Kindle, ebooks and agency pricing

Is agency pricing the future for ebooks?

This is not the post I was originally going to publish today,  I was actually going to post a blog post comparing the cost of ebooks on Amazon and WHSmiths – to see what the price difference was between ebooks for the Kindle and the Sony Reader (it worked out, over 29 random books to be just under 30p more expensive for the Sony Reader btw).  But you know what?  I’m bored of posts filled with numbers, so I thought I’d fill one full of text instead!  This was mainly prompted by the following story on The Bookseller:

WH Smith has began selling Penguin and Hachette e-books at agency prices, with the retailer’s digital offer falling into line with and Apple.

The retailer had been at an impasse with Hachette since it switched to agency pricing in September. Until now, Hachette titles were removed from sale from WH Smith’s website, as well as Waterstone’s and Tesco’s digital offer. Penguin implemented agency pricing, along with HarperCollins, on 1st November, leading to their books also becoming unavailable at online retailers, with the exception of Amazon and Apple.

The agency pricing model seems set to be the standard pricing strategy for the delivery of ebooks in the future.  Under the ‘agency model’ system, publishers set the retail price for books which booksellers are then obliged to sell at.  The ramifications of this are obvious.  If publishers set the price for books, then there is no room for suppliers to offer a variable pricing strategy and one format will not be able to steal a march on any other (naming no names *ahem*).

Of course, this is not exactly good news for the consumer either.  It will prevent ebooks from being more realistically priced in comparison to their print counterparts.  That is hardly going to persuade huge swathes of people to ditch print and take up ebooks.  Handily for consumers, Amazon have made it very clear that they are completely opposed to the agency pricing model:

“We believe [the publishers] will raise prices on e-books for consumers almost across the board. For a number of reasons, we think this is a damaging approach for readers, authors, booksellers and publishers alike.

“In the UK, we will continue to fight against higher prices for e-books, and have been urging publishers considering agency not to needlessly impose price increases on consumers.”

Although, obviously, Amazon aren’t exactly in this solely to protect the consumer, oh no.  There’s the question of a monopoly to consider.  As author Charlie Stross explains:

“… customers, Amazon would like to be a monopoly (i.e. the only store in town). To suppliers, Amazon would like to be a monopsony (i.e. the only customer in town). Their goal is to profit via arbitrage, and if they can achieve those twin goals they will own everyubody’s nuts — the authors, the customers, everyone. They are, in fact, exactly the kind of middle-man operation that the internet tends to squish, gooily.”

Interestingly, he also adds:

“Just before Apple announced the iPad and the agency deal for ebooks, Amazon pre-empted by announcing an option for publishing ebooks in which they would graciously reduce their cut from 70% to 30%, “same as Apple”. From a distance this looks competitive, but the devil is in the small print; to get the 30% rate, you have to agree that Amazon is a publisher, license your rights to Amazon to publish through the Kindle platform, guarantee that you will not allow other ebook editions to sell for less than the Kindle price, and let Amazon set that price, with a ceiling of $9.99. In other words, Amazon choose how much to pay you, while using your books to undercut any possible rivals (including the paper editions you still sell). It shouldn’t surprise anyone that the major publishers don’t think very highly of this offer …”

I think this gets to the heart of the problem and is one of the reasons why I am unlikely to be converted to Kindle any time soon.  Essentially, they want to stitch up the market so that they are the sole provider of ebooks.  This would be fine in principle if they employed a format that worked across all products.  They don’t.  Instead of supporting an open format like ePUB (which doesn’t, incidentally, mandate DRM – vendors add that), they utilise only their own format which is incompatible with others (unless you push it through some conversion).  The agency model is bad news for them (as it is for the consumer of course) because it becomes a level playing field and they no longer have the advantage over Apple, Sony etc.  This means that there is starting to emerge a straight choice between AMZ and ePub.  With the latter having the added advantage of being the format that library ebooks are delivered in.

Amazon have two choices, either adopt ePub as a standard format for the Kindle, or try to fight off the inevitable leveler.  It’s interesting that, in recent weeks, they have been employing some aggressive marketing (particularly attacking Apple’s iPad – Apple being the driver behind agency pricing) – with ads all over the newspapers, billboards and regular TV spots.  Maybe they are trying to get people to buy Kindles before agency pricing is applied across the board.  Once it is widespread, it is hard to see what advantages there are to having a Kindle at all.  Interestingly, agency pricing could be a good thing for libraries….just a thought.

Of course I could add that this the agency model is regressive and flawed, but that’s another post for another time.  In the meantime, for that argument, check this post out on FutureBook.  I’ll be interested to hear people’s thoughts on what agency pricing means for ebooks, Amazon, ePub and, of course, us consumers.  Good for some and not for others?  Bad across the board? What do you think?


2 thoughts on “Kindle, ebooks and agency pricing

  1. The consumers lost. Before Apple’s agency pricing went into effect, the ebook prices were reasonable, and mostly $9.99 or below. Now, we have the ridiculous pricing of some eBooks costing more than their hard cover copies.

    The direct beneficiary of the Agency pricing were the indie authors who were suddenly more attractive to readers.

  2. If you read enough Amazon Kindle forums you’ll be amazed how many avid readers prefer low cost ebooks, especially in the free to $5 range. I think eventually the sales will force publishers to lower prices.

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