Friday, April 2, 2010

Why the Agency plan worries Random House & why authors should worry

At Teleread (a great site to keep up with daily), this question was posed.
  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.

  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. '
($7 or $8.40 instead of $11)

(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.

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  1. I don't get why the publishers won't jump at the chance at selling e-books - even at a lower price. They are guaranteed a sale -- and if the person likes the book and recommends it to friends, those are other potential sales. When e-book prices, though, exceed the used book market price, I usually opt for the lower price for that book. My purchase of the used book deprives the publisher of a sale -- and when I resell that book it further deprives the publisher of a sale. With the e-book the sales are all new...

  2. I have been following your blog for a little while because I have been thinking about a Kindle. Now I'm probably going to wait till the dust settles. The publishers ought to think about people like me and my experience with Apple's iTune store. I have bought several hundred individual songs in the past few years. These represent purchases that would not have happened without this resource. I would never buy a CD to get a song or two. The same would be true of my book purchases. I don't buy new hardbacks at list price, and I almost never buy even older hardbacks unless they are remaindered. If I had access to new books at Amazon's prices, I would buy lots more ebooks than I would ever buy actual books. And I won't buy Apple's books at the higher price, either. So the publishers loose both my book purchase and my ebook purchase.

  3. Vogt,
    I don't understand it either. They seem to think that people who have bought e-readers will want to pay for hardcover books instead or should want to pay almost as much (for an e-book) as for a hard cover book that can be re-sold or given or loaned.

    I think they are just out of touch, to their own detriment.

    You're right about recommending the book, because most of our friends don't own e-readers and they'll go to buy a paper version.

    This is especially true of book clubs.

    I don't think we can break through using reason. They'll just have to note, with time, that they're losing good money they should have accepted.

    It looks as if Random House may be able to show them what does work.

  4. Mark,
    Thanks for following the blog. I wish I had better news, but also there are really about a million+ free books available, much of it directly downloadable to the Kindle using free cellular wireless.

    Many of us are just going to pick only reasonably priced books and continue reading some of the free ones as well. There are many good mid-priced books available. Former bestsellers we haven't read yet etc. Or books from smaller publishers that get very good reviews.

    But if you're been undecided for awhile it makes sense for you to wait until the publishers get over this strange (and, to me, desperate and unwise) move toward the Angecy plan, stifling competition on the newer books.

    If there's a book you do want, you might want to write the publisher and explain what they're losing, with potential customers like you.
    Let them know know about your experience with the iTunes store too.

    Good luck on this (to all of us).

  5. I will not pay more than 9.99 for fiction. I have enough books on my Kindle to last a year or more for sure. Also, it is time I read Moby Dick et als. So, I will wait for the publishers to wake up and smell the coffee and keep books at a reasonable price. (It may take a year or more so we must hold the course.)
    Rick Askenase

  6. Rick,
    I could have written your comment, since it's 100% my own feeling. We'll also have the smaller publishers, mid-priced books that were bestsellers a couple of years ago, free books everywhere, so we could stay the course even longer :-)

  7. My own objection to the pricing as it stands is only indirectly on account of the fact that we can't sell or lend the e-books for which we pay those prices. My objection to paying those prices, is that on the supply-side, no one is even *thinking* about ensuring forward compatibility with future devices. Meaning, if we switch readers we could lose access. I bet the music industry wishes it had thought of making us all buy a new copy of each of our CD's every time we bought a new CD player.

  8. I do remember when we had beta and VHS though and how the inferior format won out (it was cheaper).

    If something happens, google can show you methods by which the DRM can be removed. In that case they should issue a method themselves.

    For now the iPad iBooks can be read on only one device -- not even the iPhone or iPod.

    But Kindle books can now be read on ipad, ipod, iPhone, Blackberry, Mac, PC, and even a Kindle :-)


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