Death of the agency model?

[DiapDealer]

First, Apple does not want to be a wholesale purchaser of e-books, even for six months or a year. It doesn’t want to price e-books, and it doesn’t want to bear the risk that e-books don’t sell. It’s not equipped for that.

Which would be relevant only if Apple limited themselves to the sale of ebooks from Agency Publishers only. But they don't. So the idea that they're not equipped to do their own ebook pricing is just not correct. They price ebooks all the time. Nor is it correct that a non-agency agreement would somehow force them to purchase a "certain quantity" of a particular ebook and be "stuck" with whatever didn't sell. That's just silly.

Was that quoted statement even remotely serious with those arguments?

[ProfCrash]

I take it that this means that the Publishers will have to actually negotiate with the different stores as to how e-books are sold. They might want to push the Agency Model but I imagine that there will be some type of hybrid system installed that will allow for sales, bundelling, use of coupons, and that type of thing.

I would imagine that they would end up with something similar to what a B&M store has in place.

As for Apple. Who cares? If Apple does not want to be a wholesale distributor then bye-bye. Their book store has not been all that successful and people have plenty of apps they can use for reading e-books. I don't think there is that much risk involved with being a wholesale seller but I know little to nothing about business.

More importantly, I want to know if I get some type of rebate for being forced to buy books at higher prices then I should have. Probably not but it can't hurt to ask.

[stonetools]

Originally Posted by DiapDealer

Which would be relevant only if Apple limited themselves to the sale of ebooks from Agency Publishers only. But they don't. So the idea that they're not equipped to do their own ebook pricing is just not correct. They price ebooks all the time. Nor is it correct that a non-agency agreement would somehow force them to purchase a "certain quantity" of a particular ebook and be "stuck" with whatever didn't sell. That's just silly.

Was that quoted statement even remotely serious with those arguments?

I think Apple does business on the agency model with ALL its media suppliers. The agency model is how it does business in the App Store.
With the wholesale model, you buy in lots and you ARE responsible for the unsold merchandise.
Frankly, the wholesale model doesn't really make sense for digital products-another reason why Apple favors the agency model.

[DiapDealer]

With the wholesale model, you buy in lots and you ARE responsible for the unsold merchandise.

The ebook market never worked this way pre-agency, so how can it revert back to that sort of model?

[Elfwreck]

Originally Posted by stonetools

I think Apple does business on the agency model with ALL its media suppliers. The agency model is how it does business in the App Store.
With the wholesale model, you buy in lots and you ARE responsible for the unsold merchandise.
Frankly, the wholesale model doesn't really make sense for digital products-another reason why Apple favors the agency model.

The wholesale model for ebooks didn't require buying in lots and being responsible for unsold merchandise. It had the same pricing system as wholesale for physical objects, but the objects weren't "purchased" until a sale occurred. No risk for anyone, except for the occasional chargeback.

There's no reason ebooks couldn't be run on the wholesale pricing model: author/publisher sets their cut; distributor sets the end price to whatever they like.

[stonetools]

Originally Posted by Elfwreck

The wholesale model for ebooks didn't require buying in lots and being responsible for unsold merchandise. It had the same pricing system as wholesale for physical objects, but the objects weren't "purchased" until a sale occurred. No risk for anyone, except for the occasional chargeback.

There's no reason ebooks couldn't be run on the wholesale pricing model: author/publisher sets their cut; distributor sets the end price to whatever they like.

I'm going to bow to your knowledge of the wholesale model. What I do know is that under the wholesale model, the retailer has the responsibility of setting prices, not the supplier, which means a greater administrative burden on the retailer. Apple isn't set up to do that, and doesn't want to do it. It doesn't do that in its other media stores.

[MrsJoseph]

Originally Posted by DiapDealer

They might as well. It's not like iBooks was working out as well as they'd hoped anyway.

Originally Posted by Andrew H.

I like Apple, but one of the (many) reasons I've bought my e-books in Kindle format is because I never felt 100% confident that Apple would stay in the book business.

I don't think iBooks will ever go completely away. They have iTunes U...which I love and which has been integrated with iBooks in a very cool way. I can see iBooks becoming more specialized and focused on students and customers who have been already used iBooks for school related assignments.

[Fbone]

Originally Posted by Elfwreck

The wholesale model for ebooks didn't require buying in lots and being responsible for unsold merchandise. It had the same pricing system as wholesale for physical objects, but the objects weren't "purchased" until a sale occurred. No risk for anyone, except for the occasional chargeback.

There's no reason ebooks couldn't be run on the wholesale pricing model: author/publisher sets their cut; distributor sets the end price to whatever they like.

Which is why Amazon's refusing IPG's terms didn't make sense. Amazon wanted lower wholesale prices than their competitors (AKA most favored nation) and IPG said no. What risk was there to Amazon? They aren't stocking inventory.

