Agency Pricing Seems to be alive and well in Australia

[darryl]

Australia's ACCC seems to be far kinder to the large publishers than its US counterparts. Apparently this wonderful organisation has so far refused to pursue complaints in this area.

Consider the new releases section on the following sites:

https://books.jbhifi.com.au/

http://ebooks.bigw.com.au/

These are two Australian retail stores which operate in other areas but have opened ebook stores. They are noted for their competiveness and reasonable pricing, including frequent discounting. Prices on the front page for the new releases from these stores start at $14.99 and go up to $31.60. A random sample checked on Amazon Australia showed identical prices. If I am correct, Australians who do not circumvent geo-blocking will face these identical prices across all available retailers.

In other areas, notably software, Australian authorities have been critical of geographical restrictions. A Parliamentary enquiry foreshadowed the possiblity of legislation, amongst other things (http://www.abc.net.au/news/2013-07-2...rosoft/4850484). In 2011 a spokesman for the then Attorney General indicated that circumventing geographical restrictions in Australia was not per se illegal (http://www.netflixaustralianow.com.a...a-a-vpn-legal/). Choice, a local consumer organisation, offers Australians instructions on how to circumvent geographical restrictions http://www.choice.com.au/reviews-and...geoblocks.aspx

I would also comment that, for people so inclined, I would be surprised if there were many of those new releases not available as pirate versions, and probably with much less inconvenience than circumventing the geo-blocking.

I also wondered about titles published in Australia, but looked at only one, a fairly heavily promoted piece of crime fiction by Candice Fox. I would love to be able to say that I have read it and recommend it, but cannot do either, as I am not prepared to be ripped-off to this extent. I checked further and discovered that this book has not so far been released in the United States, and is not expected to be released there until some time in late January 2015, at least in ebook form. Amazon UK shows only a Paperback with a Kindle icon on the right and a "tell the publisher" caption. So far, it seems the publisher has not been listening. I imagine that there are other Australian published books where a similar "strategy" is being followed by the Publisher. One can only speculate at the reason or reasons for this approach, though I will refrain from doing so here other than to express my doubts that there is any benefit to either the potential readers or the author.

I hope that this serves to remind readers in the US and other countries what they can expect from a return to agency pricing. Amazon is not perfect, but is imho far better than the effective oligopoly that has dominated publishing for so long. Amazon may in the future become the evil monopolist some charge it even now is. However, there are some hopeful signs that it will not. And if it does, it can be dealt with then. And would we really be any worse off anyway?

And finally, imho Agency Pricing generates very powerful competition for BPH's, in the form of piracy. And some of these pirates may be motivated not by profit but by idealism, and offer their product for free. So please, BPH, remove the flag holders walking in front of that new-fangled automobile, take off the brakes and embrace the new opportunities you have been given. If you don't, you can be sure others will. Amazon already is, and look at the results so far.

[HarryT]

Agency pricing is not illegal. I'm a little unclear what it is you're actually complaining about. Can you elaborate?

[darryl]

Agency pricing is not per se "illegal" but may well be in breach of competition laws, as it plainly seems to have the effect of destroying competition. I wrote the post because it appears that the BPH are trying to return to agency pricing in the United States. I think a reminder of the reality of the effect of agency pricing (ie; eliminating competition) is timely. And for all the reader pays more I have not seen any evidence whatsoever that authors are any better off. I'm not complaining so much as simply putting forward a very interesting topic for discussion, though I must admit I don't like the attempted exploitation of Australians that I discuss in the post. And I doubt it is limited only to Australians.

For the record, I consider both Geographical Restrictions and Agency Pricing to be abominations that we can't be rid of soon enough. Although it seems we have differenct views on this topic I am interested in reading your views and those of others on this topic.

[HarryT]

My view is simply that a publisher can charge whatever they wish for a book, and that customers will vote with their wallet as to whether or not that price is reasonable. A sensible publisher will try to pitch books at the price point which maximises their profit - not so high that nobody will buy it, and not so low that people would have been willing to pay more for it.

Geographical restrictions are necessary, like it or not, because economic conditions are different in different parts of the world. Books aimed at the Indian market, to take one example, will generally be cheaper than books aimed at the US or British market, because people in India have, on average, much lower salaries than people in the US or UK do.

[tubemonkey]

Originally Posted by darryl

For the record, I consider both Geographical Restrictions and Agency Pricing to be abominations that we can't be rid of soon enough. Although it seems we have differenct views on this topic I am interested in reading your views and those of others on this topic.

You guys sure get the wrong end of the stick when it comes to pricing. It seem like companies go out of their way to gouge you.

