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It used to be the Agency 5, now it’s the Agency 6 as Random House has caved and instituted agency pricing. This further changes my book-buying habits.

Let me start by saying that I am not outright opposed to the agency system. What I am opposed to — and appalled by — is the pricing. Granted that Agency 6 pricing clearly demonstrates lack of competition bordering on price collusion (Isn’t it amazing how similar the Agency 6 ebook pricing is across the board?), but that isn’t the primary problem I have: The primary problem is that the selected price points are extortionate considering the restrictions imposed in the license (and note that it is a changeable, revocable license). Compound this with Rupert Murdoch’s greedy ploy, through his HarperCollins subsidiary, aimed at libraries, the last bastion for education of the poor, and what you have is a devil’s cabal.

(In an interesting aside, Murdoch’s Fox News has been denied access to Canadian TV because of its lack of impartiality. See Regulators Reject Proposal That Would Bring Fox-Style News to Canada. Maybe that is why he feels he needs to bleed American libraries — to make up for lost revenues and bias outlets.)

In the past I have spent significant sums of money building both my hardcover library and my cache of ebooks. It wasn’t so long ago that I could be counted on to spend $5,000 or more in a year on such purchases. The Agency 5 put a big dent in that spending. I felt compelled — if not honor bound — not to buy books, p- or ebooks, published by the Agency 5 (except where necessary because I already had several volumes in an ongoing series). So I focused my purchases on self-published, indie presses, academic presses, and Random House books. The consequence was that my expenditures on new releases dropped by more than 50% last year.

With Random House now part of the Agency cabal, my habits will shift yet again. If I want a new release in hardcover, I will wait to buy it on the remainder or the used book market, when I know that neither one of the Agency 6 nor their author will receive any compensation. But my ebook buying will (and has been) change even more dramatically.

A good example of the change occurred yesterday. Yesterday, the long-awaited second volume in Patrick Rothfuss’ Kingkiller Chronicles (the first volume was The Name of the Wind; the second volume is The Wise Man’s Fear) was released. My previous practice was to buy both the hardcover and the ebook versions; not this time, however. This time I bought just the hardcover because of the agency pricing (the ebook is virtually the same price as the hardcover and no ebookseller can sell it for a price lower than $14.99, which is exorbitant).

That is but one example. Increasingly, I am only “buying” free ebooks and ebooks that cost $2.99 or less, and those I am buying from Smashwords. The reason I buy from Smashwords is that most authors let you sample their work before you buy, some offering up to 75% of the ebook as a free sample. I admit that in the case of the free ebooks I don’t sample them, I simply download those that seem interesting, but for those that do cost some money, I generally read a portion of the sample before buying.

At Smashwords I discovered several self-publishing authors whose works are excellent. Granted they do not have the cachet of a Stephen King, J.D. Robb, or Robin Hobb, but they do know how to write a compelling story. A good example is Safina Desforges’ Sugar & Spice, a 99¢ mystery/thriller that compares well to any P.D. James novel.

The point is that the setting of exorbitant pricing by the Agency 6 has compelled me to look elsewhere for book purchases. Money that I previously spent supporting the traditional publishers is now going elsewhere — and it is costing me less yet giving me comparable enjoyment.

Yet there is one more thing that has to be said about the agency system. Currently, it is limited to ebooks. But that doesn’t make a lot of sense to me over the long run.

Under the more traditional wholesale system, the publisher sets a retail price for a book and the bookseller pays to the publisher approximately 50% of that wholesale price for each copy sold, regardless of the price that the consumer pays. (Yes, there are more wrinkles in the system, but I’m simplifying it for this discussion.) This is how it started with ebooks. The excuse for going to the agency system where the publisher sets the retail price below which no ebook can be sold and which pays the bookseller a fee for each sale was that low ebook pricing devalued the book and its content.

If that is a valid and sustainable argument, how does low pricing of the hardcover not devalue the book and its contents, too? Logically, there can be no difference. After all, a book is bought for its content, not for its package, and supposedly the content of the p- and ebooks are identical.

What this means to me is that we are the road to a major shakeup in the book industry. I think the agency system is only beginning with ebooks and will either have to be abandoned for ebooks or spread to pbooks. Although agency pricing has not been a big win so far, spreading it to pbooks could solve a major problem for publishers — the problem of returns, which would also solve the problem of excessive book print runs and remainders, and minimize the secondary market.

