E-books and the Agency Argument

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by Annette Green

Sometimes it seems to me that the thing publishing does best of all is to get itself into a terrible mess. New technologies always bring with them significant challenges to accepted custom and practice. For years the music industry has spectacularly failed to control the development of the digital media, which, at different times, it tried to ignore, to outlaw, to appropriate and to exploit. Many commentators believe the record companies have come to embrace it too late and will never now catch up with its onward march.

Book publishing hasn’t really gone about meeting its own digital challenges any better. For years the e-book was talked about, often as something that would never materialise and, if it did, would never take off. But even then, publishers were concerned enough to make sure that contractual provisions were made at least acknowledging possible future digital formats and establishing the terms for future negotiations.

When e-books became a reality the sheer size of the task of digitizing written content meant that the marketplace filled at a trickle rather than in a flood, meaning that the brave new world had very few books in it for a while. Not an auspicious launch.

But something else that immediately struck me as wrong was the pricing. Those early e-books were being put on sale at the same price as the paper versions. Why would people pay the same for a virtual book, with none of the graphic design, physical presence, production and distribution costs accepted as part of the printed kind? I always thought that in those early days e-books should have been given away as an add-on to the printed book. That would have made readers feel they were getting something extra as well as ensuring the new format received very wide exposure very quickly.

Still, eventually e-books sales did start to grow as the technology and the gadgets became more attractive. Price parity continued, but since the price restrictions of the Net Book Agreement had long been abandoned, that parity was possible at heavily discounted levels. With some books regularly selling for less than half price, bestsellers became a bargain, and if the download was just as cheap this seemed to solve the pricing issue.

Personally I’ve always thought it madness to discount new lines – the only other creative industry that does it is the music business, and look what a mess they’re in. However, the discounting is here to stay. We must live with it. Or must we?

In what seems to me a stupendously ill-judged attempt to revive the ghost of the Net Book Agreement, several major publishers have announced their adoption of the agency model of selling e-books. Online retailers will no longer participate as wholesalers, buying at discount and selling at whatever price suits their margins. Now the price will be set by the publishers and the retailers will simply take an agreed percentage commission for generating the sale.

But the Net Book Agreement worked because it applied universally. You couldn’t go somewhere else to get a book cheaper. Under the agency model we have the absurdity of Stephen Fry’s new book selling on Amazon at £10.04 in paperback while the Kindle version is £12.99. If you visit other retailers you find even bigger discrepancies. Howard Jacobson’s Man Booker winner is £10.03 in hardback on Amazon, but £13.28 as an ebook at waterstones. Ken Follett’s new novel sees the same split: £10.00 hardback, £14.00 download. Just have a browse – you’ll find loads of examples.

A statement from Amazon UK discussing its US experience says “when prices went up on agency-priced books, sales immediately shifted away from agency publishers and towards the rest of our store”. If there’s any truth in this it can’t be good for publishing.

And if the agency model spreads it risks two serious outcomes: the first will be the undermining of the whole, legitimate digital publishing market; the second, as a consequence, and more serious, is the open invitation to piracy. We have to learn the lessons of the music business. Digital technology doesn’t simply affect the way we buy and the way we read. It must also affect the way we sell.

Photo credit: Pierre Tourigny ( Colour additon to still )


Jane Makuch said...

Very good article. I agree we do need to view the recent history with the music industry and try to learn.

So many of us still have "blinders" on to the significance of decisions to be made in just the next several months that will possible effect the publishing industry forever.

Unknown said...

This doesn't seem to be a condemnation of the agency model, rather of publisher's ineptitude in implementing it. They could drop their e-book prices to stay in line with the physical books, the problem is that they don't.

I'm not sure the concern over different formats and channels having different pricing makes sense anyway. We've always had one channel that offers a nearly identical experience for free: the library. And publishing has survived, even prospered, despite (or perhaps in part because of) that distribution channel.

Alan J. Zell said...

Annette, Using distributors as order takers rather than their having inventory is not new. This is just a different version of drop-ship merchandising used by most catalogues, on-line shopping shows, home office gift business and, evem, the system of "locker stock" offered by manufacturers. In each instance, the seller is given a commission for passing the order onto the vendor for deliver. Oh, btw, many auto companies do a variation of this.

Since the ownership is still in the hands of the vendor, they control the price.

For the distributor it can be more profitable that carrying inventory so they do not need the normal markup. I'd venture to say that they would still make money with half the markup they needed f they carried inventory.

So, yes, it changes the traditional channel of distibution the publishing industry has lived with for years. But, it will not drive them out of business, it will just mean they have to adapt to the times.

Spellbinder said...

Ah-hem. Excuse me, anybody thought about the writer?
Authors normally get a very small slice of the cake, typically pence per book. E-books without their production and distribution costs leave more left over from the margin. It's all very well to discuss whether the Agent, Publisher or anybody else gets the money but perhaps its time for writers to get a fairer share of the spoils. Without them, there would be no books or margin to squabble over.

Anonymous said...

I'm no fan of the Agency Model (my own indie house doesn't use it), but do remember that Agency 5 does not allow the discounting of ebooks, whereas hardback and paperback versions of a title can still be discounted at the whim of a store to way, way below a publisher's Recommended Retail Price for the treebook editions.

It must cross the mind that heavy slashing of treebook cover price, often on release, to loss-leader level might well be the stores' way of hitting back at publishers who opted for the agency model by using apparent pricing anomalies as a means of discrediting Agency 5 ebook cover pricing.

Best wishes. Neil Marr

Library Web said...

This article basically says the music industry should teach e-books a lesson. They charged full album prices for an mp3 download, and what they get is everyone pirates and they have to promptly run after them. If they charged the cost of the product, around £1, people would buy and not pirate. Is the same about to happen to e-books.

Would cheap albums cheapen music?

Paul Brindley said...

Looking at this situation from a background in the digital side of the music industry I couldn't agree more. The idea of eBooks being the same price or more expensive than the physical versions is clearly nonsensical.

After years of doing consumer research in music it simply doesn't matter whatever you try to offer the consumer as added value extras, the equation is simple in the consumer's mind- digital should be cheaper than physical.

But you shouldn't despair. The book industry has many advantages over music. Arguably the music industry has suffered just as much if not more damage from digital's ability to enable cherry picking of tracks rather than forcing people to buy albums. So you have seen the average digital transaction become dramatically less than average physical purchases. The vast majority of digital purchases are single tracks where the vast majority of physical products bought were and are still albums. For publishing the ability to access single chapters is clearly promotional and not damaging in the slightest.

What's more piracy is far less serious a threat in publishing where the consumption environment is already being dominated by devices like the kindle which are so clearly integrated to a legal store. iTunes was a relative latecomer in the growth of the digital music scene.

The other advantage you have is a greater familiarity with the idea of subscription within the publishing world. It's not a far cry from subscribing to a magazine or a Reader's Digest type service to subscribing to an audio or ebook service. Subscription for music consumers is a lot less familiar but it really is the main hope for the music industry moving forward.

If the publishing industry is to move on it too needs to embrace digital, use it as the fantastic promotional medium it is and start finding new business models beyond a la carte.