The Shatzkin Files


The wild weekend of Amazon and Macmillan


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Now I swear all this is true. As everybody knows, a very serious food fight broke out between Amazon and Macmillan late Friday night. All weekend Michael Cader led the way in ferreting out additional useful information and I spent most of today (Sunday) trying to write an analytical blogpost. I got it just about finished in the early afternoon, and the bottom line to what I’d written was “Amazon will not be able to sustain this.”

I decided to hold the post until after going to see Crazy Heart this afternoon and, when I came home, Amazon had already folded. But I had written a post that provided a lot of useful information, even if events had stolen my punchline.

So I’m giving it the once-over to edit it for the reality that Amazon has already announced that they will not continue to boycott Macmillan books.

It is received wisdom in Washington that when you have news you have to release but would prefer to have minimum impact, you release it on Friday afternoon. The latest tiff in the Amazon versus Big Publisher brouhaha went that idea one better; it appears to have broken in the middle of the Friday-to-Saturday night.

About midnight that evening, David Wilk alerted the Brantley list to a VentureBeat post that indicated that Macmillan titles were no longer available at Amazon.

By noon the following day, Brad Stone had posted a further explanation to the NY Times blog.

The VentureBeat post had no clue as to what was going on and even carried a link to a post from author John Scalzi suspecting a “glitch.” But Stone pinned down that the disappearance of the Macmillan titles was, indeed, retaliation for Macmillan’s move to the agency pricing model, first revealed by Michael Cader in Publishers Lunch and discussed on this blog last week.

Sometime late Saturday afternoon, Lunch posted a narrative explaining what was going on and including a paid insertion from Macmillan: a letter from Chairman and CEO John Sargent giving Macmillan’s account of what had transpired.

Which, as many people who care know by now (as I write this on Sunday morning and afternoon) is that Macmillan told Amazon about the new agency model, by which Amazon would actually get ebooks at lower prices than now but also by which Macmillan would set the prices to consumers. Amazon retaliated with what is, more or less, a “nuclear option.” Macmillan books are no longer on sale except through third party vendors (extending the ban to those dealers would open up yet another big can of worms for Amazon and they hardly need any more) and that includes Kindle. Most of the third party vendors are selling used books and no Macmillan books are being transacted directly by Amazon at all.

We have said on this blog, repeatedly, that publishers’ discounts to retailers would have to come down and that the windowing tactic (delaying ebooks from being available when the hardcover first comes out) was all about pricing control and nothing else.

What I want to accomplish in this post is to lay out clearly what is happening and then enumerate some key points about what’s going on: paradoxes and prospects.

Before the Agency Model (like “now”), publishers sell ebooks at about 50 off an often ridiculously high established price (“parity” is common; same price as a hardcover on a new book) to retailers who were setting the prices to the consumer themselves and, following Amazon’s lead, always discounting. The publishers are paying the authors royalties that are frequently 25% of net, which amounts to 12.5% of publisher declared retail. Some publishers pay 15% of retail; Sargent, in a previous letter to agents, indicated a desire to move from 25% of net to 20% of net, which would be 10% of retail.

The proposed Agency Model will have publishers setting a price lower than the established retail they had before but higher than the deep discounts Amazon led retailers to sell at. The publisher intends to  pay 30% of that established price to the retailer and 25% of either the full consumer price or of the 70% “net” (still to be determined) to the author. This means that the retailer will get a higher price from the consumer and a better margin than they realize now (even though a lower percentage of the “established” price). The author’s cut per copy could actually be reduced!

The wholesalers, Ingram and Content Reserve, often get the same discount as publishers. They handle the stores and libraries publishers serve don’t want to deal with directly. So those stores and libraries get less margin than the big ones publishers handle without an intermediary. One thing that was new to me that came out on the Ebook Supply Chain panel at Digital Book World is that publishers insisted on vetting the accounts that would be selling their books to make sure they didn’t violate territorial restrictions. So Ingram (and presumably Content Reserve) has to manage a granular control by title by publisher by account.

