Let’s start with a brief explanation of the agency model.
What is the Agency Model?
Macmillan CEO John Sargent explains it thus (courtesy GalleyCat) -
Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses).
Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99.
(Bestsellers will be priced at $12.99 and once a book comes out in paperback prices will be dropped to $9.99)
E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.”
As far as all of us readers are concerned – new eBooks will cost $3 to $5 more than they used to, and no store will be able to set their own prices (although Apple has allegedly negotiated some ability to discount bestsellers).
Why are Publishers pushing the Agency Model?
The company line, via Hachette CEO David Young -
There are many advantages to the agency model, for our authors, retailers, consumers, and publishers. It allows Hachette to make pricing decisions that are rational and reflect the value of our authors’ works.
In the long run this will enable Hachette to continue to invest in and nurture authors’ careers–from major blockbusters to new voices.
That’s a rather vague explanation.
There are some very real and very non politically correct benefits of the agency model -
- Slow down the adoption of eBooks and eReaders. Perhaps even kill eBooks.
- Make hardcover books more attractive than eBooks.
- Weaken Amazon’s advantage in eBooks.
- More power and control over Publishing.
- Commoditize eBook Stores – If they’re selling the same ebooks at the same prices they’re just vending machines.
Publishers are probably focused on the first 2 benefits – they get the others as a bonus.
Changes for Readers
Readers now have to choose between different options -
- Buy the $14.99 ($12.99 for bestsellers) new eBook.
- Buy the hardcover for a little more than $14.99.
- Wait until it drops to $9.99. Mr. Sargent has said that this will not be until the paperback is out – which is a rather long delay.
- Buy another book – Perhaps one from a publisher or author that doesn’t use the agency model.
Publishers that are pushing the agency model are hoping for 1. or 2. With 1. they get a 70% cut of the new eBook price – a price they think is a sustainable price for books. With 2. they sell a hardcover book instead of an annoying ebook.
Readers get to decide whether the Agency Model works or not
For all their posturing Publishers know they can’t do a thing if readers reject the agency model.
If readers start picking authors and publishers that don’t use the agency model it’ll send a clear message to Publishers and they will be forced to go back to $9.99. They have to – because if they don’t other Publishers and Indie authors will start selling more and become more and more important. Agency model Publishers wouldn’t just be losing sales – they’d be losing sales to competitors.
Another thing worth noting is that with the agency model Publishers are making up a rather interesting and completely artificial distinction – hardcover ebooks and paperback ebooks. It’s unlikely that readers will buy this – It’s the exact same ebook.
Changes for Publishers and eBook Stores
Publishers will no longer get 50% of the physical book list price (around $14 per ebook) – They will actually get less money. They get 70% of the eBook price (around $10.49) and they are OK with it as they feel it protects them for the future - They are scared eBook stores might decide to start giving Publishers 50% of the ebook sale price (which would mean just $5).
You also get all the benefits we’ve discussed above – the fall of eBooks and eReaders, and so forth. If the Agency model can survive Publishers would be very, very happy.
eBook Stores like Amazon no longer have to take a loss. They get a 30% cut on the price under the agency model. They are, however, saddled with two disadvantages -
- eBooks are now priced much higher and are not as attractive when compared with hardcovers.
- Stores can’t discount eBooks and they lose a lot of flexibility. They will have to compete on other factors or become commoditized vending machines.
The points are worth exploring.
Under the Agency Model Physical Books become a lot more appealing than eBooks
Publishers want to preserve physical books and their control over Publishing and the agency model really helps.
A hardcover book that has been discounted to the $15 to $20 range is much more appealing than a $14.99 ebook. eReaders for $259 are much less compelling if there are hardly any eBook savings. With one fell swoop Publishers have greatly hurt the future of both eBooks and eReaders.
eBook Stores and eReaders lose a lot of their ability to differentiate
The Agency Model seems to be a deliberate attempt to curb Amazon’s dominance. With fixed prices one ebook store can’t beat another and it nullifies what has arguably been Amazon’s biggest advantage – cheap ebooks.
If it’s the same book at the same price how are two ebook stores different?
The screen technology, the free public domain books, the screen sizes, the 60 second downloads – they are all already the same across eReaders. If eBook prices are also made the same then we’re left with much less differentiation. The Agency Model would make ebook stores incapable of competing with each other freely and they would make eReaders virtually identical.
