collude to limit the other side's options, the result is the same.

I did not ask for examples of non-free markest. I asked for examples on non-real free markets which I took to be something that is called a free market but you do not consider to be a real free market.

I'm not sure what the ambiguity is. I don't like government created

The circularity is that "better" is defined as what a real free market gives us.