It is not at all clear how the Agency and price maintenance protocols get applied through wholesalers. Perhaps this means that smaller accounts and libraries just won’t have the newer titles that will only be released on the Agency basis (assuming that the scenario Sargent describes is what is also followed by other big publishers.)

This is a bizarre paradox, really. Macmillan actually proposed to sell Amazon the ebooks at what is, in effect, a lower wholesale price than Amazon gets now and their enforcement of a retail price puts more margin into Amazon’s pocket on every sale made than they earn now! And Amazon is fighting it.

Sargent’s note makes clear that the discount-off-retail pricing that has existed all along will still be offered, but that newer books wouldn’t be included in that offering. Those would be available only on Agency terms. What is not clear is whether Macmillan intends to continue the Agency terms past the nine-month “window” for new books. We’d guess they will for some accounts.

But that leads to another paradox because publishers unambiguously benefit if retailers sacrifice their own margin and discount when hardcover price maintenance and NY Times Bestseller list rankings are not at stake. Lower prices to consumers sell more copies. Presumably retailers will continue to want to compete on price and will do so when sales terms allow. But what does that do to the publishers’ challenge of “setting” prices for those accounts that want that done across the entire list?

Yet another paradox is the position of the agents. On the one hand, we have seen that many of those representing big authors see the same danger the big publishers do of inexpensive ebooks undercutting valuable hardcover sales and Times Bestseller rankings. On the other hand, publishers lowering established ebook prices and reducing their take from their intermediaries could often mean lower royalties for authors. But not necessarily.

If publishers are paying on “net receipts” (and many are) and if a) retail prices aren’t cut by as much as half (which they often won’t be) and b) if the publisher doesn’t deduct the Agency “commission” from its computation of net (sure to be debated), then the basis of the author’s royalty wouldn’t go down.

Quick summary: if you have a $25 list price ebook on which the author’s royalty is 25% of net, the author is now getting 25% of $12.50, or $3.125. If that book becomes a $15 ebook with a 30% commission, the author would get $3.75 (a nice increase) if the commission is not deducted first and $2.625 if it is (a sharp cut.) Of course, the $25 and $15 prices described here are notional and with different prices (as they say) “your results will vary.” If that notional book had been priced at $30 in hardcover, the author’s share would have been $4.50 and the ebook price change would clearly cost them something on every copy.

Author Charles Stross had a very insightful post on his blog, speaking from the perspective a gored ox (he has books published by Macmillan which have been taken down.) Stross makes clear that Amazon is miffed because their competitive strategy of driving away ebook competition through aggressive discounting will be foiled by publisher price-setting. Stross says:

Amazon are going to fight this one ruthlessly because if the publishers win, it destroys the profitability of their business and pushes prices down.

I’m not sure it “pushes prices down”; I think it actually pushes (ebook) prices up, at least temporarily. But the points Stross makes about Amazon wanting to achieve ebook hegemony and the Agency model being part of the publishers’ plan to beat that back and strengthen other players seem right to me.

We had a lot of this conversation last Spring before Sourcebooks’s windowing move with Bran Hambric, followed by Hachette with True Compass and HarperCollins with Going Rogue, pushed this tussle between Amazon and publishers to the forefront. In his analysis at that time, Cader made the point that publishers were actually helping Amazon undercut other retailers with their “parity” pricing; making the ebook retail the same price as the hardcover print retail. His logic was that the high prices increased Amazon’s advantage over other retailers because they could better afford to sell high-profile titles at a loss than their competition. Meanwhile, the publishers (and authors working on “net”) continue to get higher ebook revenues than the consumer spending would really entitle them to.

