(Image courtesy of Gizmodo)
In the continued battle over the price of e-books, Hachette has joined Macmillan and HarperCollins in adopting Apple's agency model over the existing wholesale model. (You can read their letter to agents here.) That leaves Simon & Schuster, Penguin, and Random House (not pictured) as the odd men (and women!) out.
First, I've received a few e-mails from you asking what, exactly, the agency model is. In short, it's a sales model predicated on the theory that the publisher is selling directly to consumers, and that any agent (oftentimes a retailer like Amazon) conducting a sale on the publisher's behalf is entitled to a commission on that sale (under Apple's model, roughly 30%).
The wholesale model, on the other hand, is based on the theory that the retailer is the only one selling directly to customers, so publishers are essentially out of the picture once they sell their goods to said retailer (usually at a 50% or so discount). This means that the retailer can then turn around and sell their books at pretty much whatever price they want (in Amazon's case, $9.99). Amazon lost money under this model because they were buying new e-books from publishers at roughly half the retail price ($15 or so). This was fine with Amazon, since they were selling books as loss-leaders for their Kindle devices and building significant mind and market share while doing it.
While there are some, like TechCrunch blogger Paul Carr, who believe the agency model is an anti-competitive throwback to the UK's Net Book Agreement of 1900, most believe that with publishers earning more money per sale and shelling out less in terms of overhead (printing, binding, shipping, &c), the agency model could translate into significantly higher profits for houses and, in turn, higher royalties for authors (no guarantees as yet, though).
What do you think, mes auteurs? Is the agency model the way of the future?