Anyway, I agree with you on geo-restrictions and agency pricing. As to eliminating agency, my view is to boycott all books I feel are overpriced. As I've said numerous times in these threads, there is no such thing as a must read for me. If a publisher chooses to price high, then I'll choose to read something else instead.

As to geo-restrictions, I haven't thought much about that one. That'll be a tougher nut to crack.

[darryl]

Harry. Nice to see Adam Smith is alive and well. Supply and demand works well where there is real competition. Unfortunately, I would argue this is not the case with large publishers and agency pricing. Large publishing has had its first case of competition for a long while with Amazon, and doesn't much like it.

So far as geographical restrictions are concerned, even if they are necessary in some cases, which is doubtful, it is difficult to see how there could be such necessity in the case of developed nations. Even with your Indian example, it is arguable that if the ebook can be profitably sold at a lower price in India that lower price is the appropriate price everywhere.

In any case, it doesn't matter. Geographical restrictions, even if necessary, are simply not practical. Like it or not, the internet has created one worldwide market for ebooks. The technology simply does not exist to enforce these restrictions effectively. To do so would require such draconian laws and enforcement techniques as to be completely out of proportion to the vested interests they would seek to protect.

And Tubemonkey. I agree with your post. I too simply do not buy overpriced ebooks. I have found there are some very good indies available at very reasonable prices, though it can be hard sometimes to sort the treasure from the trash. Ocassionally this means I will not buy a newly released ebook from a favourite author until it does eventually reach and acceptable price or I can borrow it from a library.

I suspect that geo-restrictions will slowly vanish as content providers are forced to adapt to the market. In the meantime, they are completely ineffective against anyone who chooses to circumvent them, and I suspect that the more unreasonable they become, the more people will choose to do so.

[HarryT]

Originally Posted by darryl

And Tubemonkey. I agree with your post. I too simply do not buy overpriced ebooks. I have found there are some very good indies available at very reasonable prices, though it can be hard sometimes to sort the treasure from the trash. Ocassionally this means I will not buy a newly released ebook from a favourite author until it does eventually reach and acceptable price or I can borrow it from a library.

That's precisely the point that I was making too, darryl: if a book's price is set too high, people won't buy it. The publisher is free to set whatever price they wish: you decide whether or not that price is acceptable to you.

[darryl]

I do agree with you in so far as me not buying books I consider are excessively priced. However, I do not agree publishers should be free to set their own prices in an agency pricing situation, where there seems to be a total lack of competition. Agency pricing operates practically to allow the publishers to artificially fix prices and exclude competition. Like far too many other industries, an oligopoly in this case, a duopoly in many others, operates to limit competition and keep prices high. Even agency pricing could work with the existence of real competition. Unfortunately there is none.

[HarryT]

Originally Posted by darryl

I do agree with you in so far as me not buying books I consider are excessively priced. However, I do not agree publishers should be free to set their own prices in an agency pricing situation, where there seems to be a total lack of competition.

How would you arrange it otherwise? Each book is unique, and is often published by a single publisher world-wide. You're saying that you don't think the publisher has the right to decide for themselves what it's sold for? You sound as if you're saying that agency pricing itself should be outlawed, but I really don't think that's practical. All sorts of things are sold through agency agreements.

[Lynx-lynx]

I most often find Australian priced ebooks to be higher in the main than other countries.

So for some time now my main source of ebooks is Kobo India. Buying from that site using discount codes means I've had the opportunity to consider and buy more books than I ever would have even considered within my financial domain.

However the Aus published books on the Kobo Indian site are way more expensive than books published elsewhere.

As far as I'm concerned the Aus publishers have shot themselves in the foot.

[darryl]

Originally Posted by HarryT

How would you arrange it otherwise? Each book is unique, and is often published by a single publisher world-wide. You're saying that you don't think the publisher has the right to decide for themselves what it's sold for? You sound as if you're saying that agency pricing itself should be outlawed, but I really don't think that's practical. All sorts of things are sold through agency agreements.

Each book is unique, but this is really meaningless. This is not a case of setting a unique price for a unique product. Publishers generally set prices for categories of books. For instance, looking at my original post, it seems new releases in Australia have a minimum price of $14.99. This can be contrasted with Amazon's $9.99 US before agency pricing.

I would now like to see agency pricing outlawed in this industry, which found a wholesale model perfectly acceptable until Apple came along. Having said this, the evil is not agency pricing per se, but the control of the industry by the big publishers who have shown no interest in really competing with each other. In Australia this has been a common problem with many industries, not just publishing. Under the old wholesale model, Amazon created real competition. By moving to Agency pricing the Publishers eliminated competition at the retail level whilst colluding with each other and Apple to ensure that prices were uniform and high. One only needs to look at the results.

