Does Random House fear agency pricing because it gives authors too much information?
Two of us didn't think that was the reason. The following is my response in connection with why Random House (at this time) appears to be avoiding Apple's Agency plan in favor of Amazon's traditional wholesaler plan which offers Amazon customers lower e-book pricing on NY Times bestsellers.
(On the other hand, there's still time for Random House to change its mind for iPad-day tomorrow morning.) Here's what I posted there in connection with why I think Random House is hesitating to sign up with Apple's iBookstore and why authors with other large publishing houses should be concerned too, no matter what their publishing houses tell them.
' It's so simple, and Random House sees it.($7 or $8.40 instead of $11)
For a $22 list price e-book (surprising how many are listed at that high a price), TRADITIONAL WHOLESALER arrangement usually gives publisher 50% of the publisher-set list price, or $11 in this case [from Amazon]. If Amazon sells the e-book at $10 Amazon takes a loss -- loss leader method.
Publisher gets more than [the $10] selling price to book-customers. It's a guarantee [of $11 for the publisher] even during special sales.
Publisher and author still get $11 regardless of what the bookstore sells the book for.
AGENCY: For a $22 e-book sold at $14 "Agent" gets 30% commission on fixed-price, or $4.20.
Publisher gets $9.80 -- less money to give to the author.
($11 goes to publisher on the wholesale plan on a [$22 list-price-book even if it's sold as a] $9.99 book, which is more likely to sell than a higher-priced one.
$9.80 goes to publisher on a $14 ebook NOT likely to sell and even if it does, there's less to give the authors.
[The publisher] gets to say the e-book is more 'valuable' -
but, as mentioned, the customer is likely NOT going to buy the $14 e-book and so the publisher/authors get even less than that.
Random House is not stupid. The examples are for the same e-book selling at (first) $10 under the wholesaler plan -- traditional -- and (second) at $14 under the new Agency plan.
That's more like best scenario for the publisher using the agency plan -- they get even less when the book price IS reduced to $10 or $12. '
(Adding for the blog)
The Big 5 publishers seem to hope people will decide to buy the hardcover books under that scenario -- more for almost the same price, on discounted hardcovers -- or at least easily pay the higher ebook price.
They're in for a big surprise if so. Below are ways to Share this post if you'd like others to see it.
-- The Send to Kindle button works well only on Firefox currently.
(Older posts have older Kindle model info. For latest models, see CURRENT KINDLES page. )
If interested, you can also follow my add'l blog-related news at Facebook and Twitter
Questions & feedback are welcome in the Comment areas (tho' spam is deleted). Thanks!