My first question when all this arose overnight on Friday was “why Macmillan?” Sargent’s note may have answered that question: because John was in Seattle on Thursday officially delivering Amazon the Agency Model news that we only assume is going to come to them from other publishers as well. One presumes that Amazon thinks that taking such drastic action as this might discourage the other publishers thinking about doing the same thing (and the iPad announcement on Wednesday would lead us to think that four of the remaining five Big Six players are indeed working out the details of a similar consumer-price-controlling sales model.)

And Amazon apparently figured out, as I was writing these words, that the only brand blown to smithereens by the nuclear option would be theirs. It is hard to imagine how extensive the brand damage could have been if Amazon delisted even one more major publisher along with Macmillan for even a couple of weeks. For a brand whose principal attributes are dependability and dedication to the consumer, it would have been catastrophic.

Amazon says now that the boycott is temporary and they were candid about the fact that they have no choice but to yield. They take a swipe at the publishers’ copyright-based “monopoly” on titles. But this was a really bungled response on every level. Amazon deserves credit for being smart enough to walk this thing back within 48 hours. Amazon may have to learn something new for them in the ebook space: how to be one of a number of players, not the only game in town.

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  • This is a very sad day for readers and book lovers. The big six publishers have been focused on ever greater consolidation, ever-higher prices and profit margins and a narrowing focus on super-best-sellers for more than a decade, two decades, even. The result for a while was just what you'd expect, the volume of book sales stagnating along with the demise of thousands of independent book stores and brilliant mid-list authors' works.

    The Internet and the digitization of content threatened to change all that — may ultimately still change all that — but today is a win for the dinosaurs like John Sargent. I went back and listened to some of his more honestly expressed views today. It's an NYU panel from last September with Chris Anderson discussing “free” as a business model. And Sargent is his element regaling the crowd with stories of how no one can grow the size of the book market, digital is a threat not an opportunity, prices should never be less than the most the customer will pay and so on (quotes are on my blog at http://bit.ly/axEJyQ). It's no surprise with guys like running publishing that the industry is running itself into the ground. As I said, a sad day for readers and book lovers everywhere.

    The one thing that surprises me is that while Mike and others were smartly predicting that big publishers hoped to use the existence of Apple's ebook store as leverage against Amazon, I think most people – certainly me – thought they would have to wait and see if it actually caught on. Apparently not. Just the mere gleam in Steve Jobs' eye and an unavailable if sexy & hyped new platform is enough to scare the heck out of Amazon and embolden the dinosaurs. Amazing.

    • You know, I really can't buy in to the idea that it is end of Western
      Civilization if an ebook of a brand name author costs $15 instead of $10.
      Price is ultimately determined by the “market”, but Amazon (and other
      retailers) were putting a big fat thumb on the market because they are after
      customers, not sales margin. And they're using the top brand names of
      today's authors and publishers to accomplish it. Amazon really *is* the
      Wal-mart of the Web. Near as I can tell, their corporate ethic is that
      everything's fair in love and war as long as the motive is lower prices for
      the consumer. That's the moral good that drives all their thinking and
      excuses any excesses.

      Now we can all come to our conclusions to what extent we think that's good
      for society or even the best choice for us much of the time, but you can
      hardly blame somebody trying to sell to the same customers through other
      channels — that might not even be as “efficient” — to have an opinion
      about price and attempt to affect it. And that is not just the publishers;
      it's the authors. And when people don't want to read their books, or if
      they're “overcharging”, they'll have to change.

      The developing diversity of paths to the ebook publisher is absolutely
      unvarnished good news for all the big publishers with the leverage Macmillan
      has (and five publishers are larger.) Whether the smaller publishers will be
      able to exercise the same controls over their pricing is a question we'll be
      learning the answer to in the weeks to come. I'd say, judging by this
      weekend, even Amazon doesn't know the answer to that question yet.