What I would like to see in all jurisdictions for publishers is the maintenance of the wholesale model and the ability of Amazon and other retailers to compete, coupled with aggressive supervision of the Publishers to prevent collusion.

[darryl]

Originally Posted by Lynx-lynx

I most often find Australian priced ebooks to be higher in the main than other countries.

So for some time now my main source of ebooks is Kobo India. Buying from that site using discount codes means I've had the opportunity to consider and buy more books than I ever would have even considered within my financial domain.

However the Aus published books on the Kobo Indian site are way more expensive than books published elsewhere.

As far as I'm concerned the Aus publishers have shot themselves in the foot.

I couldn't agree more.

[HarryT]

Originally Posted by darryl

Each book is unique, but this is really meaningless. This is not a case of setting a unique price for a unique product. Publishers generally set prices for categories of books. For instance, looking at my original post, it seems new releases in Australia have a minimum price of $14.99. This can be contrasted with Amazon's $9.99 US before agency pricing.

Do prices fall with time? If the A$14.99 is for ebooks that are currently only available in paper form in hardback, then it seems a perfectly reasonable price. If it's for ebooks that are available as MMPB, then it is expensive, I agree. $A15 is about £8.30. Amazon UK typically charge around £9-10 for ebooks that are only available in hardback; this generally falls to about £3-5 once the paperback is released.

It should be noted that Amazon's $9.99 price point was not for all books, but for a very small subset of them: those on the NYT best-seller list.

[Barcey]

The history lesson that I was given in school is that businesses originally had sales people in house, on salary, with benefits and on partial commission. This was viewed as expensive during slow sales cycles and didn't keep the sales people fully motivated. The companies allowed the sales people to become their own employees (agents) where they got paid 100% on how much they sold but they took the risk of slow periods and had to pay their own benefits. To make sure that the agents didn't undercut each other into becoming unprofitable the company included price maintenance conditions in the agent contract and voila the agency model. I don't have any problem with that and it seems to have worked well in some industries.

The problem with what the publishers are doing is that they want higher prices and they are using the agency model as a loop hole to pretend that a retailer is their agent. Grocery stores aren not agents for each of the company's products they sell, department stores are not agents and book stores are not agents for each publishing company. The law makers don't seem inclined to close the loophole though.

In a competitive industry you want to get your product to market as cheaply as possible. You don't have a goal of making your products more expensive unless you are trying to set yourself up as a premium brand or if have some sort of arrangement with your competitors to also maintain high prices. The evidence is pretty clear that the big publishers are doing this for the later reason. In the end I believe that small publishers, indie authors and file sharing will make them fail. They just have some hard lessons to learn.

What I find amusing is that the big publishers seem to think that they're playing the long game but they are going to spend the next two years trying to refight the 2010 battle. If they do eventually win back their precious agency model they'll find out the game has changed and all they've done is give Amazon more profits to use against them. Amazon has them way out classed in long term strategic thinking. Until one of the major publishing companies does a major executive overhaul and introduces some radical changes, Amazon will continue to get more powerful in the book publishing industry. I personally think that's a bad thing, they need a few strong competitors.

[Fbone]

Originally Posted by darryl

Each book is unique, but this is really meaningless. This is not a case of setting a unique price for a unique product. Publishers generally set prices for categories of books. For instance, looking at my original post, it seems new releases in Australia have a minimum price of $14.99. This can be contrasted with Amazon's $9.99 US before agency pricing.

[edited]

You can't compare prices between 2 very different countries without considering cost-of-living, wages, taxes, currency fluctuations and business expenses. For example, you don't include US sales tax or exchange rates in your price comparisons. That $9.99 book would cost me $10.69 or AU$11.38 today but AU$12.08 a few months ago. Of course, your prices include VAT.

Also, minimum wage is considerably higher in Australia. Currently $16.87 (with full health ins) or US$15.85/hour. In the US it is $7.25 or AU$7.72. So a US worker earning minimum wage would have to work 1.5 hours to buy that $9.99 book but an Australian worker only 0.9 hours for a $14.99 title. So from a value proposition the Australian shopper may feel its worth the $14.99 more so than the American one. In a sense, books are actually less expensive in Australia looking at this one metric.

Everyone wants to save money and the internet makes it easy to compare prices. And during 2012/2013 when the Australian dollar exceeded parity with the US, products appeared very cheap I'm sure.

While you may want retailers to reduce prices, I'm positive you don't want your wages reduced to match.

And India's minimum wage is 28 cents.