With the Agency 6 controlling more than half the publishing market overall and probably 75% or greater of the nonfiction market, the path they take could well become — and quickly — the path that smaller publishers take. The bulwark against the spread of agency pricing is the self-publishing market, but that market has to find ways of uniformly increasing its standards before it will supplant the traditional publishers.

In the end, it is clear that the Agency 6 lack common sense. At the same time that one or more of the Agency 6 publishers expects ebooks to grow to as much as 20% of all book sales in 2011, they try to thwart the one avenue of growth by imposing extortionate prices and limiting competition. Simultaneously, they allow the wholesale model to continue for pbooks, thereby devaluing their product and its content. Some day they will get it together; unfortunately, when that day comes, I expect it will not be to the consumer’s advantage.

In the meantime, I’ve changed my buying habits significantly and may well represent an unrecoverable customer loss for the Agency 6.

Via Rich Adin’s An American Editor blog

17 COMMENTS

  1. I agree with much of what you say, Rich. The problem I have with the agency pricing is not the idea that publishers can set a price, it’s the no discounts allowed thing—which leads to the customer being totally fleeced because the pbook CAN be discounted. So this is when you get the decades-old pbook for $6.99 and the ebook for more than double, for example 🙂 All it does is generate ill will from customers who otherwise would have been very happy.

    And it does make me seek out other sources. I spent about $1000 a year on ebooks, previously. This year? Less than $50 so far. I know publishers think every book is important, but for most readers, it is not so. There are maybe two authors whose books are must-read for me (JD Robb is one of them, and hers go down to $9.99 as soon as they hit the best-seller list, so I am okay with that). There a handful of others whose work I generally enjoy but wait and see on (I am passing on the new Jodi Picoult because the subject matter doesn’t interest me, but I’d grab it for free if the library gets it). And then there is a vast majority of other authors I could take or leave. If you price me out of their audience, I will not feel a keen loss and will happily read something different. I suspect most readers are like me. They have a few authors they like, and then the rest of what they read is just what’s around that looks interesting.

  2. Smashwords has moved on to the agency system as well. As you say it is the pricing of the Big 6 that is the problem. Have a bet riding that sometime this year a serious move will be made by one of them to gain market share via lowering prices.

  3. I find this obsession with price by publisher bizarre. I do not buy books by publisher — I buy by author and title. Telling me not to buy HarperCollins but only at Smashwords completely misses the point of why I read: for the specific content, not for the cover price.

    As long as authors in demand publish through the Agency 6 I will be buying Agency 6 titles … so long as the price remains attractive. With so much to read, I may buy fewer new books, and buy more backlist titles. But I certainly won’t stop reading the authors I enjoy.

    And, if you want samples, get a Kindle. Amazon delivers good sized sample of every ebook title for free directly to your ereader.

  4. The ones who really end up hurting in this are the authors.

    As a publisher, if MacMillan go bankrupt tomorrow, I really doubt John Sargent is going to be lining up to collect welfare – more likely he’ll get a massive payout as a “performance bonus” for helping drive the company into the ground.

    As a reader, I have plenty of alternatives to absurdly over-priced, geographically-restricted, DRM-crippled books from the Agency Six, including getting sources for clean, DRM-free copies of those same books accessible from anywhere in the world (got a copy of The Wise Man’s Fear sitting on my Kindle right now, in fact. I feel no particular shame about this – even if I were willing to pay $15 for it (I”m not), nobody’s willing to sell me a copy).

    As a writer, Patrick Rothfuss gets…nothing from his publisher, who are doing their best to cripple his career, and nothing from his reader, who couldn’t buy a copy of his book even if he were willing to pay the inflated price.

  5. Joanna wrote “The problem I have with the agency pricing is not the idea that publishers can set a price, it’s the no discounts allowed thing”

    That’s the trouble with Price Fixing Monopolies. No freedom for retailers. No responsiveness to local markets. No freedom for market forces.

    Time for Indies to make more and more noise about their titles and their prices !

  6. Peter points out the real source of the piracy problem, unavailability of a book at any price. I’ve seen comments from many very frustrated people in other countries who are instant sales for the books they’re looking for, but have no way to buy them legitimately. Those are the people who will pirate. Most people take the easy route if a book is available, OneClick purchasing from Amazon for example.

    As for me, I never really noticed the publisher until the agency model came out last year. I just won’t pay those prices to lease an ebook that I can’t lend (no, lending once for 2 weeks doesn’t count), sell, or give away. It doesn’t have as much value and it shouldn’t cost as much as a physical book. Now that Random House has joined the club, I won’t be buying their books either. Half of my wishlist went up in price yesterday and I won’t pay premium new book prices for books that are over 10 years old. Those are now lost sales.