Since there are reports of Amazon demanding and receiving better terms than other retailers now plus with the expected (temporarily) end to agency pricing, what hope does B&N, Sony, Kobo, etc have?

[stonetools]

Originally Posted by Fbone

Which is why Amazon's refusing IPG's terms didn't make sense. Amazon wanted lower wholesale prices than their competitors (AKA most favored nation) and IPG said no. What risk was there to Amazon? They aren't stocking inventory.

Since there are reports of Amazon demanding and receiving better terms than other retailers now plus with the expected (temporarily) end to agency pricing, what hope does B&N, Sony, Kobo, etc have?

what will happen is thatrAmazon's market share shoots up to 90 per cent again, as Amazonn passes on thesavings to consumers.
Then the publishers will re-impose agency pricing and Amazon's share will sink back to 60 per cent . Lets hope that no retailers go bankrupt in the interim.

[ProfCrash]

Amazon was selling some e-books at a loss. The other e-bookstores were reluctant to do so. Amazon wanted to continue selling some e-books at a loss and was told it would not be allowed to do so. They had to switch from setting their own prices to selling for what the Publishers would allow.

I don't remember anyone saying that Amazon had to sell for less then its competitors when the Agency mess was happening. It was not asking for most favored nation status.

I don't pretend to know the IPG story but, knowing Amazon, it wanted to sell the book for a lower price and the Publisher balked. I have no idea if Amazon said that it had to be the lowest price vendor on the market. I doubt that they would do that but I cannot say for sure. IPG did not like the price point Amazon wanted. I remember them saying that the margin of profit for IPG would be too small and hence not feasible. Amazon chose not to renew the contract.

[stonetools]

I think that the DOJ is likely to allow Apple (and Google) to continue under the agency model during the cooling off period, btw.

[stonetools]

Originally Posted by ProfCrash

Amazon was selling some e-books at a loss. The other e-bookstores were reluctant to do so. Amazon wanted to continue selling some e-books at a loss and was told it would not be allowed to do so. They had to switch from setting their own prices to selling for what the Publishers would allow.

I don't remember anyone saying that Amazon had to sell for less then its competitors when the Agency mess was happening. It was not asking for most favored nation status.

I don't pretend to know the IPG story but, knowing Amazon, it wanted to sell the book for a lower price and the Publisher balked. I have no idea if Amazon said that it had to be the lowest price vendor on the market. I doubt that they would do that but I cannot say for sure. IPG did not like the price point Amazon wanted. I remember them saying that the margin of profit for IPG would be too small and hence not feasible. Amazon chose not to renew the contract.

From the article:

Eliminating the most favored nation provision might be the easiest way for Apple and the publishers to dodge antitrust concerns, whether or not they can convince the DoJ to drop its insistence on a “cooling-off period.” But this is where it gets interesting for two reasons:

1.Apple uses most favored nation clauses in a lot of its contracts — for instance, with magazine and newspaper publishers. Is the DoJ worried about antitrust concerns there, too?
2.Amazon also uses MFN clauses in its contracts with publishers, and did long before Apple. In fact, in February 2010, The New York Times’ Nick Bilton reported that Amazon had been pushing book, newspaper and magazine publishers for most favored nation status in exchange for “a bigger cut of revenue than they currently get for content they sell on the Kindle.” That’s almost exactly what Blue Cross and Blue Shield of Michigan did with hospitals. And later that year, state Attorneys General in Connecticut and Texas brought both Amazon and Apple to meet with them about their concerns.

[ProfCrash]

Interesting. You learn something new every day. K for that.

[DiapDealer]

Originally Posted by stonetools

I'm going to bow to your knowledge of the wholesale model. What I do know is that under the wholesale model, the retailer has the responsibility of setting prices, not the supplier, which means a greater administrative burden on the retailer. Apple isn't set up to do that, and doesn't want to do it. It doesn't do that in its other media stores.

How does Apple currently go about pricing the non-Agency ebooks that they sell?

[Elfwreck]

Originally Posted by stonetools

I'm going to bow to your knowledge of the wholesale model. What I do know is that under the wholesale model, the retailer has the responsibility of setting prices, not the supplier, which means a greater administrative burden on the retailer. Apple isn't set up to do that, and doesn't want to do it. It doesn't do that in its other media stores.

No reason they can't use the same system they use for agency: take the amount the publisher is demanding, add 42.5% and call that the retail price. A book for which the publisher demands $7 become $9.98 for the same 70/30 split that's used under the Agency model. They aren't obligated to tweak prices to cope with market shifts; they can have a flat-rate markup just like they do now.

Of course, they'd then be competing with stores that *do* shift prices by market trends, and that offer coupons and frequent-buyer bonuses. They'd have to convince potential customers that the advantages of iBooks data management are worth the occasional higher price. And if Apple's stance is "we don't want to be forced to compete in an open marketplace," well, I lack sympathy.