      Mike

      • I'll try and keep it brief and stop here but probably the most important thing in your reply that I disagree with is: “And when people don't want to read their books, or if they're “overcharging”, they'll have to change.” The content bigwigs have shown time and again that they will not change and they will instead be replaced by other forms of diversion and entertainment. If you are a newspaper lover, bummer for you. If you are a book lover, this is not a good day. What John Sargent wants is higher profit margins. What he wants is ebooks sold at the same price as print books or close enough that it doesn't matter (and if there is anything to learn from Apple and the record labels it's that as soon as they break the back of the leading retailer and agent of change, they go for the biggest price hike they can). Sargent doesn't believe there is any opportunity to attract new readers or sell more books in total. He believes in extracting the most profit from what he sees as a slowly dying market. And that's beyond pathetic.

      • What you describe as “pathetic”:

        *He believes in extracting the most profit from what he sees as a slowly
        dying market*

        is, I believe, exactly what every major author and all the people who own
        those companies would want him to do. On what planet would you possibly
        expect anything else?

        Look, you're welcome to your opinions about how society ought to be
        organized, how access to information markets should be allocated, and who
        should get what money, etc. etc. Opinions are like noses; everybody's
        entitled to their own. But economic reality and human nature are a little
        more immutable. Nobody in the industry is on record more forcefully and more
        consistently about the jeopardy of the Big Six business model than I am. I
        gave my “The End of General Trade Publishing Houses” speech four years ago.
        But you can't really expect them to burn down the model that is providing
        all the revenue. Any chance they have depends on keeping it going as long as
        they can.

        Think about this. If you are for the widest dissemination of digital
        information, you are for the faster demise of retail bookstores. You can't
        have it both ways. Publishers have sided with the bookstores; they actually
        have an interest in slowing down the shift to digital if they can. That's
        economic reality and, the love of books and bookstores, human nature.

        There is no successful publisher at any scale that doesn't have, among other
        skills, the ability to manage price, which they can do because they own
        copyrights. The digital revolution puts a lot more “loose” content in
        competition with them and makes their job a lot harder, but it doesn't
        change the essential nature of the business that is still generating most of
        the money for most of the authors in the world.

        Mike

      • andyross797

        I have to vehemently disagree with Mr. Pressman and agree with Mike. Pressman seems to be impressed with Chris Anderson who is the guru of “free” as in intellectual work should be free. That is a common feeling in Internet Culture, but it is insulting to writers and not a robust business model for publishing (which is dependent on intellectual work.) Ultimately a book is a product. If it can't be sold at a profit, the business will perish.

      • Thanks for the support, Andy. You can't blame people for lobbying in their
        self-interest, and all consumers will always prefer things to be cheaper.
        But those of us who think about making a living from it take a different
        point of view.

        Mike

  • Mike, thanks for another lucid overview of this confusing situation–which reminds me of one of those dustclouds in a cartoon strip, with fists and feet sticking out of it.

    It's very interesting to read the Kindle forum posts on Amazon. Their announcement is clearly intended to cast Macmillan as the bully here, and a vocal audience of Kindle owners, who have come to regard $9.99 as the inalienable right of e-book buyers, are ready to see it that way. Still there are several posters who say, “geez, 14.99 doesn't sound so bad.” Completely lost in the conversation is the fact that all these Macmillan titles might be available for $9.99 if you're willing to wait for them, the way you do for a paperback. I think Macmillan (and other publishers who want to “window” e-books) need to make consumers much more aware of that.

    Also interesting, of a hundred or so comments I read at the NYT Bits blog post on the controversy, many readers knocked Macmillan but a greater number saw this as bullying by Amazon.

    I don't know whether we'll see $14.99 hold as the new standard price for e-books but I think it was fortunate for publishers that Apple came along when it did, before Amazon was able to get a stranglehold on the e-book market.

    • Peter, I looked at the Amazon blog and was also struck by the fact that as
      many people seemed okay with $14.99 as objecting to it, despite the framing
      Amazon gave it at the top.

