As some of you may have heard, Amazon and Macmillan got in a little scuffle on the playground recently over ebook pricing.
What happened?
- Apple agreed to an agency model with publishers in their iBookstore on the iPad
- Macmillan proposed an agency model to Amazon
- Amazon stopped selling Macmillan’s books in the Kindle store and their website
- HarperCollins and Hachette announced their support of an agency model
- Amazon backed down
Current Model vs. Agency—what’s the difference?
Publishers
- Current Model: set a list price and then discount that price to sell to retailers
- Agency: set the price and sell through retailers to readers
Retailers
- Current Model: buy from publishers at a discount and then set the price for the readers, discounting when the market demands
- Agency: take a commission, which is usually around 30%
Readers
- Current Model: different retailers have different prices
- Agency: see the same price for the book no matter which retailer they choose to buy from
What does it mean?
Retailers
Readers will see the same price from every retailer, so retailers are being placed on an even playing field as far as price is concerned. Retailers cannot depend on price to lead readers to choose them over their competition. What will the deciding factor be: Selection? Familiarity? Convenience? Experience? Devices?
Publishers
With the agency model comes control of the price, but that means that publishers have to, well, control the price by analyzing trends and flexing their pricing accordingly to optimize demand. Up until this point that has been the retailer’s job. Publishers do the initial profit and loss statement and come up with a list price, and the retailer takes it from there. Putting the publisher at the wheel is both an opportunity and a threat: publishers control the price and change it as quickly as they need to, but they also need to learn how to do this kind of analysis and have someone whose job it is to be on it all the time.
$9.99
As publishers flex prices and do some analysis, we’ll see if $9.99 really is the price that the market demands or if it was retailer-driven.
Expectations
As readers see prices increase above $9.99, they are also going to expect more from an ebook. Currently, a lot of ebooks are pretty sloppy with hyphenation errors, invalid characters, typos, weird line breaks, and useless front matter (this is due to a number of factors such as conversion houses, lack of quality control, print-first workflow…but that’s a different post entirely). As publishers ask readers to pay more, readers are going to expect publishers to give them more. Poor quality ebooks won’t cut it.
The Round-up
- Mike Shatzkin’s overview of the Macmillan and Amazon situation and his thoughts on how Apple going with an agency model could change the industry
- Michael Tamblyn looks at pricing and the agency model on the Kobo blog
- Kassia Krozser talks about what the agency model means for everyone involved on the Booksquare blog
- Liza Daly posts her slides from Digital Book World about improving the quality of ebooks
- The official Amazon statement from a Kindle Community discussion
- The official Macmillan statement that ran as a paid advertisement in Publishers Lunch
