Wednesday, March 2, 2011

The Agency Six

In case you haven't heard, mes auteurs, the last Big Six holdout on the agency model—Random House—has capitulated. Effective this month, their e-books are now being sold under the new pricing system.

What does this mean for you, gentle readers?

As Consumers

It means two major things: one, you'll likely be able to purchase Random House's titles directly from the iBookstore, and not exclusively through a third-party app like the one Amazon has for the Kindle; and two, you may be paying slightly more for your e-books.

As you may recall from my earlier post on the subject, the agency model treats the retailer as a middleman making a commission, not as a vendor setting his or her own price after purchasing goods wholesale. This means that rather than buying an e-book from the publisher at a predetermined discount and selling it to you at however low a price they want, retailers must now sell Random House's e-books at the publisher's price, keeping a 30% cut for themselves and sending the remainder to the publisher.

Many have speculated that this move is likely fueled by Apple's unveiling of the long-awaited iPad 2 (you can follow the event live here). If this is the case (and I don't know if it is, since the involved parties aren't commenting to the media), it would seem to betoken a certain amount of faith in Apple's business model.

As Authors

Again, this is pure speculation, but I imagine e-book royalties may be affected by this move. And not just for those of you with Random House book deals: now that the world's largest trade book publisher has signed off on the agency model, I imagine a slew of smaller publishers will follow suit. If any of you, gentle readers, know more about this than I do, please feel free to educate me/your fellow readers in the comments.

I'm also curious to see how this vote of confidence in the Apple program influences iBookstore sales. Should Apple eventually sport e-sales figures on par with those of Amazon, I think the increased competition could speed up the shift toward market parity (that is, equal dollar sales of physical and electronic books). My current guess is that 2011 will see e-books top 10% of the overall market, and that 50% of the market will comprise electronic books by the middle of 2014.

Finally, I imagine Amazon is unhappy about this, since it seriously undercuts their ability to set prices in the industry. However, they, too have not officially commented (as far as I know).

What do you think, mes auteurs? And more importantly—are you getting a second generation iPad?


  1. This is insane. Ten years ago we'd have laughed at the idea... But the industry is certainly not the same as it was 10 yrs ago.

    You knew it was only a question of time before Random House jumped on board.

  2. No on the iPad (happy with my NOOKcolor). When my first books were published with a major e-publisher, the only place you could get them was via the publisher's site. When they decided to expand to Amazon, the pricing was suddenly out of the publisher's control. (IMHO, not a bad thing at the time, because the publisher set a ridiculously high price which Amazon dropped to $9.99)

    As a reader, I draw the line at anything over mass market paperback prices for my e-books. As an author, I sell my back list books for $2.99 and am content with the royalty percentage there.

    Terry's Place
    Romance with a Twist--of Mystery

  3. and two, you may be waiting for the price to drop before you buy your e-books.

    Fixed that for you.

    Finally, I imagine Amazon is unhappy about this, since it seriously undercuts their ability to set prices in the industry.

    I still contend Amazon already won that battle. I won't buy an ebook priced over $9.99.

  4. I agree with Joseph--for me, the price point is set. I won't buy an ebook over $9.99. In exchange for a lower price, I'm giving up the ability to resell the book or loan the book to a friend, or even be able to use the book if I move to a different reading device. The fact that in some cases I could pay MORE for this than a paperback is ridiculous.

    (I know Amazon has that ability to loan a book, but: a) not all my friends have Kindles; and b) 14 days is not long enough for people with kids, jobs, etc. to get through a long book, I don't think.)

    I've prepared a Kindle book, and it's not hard. Publishers can take the file that's ready for print, upload it, and that's really all there is too it. (Although the seem to mess it up quite a bit still.) There's no extra work they are doing to make it available, and no extra cost to them to make it available. It's just them charging 5 bucks more. And I'm just guessing, but I'm sure find a reason they should keep that and not give any to the authors ....

  5. Hi Jason,

    There's currently a lot of extra effort expended in the conversion of backlist titles and the creation of e-ready files from the MSS received from authors.

    I agree with you that in the next couple of years file conversion won't produce much overhead, but at the moment there is extra time and money involved in producing e-books.

    Thanks for reading,


  6. Re. iPad 2: I may have to bite on the new 'shiny'. It's so pretty!

    As for RH and the agency model in general: Awesome, this is exactly what we need! Even more outlandish eBook pricing from the big publishers! $10-14 is such a great price for something that I can't touch, loan to a friend, sell used, put on a shelf or have autographed. THANKS RH! *SARCASM*

    Can someone, ANYONE, send a memo to corporate publishing detailing what the average consumer is willing to pay to own air? I'm sure James Patterson could give a rip, but what about the poor new authors? Are people really willing to shell out $10 for an unknown's eBook? Doesn't seem likely ...

  7. I guess we just hope that the publishers realize what people are willing to pay for an e-book and price them accordingly. Market forces should win out, but I fear that e-books don't dominate a big enough percentage of the market yet for publishers to really notice if people aren't buying them because of high prices.

  8. I think the reason behind the RH switch is pretty clear. In June Apple will pull the plug on any iPad app that doesn't offer its wares for sale in the app itself & give Apple a 30% cut. And retailers can't charge more for their content when it's sold via the iPad app, so in effect they probably can't make any money. Which means, very likely, that the Kindle app and the B&N app will disappear from the iPad. Random House wants to be in iBooks because it will soon be the only ebook app that runs on the iPad, and there are millions of iPads out there.

  9. What karen-w-newton said.

    The "certain amount of faith in Apple's business model" is the knowledge that come July 1, iPad, iPhone, and iPod Touch owners will have to buy their e-books from the iBookstore, not from Amazon, B&N, Borders, Kobo, or wherever. That's a fairly large captive customer base, and Random House probably didn't want to be left out.

    Given that RH would have to convert to Agency Model prior to July 1, converting prior to the iPad 2 announcement seems eminently sensible.

  10. @Jason: It's not been my experience that there is no work getting an MS ready for Kindle. I'm in the process of getting my reverted backlist in eFormat. In fact, it's been a LOT of work much of which I ended up outsourcing since I need to spend my time writing my contracted books. In fact, there are something like 10 different file formats and if you want a CLEAN reading experience, each of those formats need some massaging.

    My guess is that publishers don't yet have the right people with the right skill-sets and there's some painful experience being gained.

    As a reader, I agree. Amazon has already won the price point war. Publishers don't seem to be aware of just how angry avid readers -- and it's the avid readers who buy the most books -- are about these pricing decisions. I won't buy an eBook for the same price as the paper version.

    As an author, I'm looking at some pretty brisk Amz sales of the backlist title I have out for Kindle. With a 70% royalty I'm wondering if there's anyway I can retain the digital rights for my future sales. In less than 2 weeks I've recouped my initial costs.

    I have an iPad, love it, but am lusting after the 2nd gen version.