Agency Model
Discussion on yesterday's post has been fun -- I need to go reply -- and thus I wanted to follow up just a little bit with some thoughts on the currently-under-fire agency model. To begin: writer buddy Max Gladstone (you can preorder his book here) confirmed that ebook royalty percentage is higher, but that doesn't mean that the royalty payout is higher; there's much complicated math involved in that equation (as the series of emails in our thread has shown). That thread led me to cite a figure jeff_duntemann has offered before (once here in the comments on my blog) -- he estimates that ebooks cost half as much to produce as print books, and thus should cost consumers half as much. Based on the figures my writer friend was throwing out there, I wonder if this is truer for smaller publishers: big publishers have a lot more overhead, just by nature of having much larger staffing, needing a greater number of people supporting that staff, warehousing, etc., etc. Looking for Jeff's breakdown (which I did not find -- Jeff, if you're reading this and you've done a breakdown, we'd love to see it!), I stumbled on a few more recent entries of Jeff's defending the Agency Model.
You may have noticed that I've not had much to say in favor of the Agency Model, so that Jeff -- who has a better grasp of how the industry works than almost anyone I know -- was supporting it made me stop and take a look at his points. And here's what I discovered: I have been looking at the Agency Model issue first as a consumer, and second from the perspective of an e-book only retailer. As a consumer, it may not be super convenient for me to have to go poking around for different prices at different places, but if I bargain shop at several stores, I know I'm getting the best deal. I used to do that a lot pre-Agency Model. When the Agency Model came on the scene, I largely stopped shopping at Books on Board and Kobo Books, because most of the titles I'd been buying from them were now on the Agency Model, so I might as well buy them from Barnes and Noble and get them delivered wirelessly to my nook.
(I still shop at DriveThru Fiction, where my own books are sold, for a different niche of books. Fictionwise, Smashwords, and Bookview Cafe still had the kind of self-published stuff -- usually short stories or backlist titles from writers I knew had content there -- that they remained worth checking, but for different content than I'd purchase at B&N anyway.)
So, the Agency model drove me away from non-chain e-book retailers on the Web. It made it impossible for me to use coupons or to receive incentives from retailers -- something I've become accustomed to as a book buyer even at indie bricks and mortar stores over the years. Customer loyalty initiatives no longer worked for e-books for a large enough percentage of what I was buying that I quit shopping around.
Worse yet, the Agency Model didn't actually seem good for the publishers! My writer buddy reminded me of this post from Nathan Bransford from back in March 2011 about how Agency pricing works, which shows that publishers often make less money on Agency Model books. So it was looking to me like this: the consumer loses because the prices are higher and they get no incentives. The indie e-book retailers lose, because customers like me stop bothering to shop there. The publishers lose because they make less money per sale.
But hold the phone. Jeff (whose latest book, published by his publishing house, you can buy here) points out that the big publishers make less money per sale. Once you take out some of the risk factors (like print run size), publishers that publish e-books, either exclusively or as the majority of their business, have an incredible opportunity with the Agency Model. He writes: "An online ebook store’s capacity is essentially unlimited, and any number of publishers can play. If there are a million publishers and 999,900 of them sell products at lower prices than you do, your control of pricing is less than it was in the era when it was tough to get your books into stores and a relatively few large publishers dominated the market."
Scott Turow laments the potential loss of the Agency Model for its probable impact on bricks and mortar bookstores -- and it turns out that places like Barnes and Noble have done really well under the Agency Model, so even my preferred chain will be impacted if the DoJ does win the suit against Apple, Macmillan, and Penguin. So there are additional factors I'd not been considering in my previous assessment of the Agency Model.
As for now, however, I'm back to shopping around for good prices on ebooks. If you have a favorite indie ebook etailer I haven't mentioned already, I'm always up for a new place to price check!
You may have noticed that I've not had much to say in favor of the Agency Model, so that Jeff -- who has a better grasp of how the industry works than almost anyone I know -- was supporting it made me stop and take a look at his points. And here's what I discovered: I have been looking at the Agency Model issue first as a consumer, and second from the perspective of an e-book only retailer. As a consumer, it may not be super convenient for me to have to go poking around for different prices at different places, but if I bargain shop at several stores, I know I'm getting the best deal. I used to do that a lot pre-Agency Model. When the Agency Model came on the scene, I largely stopped shopping at Books on Board and Kobo Books, because most of the titles I'd been buying from them were now on the Agency Model, so I might as well buy them from Barnes and Noble and get them delivered wirelessly to my nook.
(I still shop at DriveThru Fiction, where my own books are sold, for a different niche of books. Fictionwise, Smashwords, and Bookview Cafe still had the kind of self-published stuff -- usually short stories or backlist titles from writers I knew had content there -- that they remained worth checking, but for different content than I'd purchase at B&N anyway.)
So, the Agency model drove me away from non-chain e-book retailers on the Web. It made it impossible for me to use coupons or to receive incentives from retailers -- something I've become accustomed to as a book buyer even at indie bricks and mortar stores over the years. Customer loyalty initiatives no longer worked for e-books for a large enough percentage of what I was buying that I quit shopping around.
Worse yet, the Agency Model didn't actually seem good for the publishers! My writer buddy reminded me of this post from Nathan Bransford from back in March 2011 about how Agency pricing works, which shows that publishers often make less money on Agency Model books. So it was looking to me like this: the consumer loses because the prices are higher and they get no incentives. The indie e-book retailers lose, because customers like me stop bothering to shop there. The publishers lose because they make less money per sale.
But hold the phone. Jeff (whose latest book, published by his publishing house, you can buy here) points out that the big publishers make less money per sale. Once you take out some of the risk factors (like print run size), publishers that publish e-books, either exclusively or as the majority of their business, have an incredible opportunity with the Agency Model. He writes: "An online ebook store’s capacity is essentially unlimited, and any number of publishers can play. If there are a million publishers and 999,900 of them sell products at lower prices than you do, your control of pricing is less than it was in the era when it was tough to get your books into stores and a relatively few large publishers dominated the market."
Scott Turow laments the potential loss of the Agency Model for its probable impact on bricks and mortar bookstores -- and it turns out that places like Barnes and Noble have done really well under the Agency Model, so even my preferred chain will be impacted if the DoJ does win the suit against Apple, Macmillan, and Penguin. So there are additional factors I'd not been considering in my previous assessment of the Agency Model.
As for now, however, I'm back to shopping around for good prices on ebooks. If you have a favorite indie ebook etailer I haven't mentioned already, I'm always up for a new place to price check!