gift card.jpgAs most ebookers know, the big 5 publishers, conspiring with the consumer’s “best friend” Apple, have instituted the agency pricing model — they now set the selling price to which all retailers must adhere. Why did they jump at this pricing scheme? Because they thought their ebooks were being devalued when they were sold at $9.99. I wonder what the big 5 think now.

So, how do you buy agencied books at a discount? U.S. Sony users have the answer this week: buy $25 Sony eBookstore Gift Cards at Target stores for $15 — a 40% discount. How does this thwart agency pricing? Well, if the agencied ebook price is $14.99 at every ebookstore, using the Sony Bookstore Gift Card reduces the effective price to $9.00 — even less than the dreaded $9.99.

I don’t know who is absorbing the loss on the gift card, whether it is Sony, Target, or a combination of the two, but I do know that the deal is great for anyone whose ebook reading device can handle ePub with the Adobe DRM, which is most devices. I bought 10 of the gift cards and am thinking of buying another 10 before the end of the sale.If this works as well as I think it will, Sony should see a significant increase in sales. I know it will see a significant increase in purchases made by me. A 40% discount is mighty enticing, especially when it is on any ebook, not just New York Times bestsellers that I don’t read. But more importantly, this could turn into a wave of me-toos from other ebooksellers.

How can they get away with this? Well, I admit I’m just speculating, but here are my thoughts. First, the agency publishers cannot control the price that an independent retailer like Target can sell a gift card for; similarly, they can’t control the price that Amazon can discount gift cards.

Second, gift cards represent cash — unspent cash. So a $25 gift card, whether it cost $5 or $50 to buy, was bought with cash and represents $25 cash and can be used to purchase $25 worth of goods. State and federal regulations govern this.

Third, the ebooks are being sold at the agency price; they are not being discounted. When the ebooker buys that $14.99 agency priced ebook, $14.99 is deducted from the $25 credit that the gift card represents. The agency publishers have nothing to complain about and no agreements (to the extent I have knowledge of them, which is to the extent of what I read in the press) are violated.

So who wins with the discount gift cards? The gift card ebookstore who gets my money in advance and who now knows that I will buy at least $X worth of ebooks from it because the gift cards aren’t usable elsewhere. Plus I am now encouraged to look at, in this instance, the Sony Bookstore whereas before I only occasionally looked for a book there. In addition, because people who own ereading devices other than Sony but that are ePub-with-Adobe-DRM capable can also buy books at the Sony Bookstore, Sony gains access to more ebookers.

The gift card seller (i.e., in my case Target) who lured me into its store, a store I rarely go to, to buy the gift cards and hopefully something else.

eBook authors and publishers because I have now committed to buying ebooks that I would not otherwise have bought. The Sony gift cards I bought are not redeemable for anything but ebooks at the Sony Bookstore.

With only the Sony Bookstore gift cards currently available at such a discount, ePub and Adobe are winners, too, because devices that aren’t hampered by being unable to read (without stripping DRM, which most ebookers either cannot or will not do) ebooks in ePub with Adobe DRM can make use of these gift cards — that’s a lot of ebookers.

And me, the ebooker, who is able to buy ebooks at a discount. In this case, I am the big winner because a 40% discount is a bigger discount on an ebook than usually offered once you look past the New York Times bestsellers.

The only losers today are the international ebookers who live outside the United States who do not have access to the gift cards; they need to be bought in person at Target. But this might be the first breath of wind in a brewing storm where the ebookstores begin competing by discounting gift cards. Will Amazon and Barnes & Noble join the fray?

Editor’s Note: Rich Adin is an editor and owner of Freelance Editorial Services, a provider of editorial and production services to publishers and authors. This is reprinted, with permission, from his An American Editor blog. PB

5 COMMENTS

  1. Ultimately, this is a very, very good thing. Its not good for a market to prevent retailers from competing on price. I suspect Amazon to follow suit fairly quickly, and perhaps fictionwise will start increasing their micropay rebates. Apple, as the instigator of Agency pricing might be more reluctant to go along with this.

    Still, let the games begin 🙂

  2. “Third, the ebooks are being sold at the agency price; they are not being discounted. When the ebooker buys that $14.99 agency priced ebook, $14.99 is deducted from the $25 credit that the gift card represents. The agency publishers have nothing to complain about and no agreements (to the extent I have knowledge of them, which is to the extent of what I read in the press) are violated.”

    Yes, I think this is the crucial part: that perceived cover price for the ebook. It still tells you, ‘This ebook is worth $14.99, not $9.00.’

    Perception was everything with the big 5 — some of them admitted that they would be getting less revenue on an agency $14.99 book than on an Amazon-subsidized $9.99 book.

    I wonder if this sort of end-around will become common. and I wonder if similar workarounds will arise like, say, a book club with monthly fees but discounted prices (by giving you ‘bonus dollars’ to spend each month on full-list-price agency-model ebooks).

    — asotir

  3. From a publisher perspective, this is GREAT. The publisher gets full pay, the customer gets a discount, and the list price isn’t diluted. Perhaps it also says something about retailers getting too big a cut of the action–a 40% discount sounds like Target has to be losing money.

    Rob Preece
    Publisher

  4. As a bookseller, 40% is roughly the discount booksellers receive from publishers. I suspect Target and Sony are using the gift cards as “loss leaders” to garner new and loyal customers, which is fine. That’s how it’s done, much to the chagrin of us independents. Agency pricing doesn’t restrict what we price our books to customers. It’s the price you see on book covers, but we can discount prices if we choose. I’m upgrading my site to add e-books and will probably offer an ongoing 25% discount.

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