The Agency Model, if successful, would kill the democratization of Publishing
That’s what this is really about - To give Publishers the power to be gatekeepers once again and crush the smaller publishers and indie authors. To weaken the dangerously strong Amazon Kindle ecosystem and play off one retailer against another.
Apple probably holds a grudge against Amazon for killing mp3 DRM and now it’s really hurting the Kindle ecosystem by backing the Agency Model.
It’s the exact anti-thesis of the 1984 ad.
Apple is no longer the girl throwing a hammer at the screen – No, Apple is the guard that shoots the girl right before she can launch her hammer.
What Apple does is not important though – All of us readers get to decide what happens with the Agency Model and we’ve beaten Publishers before and we’ll do it again.
Filed under: publishing Tagged: | cowardly agency model, fight for $9.99, future of publishing
There is one other option for ebook readers who reject the customer unfriendly Agency Model, and that is pirating the books. Generally speaking, I believe most customers are happy to pay something for their books, for the convenience of first-party buy/download and knowing they’re supporting authors they like. The more unattractive ebook prices get, I think the more likely people are going to be to seek out other means of getting the books, not “OK, I’ll pay more for a hard cover book”.
Unfortunately, the agency model also seems to be making e-books less appealing (and more expensive) than paperback books. I always waited for the mass market paperback to come out to buy a book for recreational reading. Prices for paperbacks were in the $7.99 range. And, of course, some part of that price went to paper, printing, distribution, storage, etc. When I first purchased my Kindle (late 2008) a number of “paperback” titles (of well known authors) were in the $5 – $6 range, which seemed to me to be fair. Prices have been inching up.
I read Sargeant’s full quote; while he does say $9.99 or less, I too read that to mean $9.99 as the general bottom price, with perhaps a few limited exceptions. I hope I’m wrong. Increasing the price to $9.99 is simply going to drive me to other authors.
“once a book comes out in paperback prices will be dropped to $9.99″
How is paying more for an e-book than its respective paper edition remotely reasonable? Does this mean an increase of a few dollars to paperback books?
Paperback may equal trade paperback, a format which typically costs in the $12-14 range at list price and around $10-12 on Amazon. At this point you would be paying about the same or a little less for the ebook version – not terribly attractive (and why I’ve never found the $9.99 price point compelling. as my new book purchases are generally trade paperbacks), but not actually -more-.
This is an increasingly common format as a second step in the publishing lifecycle of a book, with the mass market paperback a distant (and $8) third. It’s also what Amazon itself refers to as a “paperback” book – mass market editions are labelled as “mass market paperback”.
What baffles me about all of this is that *authors* are falling for this agency model crap – when arguably they’ll be the most affected by it, and it won’t be pretty.
As you point out, the publishers won’t make more money out of each individual sale in this model; actually, it’ll be less. But even if they did get the same amount, the author generally earns royalties based on the *wholesale* price, not the end customer price; Sargeant has already confirmed that this won’t change. So in the agency model, authors won’t be making any more money out of each individual sale; they’ll make the *exact same figure*.
Note, also, that this figure-per-sale is also the same they get for printed books – meaning that, where the author’s interests are concerned, it doesn’t matter a bit if the customer buys the electronic version of that author’s book at $9.99 or the hardcover one at $20; what matters is that someone buys it at all.
Except that the agency model grabs part of that author’s audience – those who buy e-books – and suddenly rises that book’s end price. If 100% of that audience swallows it up and still buy that author’s book – still in electronic form or not, it doesn’t matter – that author is at best in the same position he was before; he/she didn’t make a penny more.
But for every customer who decides to screw it and buy something else, the author is losing one sale and therefore earning less overall (and everyone knows that ‘overall’ doesn’t amount to much already). Even if this loss amounts to 10% of 10% of that author’s audience, most authors simply can’t afford this for no discernible advantage at all (and no, preserving dead tree books isn’t a real advantage to the author; keeping his/her audience coming back is, though).
What the heck these authors are rooting for? Maintaining the status quo? I can understand it as a goal on its own, but at the price of actually losing income? It’s either insanity or delusion.
These guys need to snap out of that bubble, and fast.