      Amazon really takes a hit here. Their brand is right out there for all to
      see. Macmillan as a brand, even if some angry consumers remember it and want
      to punish it, is not so obvious. Does every consumer know Macmillan means
      Farrar Straus or Holt or St. Martin's? I don't think so. This is a problem
      trying to demonize any major trade house by its corporate name; most of the
      books it sells are under some other name!

      Mike

  • Ted R.

    I noticed over the weekend that those taking Macmillan's side focused on fair pricing for ebooks versions of hardcover books. I'm undecided about ebooks near-matching discount hardcover prices. I suppose I could learn to live with it, as I used to wait for paperbacks.

    However, what so many missed was that Macmillan has a track record of keeping the ebook at $14-$15 permanently, even when the $8 paperback has been out for years. For reference, check Mobipocket.com's listing of Macmillan/Tor ebooks (http://tinyurl.com/yjxoabg). (Mobipocket has always listed at the publisher's desired price, which one assumes will be the new prices on Amazon now.) The only exceptions to the $14-or-more price point, as far as I can discern, are ebooks that were once given away for free without DRM. I got about a dozen of the listed $8 ebooks last year in a Tor promotional. I understand they gave away even more in their “club” email list.

    Assuming Macmillan (and others to come) don't change their ways, what is their purpose in pricing ebooks at nearly twice the listed paperback? Is it to slow ebook adoption and keep the status quo? I'm beginning to suspect that's the case.

    I've converted to ebooks much like some have converted to audiobook-only consumption of novels. I can't go back; if a book is not available in ebook form, or is more expensive than I feel fair (near-twice paperback is not fair, in my mind), I will not read it. A shame in the case of Tor authors since I enjoy quite a few of them (bye-bye Scalzi and Stross, though you guys lost me anyway for your attitude this weekend), I do prefer to read the latest stuff. But there's more other reading material in ebook form, either free or at reasonable prices (e.g. Baen Books), than I can finish in my expected lifetime. Not to mention other forms of entertainment. I'll get by.

    We'll see what happens.

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  • Peter Donoughue

    Mike, with great respect, you're all over the place like a dog's breakfast here.

    In most Western countries, as in Australia where I'm from, retail price maintenance is quite illegal and has been for decades. Macmillan and other US publishers can only get away with muscling Amazon on price because of the dated pro-producer bias in US trade practices law.

    Your defending Macmillan's brazen anti-consumer behaviour is disappointing in the extreme.

    Why not allow the market to sort this out? Competitors to Amazon are emerging, such as Apple. Amazon, while huge, is not the only retail ebook outlet available to publishers. Relax.

    • Peter, I'm against “the market sorting this out” because so many interests
      that have nothing to do with intellectual property have their thumbs on the
      damn scale!

      Pricing of ebooks has nothing to do with content, its value, and its market.
      It has entirely to do with much larger entities seeking to control markets
      for ebooks and ebook reader hardware. We're pawns in their game.

      Sorry to disappoint you, but I think people who support retailer-led pricing
      for content are anti-author and anti-publisher in their behavior, if not in
      their attitude. You're right that Apple (and soon Google) offer Amazon
      competition, but if they only compete on price, all that will do is continue
      the subsidized downward spiral for the value of intellectual property.

