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GalleyCat has some riveting news and claim that the ‘Agency Four’ i.e. Simon & Schuster, Harper Collins, Penguin, and Hachette are all part of some major drama -

Here’s an excerpt from the subscription-only story: “The indications are that if the Agency Four have not finalized new digital sales agreements with Amazon prior to the launch of Apple’s iPad, they could face delisting from direct sale at Amazon, as Macmillan did.”

The main point of contention seems to be that Amazon want Publishers to lock-in to three-year contracts and guarantee that no other competitor will get lower prices or better terms.

GalleyCat quotes an article at The New York Times and it explains the Amazon vs Publishers situation much better -

1. Publishers (the Agency Four) want to go with the agency model. 
2. Apple has agreed to the agency model, gotten some as yet unknown concessions, and is requiring publishers to not permit other retailers (read Amazon) to sell any ebooks for less than what is listed in Apple’s iBookstore. 
3. Amazon is supposedly ready to go with the agency model (their only other option might be to go to the courts) – It’s demanding Publishers sign 3-year contracts that guarantee no other store gets cheaper prices or better terms. There are weak rumors that Amazon is demanding other concessions as well – though no one has any details.

It does seem that the Agency Model has won out for big Publishers and now Amazon and Apple are just trying to ensure they don’t get under-cut on price.

Would Amazon really de-list 4 of the big 6 Publishers?

It doesn’t really seem legally defensible for Publishers to -

• Firstly, force Amazon to follow the Agency Model.
• Secondly, give Apple special concessions so that Apple can price books lower than Amazon.

However, given Amazon’s insistence on getting 3 year contracts guaranteeing it isn’t undercut on price, it seems that Amazon think Publishers and Apple will collude to steal Amazon’s market share. It makes sense for both Apple and Publishers as it weakens Amazon’s lead and power.

If Amazon were to take this to court it could be 2 to 3 years before it’s settled and by then the damage would be done. That leaves only the ‘We’ll delist your books if you collude against us’ option.

Would Publishers collude against Amazon?

If they can get away with it they will. Amazon supposedly owns 90% of the eBook market and is pushing for lower book prices. That has to be very unsettling to Publishers – both the loss of power and the pressure to be more efficient. With Apple they get their agency model which they feel has more sustainable ebook prices.

The second major benefit (which Authors and Publishers are pretending doesn’t exist) would be that if Publishers give Apple special terms they could cut down Amazon’s market share and get to a situation where Apple has 40 to 50% of the market, Amazon is left with only 40 to 50% of the market, and other retailers have the rest. At that point Publishers would have used divide and conquer to re-establish themselves as the dominant force in Publishing.

The War for Smaller Publishers

The NY Times articles also brings up an intriguing sub-plot of Amazon trying to get smaller publishers to forsake the agency model -

Amazon appears to be responding to the Apple threat by waging a publisher-by-publisher battle, trying to keep as many books as possible out of Apple’s hands, while preserving as much flexibility as it can to set its own prices.

Evan Schnittman of Oxford University Press has a very insightful comment -

Amazon’s strategy “is to work very hard to limit participation in the agency model to only the big four or five firms that are already announced,” 

“This would leave 50 to 60 percent of the content out there subject to the standard distribution terms, enabling Amazon to promote and price as it does today, and forcing Apple to have to compete with Amazon’s strength.”

That makes a lot of sense from Amazon’s perspective. They may be forced to adopt the Agency Model for larger publishers – However, they have much more leverage with smaller publishers and could get them to stick to the current Amazon model and that would ensure Amazon still has better prices for 50% or more of books. It’d be a huge win.

Apple on its end is advertising a job for an Independent Publisher Account Manager for the iBookstore and is unlikely to give up smaller publishers to Amazon without a fight. Just when we think the Agency Model has won out we find out there’s a brutal battle going on behind the scenes.

Filed under: publishing Tagged: | book wars, fight for $9.99