    The silver lining are the indie authors and authors who self-publish their backlists when they get their rights back. I get good quality enjoyable stories for an affordable price and the author gets as much or more than using a traditional publisher. Doesn’t anyone see a problem with books that retail for $15 – $30 providing only $2 to the author? A $2.99 ebook cuts out the middle man, provides the author with a reasonable income, provides an affordable reading experience for the reader, and creates a real relationship between author and reader.

    Maybe as more authors see Amanda Hocking’s success and control over her career, they will start abandoning the traditional publisher ship. We can only hope.

  7. “Granted that Agency 6 pricing clearly demonstrates lack of competition bordering on price collusion…”

    Sellers declaring the same price for equivalent items is no more “price collusion” than two neighboring grocery stores charging the same price for a twelve-pack of Diet Coke. They set the same price because that’s the market price. It’s not like they’re all meeting on some secret volcanic island where they all agree to charge $14.99 and anyone who disagrees gets fed to the Laser Sharks.

    “If that is a valid and sustainable argument, how does low pricing of the hardcover not devalue the book and its contents, too? ”

    The intent behind sale pricing of hardcovers is to move old stock off the shelves more quickly, to make room for new stuff. That aspect of selling simply doesn’t exist when you’re talking about ebooks. Why should an old ebook be worth less than a new one? It’s not like there’s a quality concern.

    Now, if you’re talking about market-manipulation pricing (“one-day sale!” “Pay extra to get it before the official publishing date!”) then that’s a different story, but I kind of thought you wouldn’t be into such blatantly commercial activities…

    “In an interesting aside, Murdoch’s Fox News has been denied access to Canadian TV because of its lack of impartiality. See Regulators Reject Proposal That Would Bring Fox-Style News to Canada. Maybe that is why he feels he needs to bleed American libraries — to make up for lost revenues and bias outlets.”

    …really? Really. You trot out stupid crap like this and you expect us to take you seriously?

    I do have to say that it’s amusingly ironic to see the editor of an ebook-issues discussion site proudly declare that, due to ideological issues, he’ll never buy ebooks from Certain People again–and then he turns around and craps on Fox News for being closed-minded.

  8. @Density Duck: You wrote “I do have to say that it’s amusingly ironic to see the editor of an ebook-issues discussion site proudly declare that, due to ideological issues, he’ll never buy ebooks from Certain People again–and then he turns around and craps on Fox News for being closed-minded.”

    I just want to clarify my position. It is not that I will never buy from these publishers, it is that I will not buy from these publishers at these exorbitant prices and as long as they continue to support exorbitant prices, I will spend my money elsewhere.

    I find few authors such compelling storytellers that I must read their writing.

    In many ways, this agency problem is analagous to movie going. Years ago, my wife and I went to a movie nearly every week, certainly at least 40 times a year. Then prices rose and quality wasn’t so great so we moved to the video scene — it was much more economical to buy a new release DVD when it went on sale than to buy 2 tickets to the theater. Consequently, we now go to 3 or 4 movies in a year at max. I’m not opposed to going to the movies, but now it has to be something really compelling to induce me to pay current ticket prices for 2 hours of entertainment that may or may not be good.

    The Agency 6 have simply decided to price me out of the ebook market for their titles. BTW, has anyone noticed a steady decline in ebook prices from John Sargent and Macmillan? At least the titles I’m interested in are still at the same price as they were when agency pricing started.

  9. I for one, am completely fed up and disgusted with the big publishers. Who seem intent on repeating the mistakes of their predecessors in the music and film industry when it comes to digital content. If they really think that by pricing ebooks at the same price or more than printed books will protect/ increase their sales they must be living in cloud cuckoo land. Most consumers look at an ebook and cannot understand why something that once it has been created can be copied by the publisher endlessly for nothing can cost so much to buy. I understand they are scared of piracy and trying to protect the sales of printed books but by pricing ebooks so high they actually encourage piracy. I believe most consumers are prepared to buy at what they consider a fair price and the agency pricing model is not delivering that. The internet has changed the game and the old ways don’t work anymore. I think these publishers are basically dinosaurs who, if they don’t change their ways, will in the long term go extinct.

  10. Indeed, it’s been a year, so all those $15 ebooks from a year ago have now fallen to near or below paperba…oh, who are we kidding? We knew it was a lie the moment he said it, and a year’s experience hasn’t done anything to prove otherwise.