      Mike

    • @Peter. Coming from a very different ecosystem (in Europe we have faught and won the battle for publisher's fixed prices with the result that books are cheaper in the Continent than in the UK, where they have prices fixed by the retailer) I hardly understand your point. It's not that I'm a Macmillan's fan, but there's more to this tiff than catches the eye.
      As Mike has stated several times, publishers (all of us, big six or thousand small) will depend on hardcover revenues for many years, while adapting (or not) to the digital shift. Brick and mortar booksellers are cardinal to us now and, as a matter of survival (we have the right to wish ourselves a long life), we need the ecosystem of bookshops healthy. Amazon IS A THREAT for that ecosystem. And I see the move of Macmillan (and the supossed move of other 4 among the Six) not only from the narrow point of view of consumer right to lowest price always but as a move to protect the ecosystem of smaller bookseller, of which we have an excruciating need nowadays.
      It is also true that, in the past, the Big Six have mistreated independent booksellers and favoured concentration, namely, Amazon. But things have changed and I don't see harm in adapting to changes. Hope that ABA understand the move rightly.
      As for the Big One who Mike leaves outside the move, I'm curious like a cat and just wonder: is it RandomHouse? Is there anything real in the buzz about Amazon buying them in order to play Publisher and Retailer at the same time?
      Mike, I'd like some enlightnement on this issue.
      (And be lenient with my heavy written brogue).

      • Julieta, I have no inside information, but my reading of the public stances
        of the companies would suggest that Hachette, Harper, and S&S are pretty
        much in the same place Macmillan is on this. Penguin's a little harder to
        read, but they also seem close: they are publicly in favor of pricing
        “parity” (ebooks same as hardcovers) and they were one of the publishers
        featured in the Apple announcement. Random House was the one Big Six house
        left out of the Apple announcement. Their position is the most inscrutable.
        Whether they have any difference in insight or attitude because they have a
        recent Amazonian now steering their digital strategy is not apparent to me.

        Mike
        ——————–
        Mike Shatzkin
        /blog
        [email protected], 212-758-5670
        Founder & CEO
        The Idea Logical Company, Inc.,
        Co-founder: Filedby, Inc. http://filedby.com
        Conference Chair: Digital Book World http://digitalbookworld.com

      • Thank you very much, Mike, for your always insightful comments.

      • I would *never* pay hard cover prices for an ebook in 2011.

        I used to, 5+ years ago, spend the occasional $20 on a really rare ebook I thought might be valuable (Charlot Iserbytte’s Deliberate Dumbing Down of America – $20 comes to mind), but now a days, I will think 3x as hard before I pluck down more than $9.99 and my max limit is $13.99 for a Kindle book.

        Kindle is far too convenient, I’m afraid, and it’s TCO is so much lower that I would never consider buying from another vendor unless they offered it for $5 (impossible with agency model!!) or less, or it was from an indy author (like Christian Cantrell).

        I’m sure there are *tons* of people like me who would rather go back to piracy than pay more than $9.99.  Doesn’t it make sense that ebooks have been around for DECADES but **only** took off after the Kindle for PC and cheap ebooks (via non-agency model) happened after mid-2008??

        Authors: If you want to keep your existing royalties, do not support $15+ ebooks. If you want to make more money, consider self-publication or not selling away your copyright and distributions rights to a major label who treats you as nothing more than a cog in a profit machine.

      • Theodore, I am sure there are “tons of people like” you who will not pay more than X for an ebooks.

        But there are also apparently “tons of people” like *me* who buy what they want to read without making the price a matter of principle. I bought and read two $19.99 ebooks last year; the hardcover would have cost more. Of course, *I *personally would pay more to *avoid* having the paper to carry around with me.

        People are different. Correct pricing has to do with how it all works out in the end.

        Having said that, I have heard about pricing experiments where sales rose astronomically when a book was cut in price from $10 to $1; rose by much more than 10 times.

        The fact is: we don’t actually know yet…

        Mike

      • All I’m saying is that I love awesome books.  I’ve never personally read any of your books (I think this may be a marketing problem, as I never heard of you before 🙂 

        I personally donate to people who throw up donation buttons *if* I think I’m paying a lot less than something is worth (for instance: There’s this one indy author who open sources all his books (Creative Commons), puts them “unlimtied usage” on Kindle, and sells them for $1. I found his site, found his email, and sent him $50 via amazon payments I liked his book so much.

