Random House adopts agency pricing March 1st

[Kali Yuga]

Originally Posted by rogue_librarian

Not justified. It's really the same thing, dealer buys stuff for resale. In this case it's licenses instead of paper, but that's it.

Not even close, as far as I know.

I have no idea how the schedule of payments works out. However I cannot imagine that a retailer is paying for a block of 10,000 copies of a title, selling those copies off, ordering more if too many are sold, and returning unsold copies.

Originally Posted by rogue_librarian

You mean, make more ebooks, stock is running low?

Very cute, but no.

I mean that one argument is that retailers are "better" at pricing goods than the publishers. However, the publishers will end up with as good, if not better, data than any single retailer, and should do about as good a job adjusting prices.

One major difference in incentives is that retailers will want to slash prices on certain books as loss leaders, and the publishers believe this is devaluing their product.

Originally Posted by rogue_librarian

Of course the publisher (or author) gets to set the price, it's their book after all. It's always been that way. What's new is that not only does the publisher get to set the price, they also get to decide the retail price the customer needs to pay, which really is none of their business.

OK, but my point is: If it isn't the publisher's business, then who should set the price for self-published books?

We all seem to readily accept the premise that a small publisher who uses CreateSpace can set their own price, and hold to that same price on Pubit, Smashwords, Scribd and any other such outlet. (Also on services like Wiiware, Android Market, App Store, etc etc). Why is it OK for a small publisher -- including a self-published book that lands on the best seller lists -- but dastardly and unacceptable for a large one?

Conversely, why is it OK for Apple to set a flat cost of $1 per song? Was it wrong to give the record companies some latitude on price?

And why isn't price the business of the publisher, when the retailers are destroying the value of their product with discounts and when disintermediation is a common practice?

Originally Posted by rogue_librarian

Can you imagine that for regular consumer goods? I can't. It's anti-competitive, and, like all monopolies, bad for the customer.

Please re-read my post for several examples on how the status quo has, in fact, produced many consequences that might be characterized as anti-competitive -- e.g. large retailers can leverage the economies of scale to undercut smaller stores on pricing.


Ultimately the problem isn't really "manufacturers setting prices." The problem is that there is a perception (only partly based on reality) that agency pricing = higher prices. If agency pricing resulted in lower prices for new books, I'm convinced that no one would care in the slightest.

[Giggleton]

Originally Posted by rogue_librarian

What's new is that not only does the publisher get to set the price, they also get to decide the retail price the customer needs to pay, which really is none of their business. For the sale from publisher to first buyer, they can ask any price they want, but they are also dictating what price they need to charge upon resale.

One of the neat things about ebooks, and digital/digitally printed physical goods is that there does not need to be any more retailers.

It feels like you're talking about first sale rights? Or something similar?

Are companies like Amazon still ordering ebooks from publishers at set prices? Rather than just acting as a marketing facade? I can't imagine that's occuring, what are you talking about?

[Logseman]

large retailers can leverage the economies of scale to undercut smaller stores on pricing.

The famous "economies of scale" are quite overrated, and it is public transport infrastructure which helps these economies of scale to be exploited to the fullest. In the absence of this government subsidy (eminent domain prices much lower than market prices + public works, both financed by the taxpayer and not by the large retailers which benefit mostly from them), these economies of scale would need to be really huge to compensate for the need to build said infrastructure.

Why do I say this? Because the online business model of large publishers seems to follow exactly the same general patterns: competitive advantages don't come from the innovation, the ingenuity or the special capabilities of the large publishers, but from state-granted privileges.

[Kitabi]

I own a number of books from Vintage which is owned by RH. I had been contemplating re-buying them as ebooks but no longer.

My issue is not with Agency Model and my issue with price is limited to how good a value proposition a book is. I will pay a higher price if the book is worth that to me.

My bigger issue is that ebook prices do not appear to make sense to me in relation to pbooks. For most books I buy, paperbacks are priced cheaper. The publishers have done an awful job of explaining why I need to pay a higher price for ebooks. As many on MR have argued, the price of a book is related to notional value for the most part. The medium has limited impact.

Where medium is concerned, the common argument peddled on MR is that ebooks are perpetual and so should cost more but that is not the case. NOBODY - not the publisher, not the retailer - guarantees ebooks against technological obsoletion. If support for the format or DRM I bought with expires, that book is as gone as a damaged or lost pbook.

As far as the convenience goes, the compactness of an ebook library is offset by lamentable technology, the price of that technology, (replacing readers - most people forget that since ereaders are relatively new), change in ownership rules (no resale) etc.

This is why I feel that as an ebook adopter, the publishers are trying to unfairly milk me for more while offering less.

[ATDrake]

Well, we can already see the effects on availability at smaller retailers.

For the past couple of weeks, a large chunk of Fictionwise's new offerings in the secure column were authors I recognized as being from Random House imprints. They had stuff by Anne McCaffrey, Barbara Hambly, Barry Hughart, etc., and the list was generally much longer than the MultiFormat offerings in the left-hand column.

This week, there's a lonely single Harlequin sitting in the Secure new releases column and all the above authors have disappeared entirely from the catalogue.

Kind of scorched earth, really.

[Kali Yuga]

Originally Posted by CleverClothe

In theory. However, the world works on facts. The publishers have already publicly stated that they want to save paper sales as much as possible. So they are actively trying to slow down ebook adoption (and according to an Amazon statement, it seems to be working for them).

AFAIK the big publishers pretty much gave up that attitude about a year ago.

What they want to do is protect their margins. Hardcovers are high-margin sales, and paperbacks are low margins. An ebook at $14 is much more profitable than one at $10 (and no, a boost in sales numbers do not necessarily offset the lost profits).