  11. I never paid attention to publishers’ names at all before the introduction of Agency pricing. Now I know exactly who, and which imprints, use it, and I don’t buy their books unless the author is someone whose book I just have to have. The amount I spend on ebooks, and I buy mostly ebooks, has dropped drastically since Agency pricing, and the number of ‘auto-buy no matter the price’ authors has dropped too. I keep a wish list of books I’ll buy when discounts are allowed again, and I record those lost sales at http://www.lostbooksales.com.

    I am a little hopeful over Random House joining the club, though. I think that perhaps the Agency 5 didn’t notice drops in sales due to Agency pricing because of the bump last year in ereader sales. Now that the holidays are over, I’d like to think that Random House might feel it immediately. Probably wishful thinking….

  12. Since April 1 last year, I’ve purchased around a dozen books from the Agency 5, and probably 200 from Random House. The Random House books were discounted to the price range I consider reasonable. I have no problem buying Agency publisher books if they price them at least 10% less than the paperback list price (price at B&N with their loyalty program). I’ve got at least 1000 books to be read on my Nook, I can wait a long time for the Agency 6 to realize that they are overpricing. I know I splurge when I’m getting a deal, I won’t have that problem with Random House any more.

  13. Times are hard in Australia for self-published authors – it’s harder for a new author to get published than it is to win the lottery. The government has colluded with the major publishers and book chains to keep Amazon out with the result that independent authors have no option than to sell their books on Amazon US and adding $10.95 postage to the cover price. You have to want a book ‘real bad’ to pay the freight cost!! Seems like e-books is the only fair playing field.

  14. Ann, you can self-publish ebooks on Amazon and get 70% of the selling price. It’s really easy: just choose your options and upload an ePub file, or an HTML file which they will convert to ePub. No postage required. 😉

    I’m also from Australia, and haven’t been as much affected by Agency pricing because earlier on their imposed “geographic limitations” shut me off from most of the books I wanted to buy anyway. Previously, I bought about 1000 books a year, and I only read ebooks due to disability. All I had to do was log into Fictionwise, buy books and download them. I got a good loyalty discount, there were lots of extra discounts, and excellent notifications so I could keep track of new books and series.

    The imposition of geolims has changed my consumer behaviour just as the imposition of Agency pricing has changed Richard’s. I’m not _allowed_ to buy the books I want. Previously, I just bought books and read them. After geolims, I spent months trying to work out WTF was going on, and as a consumer I resent having to spend so much time investigating the book business just to BUY BOOKS. And then to find I still wasn’t allowed to buy them! The publishers can’t possibly consider this good business.

    Like Richard, I read elsewhere now. I read blogs and news, and indie books. I buy directly from authors. The Agency 6 have lost a lot of money from me each year, and have lost my continuing business.

    Either that was their goal from the start, or they’re not as successful as they think they are.

  15. Ann, you can self-publish ebooks on Amazon and get 70% of the selling price. It’s really easy: just choose your options and upload an ePub file, or an HTML file which they will convert to ePub.

    actually, Amazon uses mobi, not epub.

  16. Hi,

    I just happened to stumble across this post.

    Firstly, may I say “thank you” to the writer of it for recommending my book, Sugar & Spice. It has just become a bestseller in the UK Amazon Store, ousting the likes of Stieg Larsson and Stephen Leather from their comfy spots in the top ten!

    Secondly, how true!

    As an indie author, and as others have commented, we are purposely keeping our prices low, as the cost to us is relatively low and should be passed onto the reader (IMHO).

    The cost to the environment is also greatly reduced.

    I am not adverse to DTP (Dead Tree Publishing) at all, but the price of ebooks by some of the so-called ‘bestsellers’ is ludicrous! There are famous writers in the top ten now that I will never read again, solely due to the fact that they (or their publishing house) requires £8.99 for a book that cost almost NOTHING to make available on Kindle.

    I may or may not end up publishing the traditional way and the pricing may be taken out of my hands, but rest assured, whilst I am in control of it, you will not see one of Saffina Desforge’s books for sale for more than a very reasonable and realistic amount.

    There is no WAY we would be selling 12,000 books a month (as we are now) at £8.99 – just look at the chart for proof of that!

    Thanks again!

    Saffina Desforges

    PS. You can get S&S here:
    http://www.amazon.com/Sugar-Spice-full-length-thriller-ebook/dp/B004AYDK22

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