        I would *gladly* (and with joy) do similarly every time I read one of Orson Scott Card’s books again, but I cant readily find his site or email or donate button, or any # of authors, but have the same problem.  I wonder how many others are like me. Hell, if Card could get 0.00005% of his readership to give him $20 every time they read his book, how much better off would he be?!

        I made a filesharing app back in the early 2000s where I tried this; I would gather music artists’ donate buttons HTML code (very rare back then) and email addresses (back when paypal was starting) and whenever someone searched their band name in my app, their donate button would come up. This was *way* before Amazon MP3 or iTunes.

        I was crapped on by the U.S. corporations (you can read about it 
        http://yro.slashdot.org/story/03/08/21/1333258/RIAAMPAA-vs-xMule-Author-EarthStation-5 ) and I stopped maintaining this program in 2004, but what if we could append the same logic to Amazon, iTunes and other filesharing apps?

        I was doing it for free and it was for UNIX systems so it never really caught on, but still 😉

      • None of my books are “awesome”, frankly. And, except for the collection of my blogposts from the first two years, none of them are very recent either or available as ebooks.

        I think your purchasing habits are pretty individualistic, particularly your willingness to put extra bucks in the tip jar. Now, *that’s* awesome!
        Mike

  • Good point–we publishers often bemoan the fact that our brands mean so little to consumers–here's an upside!

    Actually, a good number of the Amazon commenters knew that Macmillan includes Tor and seem to be big SF readers (not too surprising). But many of those readers also were disappointed that authors they like were going to be hurt by Amazon's move.

  • Pingback: Monday Midday Links: The Macmillan Amazon Fight Post Mortem Continues | Dear Author: Romance Novel Reviews, Industry News, and Commentary()

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  • dickhartzell

    Mike —

    I appreciate your explanation of the Amazon-Macmillan brouhaha — it's the best I've seen so far.

    But as someone who has worked in professional/trade publishing and bookselling his entire life, there's something I still don't understand about the Agency pricing model you say Macmillan (and the other four majors who have agreed to a similar model with Apple) is insisting on.

    So far, it's my understanding that Amazon's $9.99 price point has meant it has been selling most of its ebooks at or below cost. Macmillan proposes divorcing ebook pricing from physical book pricing, lowering ebook retail prices mostly to the $12.99 to $14.99 range, and via the agency model giving Amazon a 30% commission on such sales.

    My question: under this model what prevents Amazon from imposing a lower commission on itself and using the difference to lower the price of the agency model ebooks it buys back down to $9.99?

    Textbooks have long been sold under the agency pricing model, and the online book retailer where I work plays with its prices for those books all the time.

    Why can't Amazon — and any other online retailer that wants to — do the same?

    • Dick, what will prevent it will be terms of the Agency agreement. That's
      all.

      It will be interesting to see how tightly publishers structure that
      agreement. For example, will they prohibit a retailer from having a
      “loyalty” program by which they refund or credit a certain percentage of
      purchases over time? I think they'll have to.

      But the short answer to the question is that there will be a deal that will
      include “publisher sets the price and sales agent honors it.”

      Mike

  • dickhartzell

    Thanks for clearing that up, Mike.

    This is sobering news. I suppose it will slow the adoption of ereaders … at least until their underlying technologies make a $99 price point possible.

    Macmillan's move notwithstanding, it's impossible not to conclude this is the beginning of the end for printed books. (That Macmillan acted at all is merely proof that the ebook format has grown beyond an interesting tech curiosity.) Hardcovers and paperbacks will linger, of course, but in a generation they'll be like LPs — available mostly from specialty stores and invisible to everyone but eccentric bibliophiles.

    Hardly the futurist scenario envisioned by Ray Bradbury in “Fahrenheit 451”. Though somehow the net effect feels the same.

    • Dick, my only disagreement with your characterization is that I think the
      “beginning of the end” of printed books took place some time ago. I think,
      to borrow from Churchill, that we're at “the end of the beginning” of the
      first stage of transition. We'll be living in a different world 10 years
      from now.

