Rushing for the Agency Model

by Adam on April 1, 2010

Today marks the first day that the Agency Five will begin selling books through retailers via the agency model (or at least for most, that’s the case…some don’t make the switch until April 3). This represents a day of great change for publishers, but underneath what appears to be a huge win for ebook sales revenue to larger houses is an issue that lies at the center of problems in the industry.

Yesterday’s PW Daily covered it in an article “Agency Model Means No Discounts, Higher Prices, Possible Disruptions” – the thought that this new model presents larger issues for retailers…for publishers, these complaints fall on deaf ears.

I can’t help but think this is a case of publishing hypocrisy – the pot calling the kettle black, if you will. Think back just recently to the Author’s Guild’s claim that authors should demand from their publishers a 50/50 split on ebook royalties…anyone on the inside realizes this would be the death of publishing (or at least the end of what profitability we have). And it’s naive and dangerous for the AG to try to assume it knows how to run our businesses, such that they can tell us what we should be paying authors.

Now put yourself in the retailers shoes. I’m not saying a 60% discount on the print list price is justified, but doesn’t it feel a bit like the agency model is being shoved down some companies’ throats? Kobo is one example of a bystander that didn’t need to take a hit in this situation – they’ve been offering affordable, effective conversion to publishing housing and have been doing it well enough to get along. So publishers now have to demand that they take a smaller share of profits because that’s just where the industry is going?

If this is where the iPad has gotten us then we’re in a bit of a mess (although the greedy publisher in me wants to think otherwise). There’s two reasons: 1) Apple doesn’t need eBook revenues to survive, so while 30% of sales is just additional benefit to them, for other retailers it’s the lifeblood for future success, such that many may fall away in the coming years (keep in mind though that Apple has done a great job of homogenizing the revenue split gene pool); and 2) smaller publishers are going to be locked out of the iPad unless something changes. Apple wants to have the most competitive revenue split with its partners, but there’s no way a smaller publisher will get other retail outlets to agree to a 30% share of the sales…

Not a good place for us to be and publishers should be a bit smarter about chasing dollars after all they’ve already been through trying to get authors on-board in the digital world…

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