That's pretty much why they jumped on agency pricing, and stopped delaying ebook releases -- because they knew that by pricing ebooks higher, they could maintain decent margins, then reduce the prices 6-12 months later to boost sales again.

Some smaller and/or international publishers may still be nervous about ebooks. However the industry pretty thoroughly realized that ebooks were going to dominate the market, and many believe that will be the case in 5 years or less.

[Guns4Hire]

Originally Posted by Kali Yuga

-- because they knew that by pricing ebooks higher, they could maintain decent margins, then reduce the prices 6-12 months later to boost sales again.

Has anyone actually seen this fabled 'reduction'?

[aagstn]

Originally Posted by ATDrake

Well, we can already see the effects on availability at smaller retailers.

For the past couple of weeks, a large chunk of Fictionwise's new offerings in the secure column were authors I recognized as being from Random House imprints. They had stuff by Anne McCaffrey, Barbara Hambly, Barry Hughart, etc., and the list was generally much longer than the MultiFormat offerings in the left-hand column.

This week, there's a lonely single Harlequin sitting in the Secure new releases column and all the above authors have disappeared entirely from the catalogue.

Kind of scorched earth, really.

They pulled the Random House stuff in a hurry. Fictionwise is a ghost town now.

[aagstn]

Originally Posted by Guns4Hire

Has anyone actually seen this fabled 'reduction'?

No. What I keep seeing over and over are really old books for $10. I was interested in picking up Dashiell Hammett novels. At first I thought they would be public domain, but not only are they under copyright, but they have the audacity to charge $10 for books 80 years old. I see this time and again with the classics still in print. I was a person that spent hundreds of dollars a year at Fictionwise, but I have spent a grand total of $0 in 2011 and I don't see that changing.

[kjk]

Originally Posted by Guns4Hire

Has anyone actually seen this fabled 'reduction'?

Rick Riordan's books have dropped in price-his latest novels, Red Pyramid and The Last Hero are still $10.99 on iBooks, and $9.34 on Kindle, but his earlier books are only $6.99 on iBooks, and in fact The Lightning Thief has dropped to $5.00 on Kindle. Hardcover of Lightning Thief is $11.63, and the paperback is $7.99. I think I paid $7.99 for the eBook.

[Kali Yuga]

Originally Posted by Guns4Hire

Has anyone actually seen this fabled 'reduction'?

Yes.

It usually takes about a year for the price changes to kick in, and it's often cued to paperback release timing.

I don't usually buy books that are either brand new or over $12, but a few from my collection have popped up, and yes they're all agency priced:

"Denialism: How Irrational Thinking Harms the Planet and Threatens Our Lives" and "Being Wrong: Adventures in the Margin of Error" were each $14 when I purchased it last year, and are now $10. Other books I've purchased have gone down by $1-2.

A quick check of agency-priced books that are now $10 or less, that were on the HC best seller list early last year: "Lost Symbol" (Dan Brown), "Impact" (Preston), "The Last Song" (Sparks), "The Honor of Spies" (Griffin).

So, yeah. I can't definitively say how many agency books are priced lower, but it's definitely happening.

[Kali Yuga]

Originally Posted by kjk

Rick Riordan's books have dropped in price-his latest novels....

Just so you know, Riordan's books are not agency pricing (at least, the ones I saw, including the new ones). Retailers set those prices.

[kjk]

Originally Posted by Kali Yuga

Just so you know, Riordan's books are not agency pricing (at least, the ones I saw, including the new ones). Retailers set those prices.

Interesting! Hyperion is owned by Disney, but distributed by Harper Collins. So Apple's iBooks store doesn't require all books to be under agency pricing, it seems.

[leebase]

Originally Posted by Kali Yuga

Ultimately the problem isn't really "manufacturers setting prices." The problem is that there is a perception (only partly based on reality) that agency pricing = higher prices. If agency pricing resulted in lower prices for new books, I'm convinced that no one would care in the slightest.

+1

Lee

[GreenMonkey]

Originally Posted by Kali Yuga

A big retailer may order 20,000 copies of a new book and demand a wholesale price of $9.00. An indie shop, on the other hand, may only need 2 copies. That results in either paying the publisher full price ($11 perhaps), or working through a distributor who in turn takes a cut.

As a result, the bigger stores can charge less for the same title -- an advantage which results in the big stores getting bigger, and the indie stores closing shop. (Which is exactly what has been going on for the last few years.) Are you sure this is good for competition?

Similarly, Walmart has enough power to "negotiate" (i.e. dictate) prices to its vendors, including major corporations, and demand excruciatingly efficient and precise delivery schedules. In doing so they can dramatically undercut other stores. Is this beneficial or anti-competitive? Or both? Or neither?

Plus, as mentioned, nothing about this prevents smaller publishers from undercutting agency publishers on price.


I do agree that in some cases prices can be too high for some buyers, but that is not a federal crime.

Walmart is a special case. Their market power is so high it practically borders on monopolistic. If for some reason Target went under, they'd have virtually no competition left on a national level.

The biggest problem with the agency scheme is that it is allowing all of the big publishing houses to set higher prices on books. They are basically agreeing between each other to charge higher prices to customers, while their agency schemes prevent any flexibility on the part of retailers, and restrict the retailer's right to sell product however they can make a profit. So they are agreeing between themselves to set up a scheme that keeps prices artificially high and that prevents free-market competition on the part of retailers. Sounds like a price-fixing ring to me.

It's the MAP scheme all over again. It's like living in a world where every company is Apple or (shudder) Bose. Imagine every product at MSRP and retailers are unable to adjust prices.

If they want to do away with retailers and become the retailer themselves, fine. But setting up a scheme where the manufacturer (or publisher) can tell the retailer what they can sell, how they can sell it, and at what prices, is not my idea of a free market economics.