      Mike

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  • davidbaer

    Often we forget the little guy, the SMB, in our discussions of the comings and goings of the Internet marketing industry. Sure there are times like this when a report surfaces talking about their issues and concerns but, for the most part, we like to talk about big brands and how they do the Internet marketing thing well or not so well.

    http://www.onlineuniversalwork.com

  • Thanks as always Mike for a succint summary and insight.
    With new industries come new pricing models and business structures. It has always been this way. What is apparant is that publishing houses are attempting to control a perceived threat rather than embrace a new world. There are massive opportunities in eBooks and digital publishing for bright, dynamic and engaging individuals and companies that are willing too bend and flex with the emerging market rather than stand against the winds of change and risk being snapped in two.
    eBooks aren't on the margins of the book world anymore. They are a real and integral part of the landscape. Like may, I haven't read a paper book in several years now. There are many many people who always have and always will prefer paper books and thats fine too. Rueing the demise of Brick-and-mortar bookshops now is a little late – since 2008 online book sales have begun outstripping store sales – that was coming before eBooks became a true force.
    So wise up publishers – these are new times and old tactics and practices ultimately will fail.

    • Gareth, there are very large entities selling a great volume of books that
      depend on print and brick-and-mortar for their competitive advantage, and
      the Big Six publishers and Barnes & Noble would be obvious examples.

      There is no way under the sun that the switchover to digital is good for
      them; it erases huge competitive advantages built on physical
      infrastructures and scale.

      So whatever overall perspective we have about change and how it will be
      better or worse, it is *not* odd that legacy businesses would defend the
      status quo. Self-preservation is a powerful motivator.

      Mike

  • Thanks, Mike, for sparking such a good conversation from your post. It's fascinating.

    Over in this side of the pond in the publishing companies (the big ones) that I work, there is an excitement since the arrival of Apple's iPad which I have not sensed before now at all.

    There has been a lot of work in the background by the big six to convert larger numbers of books into ebooks and now they are sensing that this is the time to start reaping the rewards for that investment in conversion to ebooks.

    The move by some of the 'big six' that we work with has been in their plans to connect with the readers both through selling to them directly through the internet, and also to communicate with them directly.

    But is not just the 'big six' that are doing this. There are some notable small publishers that are doing exactly the same as their large competitors in selling directly to customers as well as communicating with them, not forgetting their sales to and through the booksellers.

    The big challenge for all publishers is sharing their knowledge internally about the digital environment they are now in across the whole business. This is exactly what one senior digital chap in a large publishers asked me to help him with recently.

    The pricing war over the weekend seems to have brought all of the tension to the surface, but the consumer is going to have more choice in what they buy, in what format and at what price than a year ago.

    A colleague (who is much younger than me!) seemed to typify what the customers of publishers are likely to be soon. She has been reading a printed book by a well known author. She also bought the eBook version and the audio book for her iPhone so she can pick up where she left off in the printed book. Now, if that's not good news for a publisher or a bookseller, then I don't know what is!

    Thanks again. I always learn from your posts!

    • Will,

      The big companies here haven't really taken to selling direct. I am not sure
      how much a publisher that isn't “vertical” can benefit from doing that.
      There's a bit of a margin bump, but not a big one (since most etailers don't
      take anything like the margin that brick and mortar booksellers do) and it
      is a lot of infrastructure and work.

      I am skeptical that your multiple-purchase consumer will be replicated very
      often. I don't think we've seen a lot of book-and-audio purchasers. But it
      is early days, and we'll be learning a lot about what new habits consumers
      might form in the months to come.

      And thanks for all the nice things you said about what we say on this blog.

      Mike

      • Hi Mike,

        Yes, it is certainly going to be interesting to see how habits develop. And, yes, the infrastructure needed to be able to service customers directly is not necessarily something which all publishers want to invest in.

        Thanks again.

        Will

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