Quote:
Originally Posted by zoetmb 
A few things:
- contrary to popular hype, sellers such as Amazon do not get better pricing because of what they buy overall - they can only get better pricing based upon the number of copies of a single title placed in a single order. There was a lawsuit against the publishers about 10-15 years ago by independent booksellers objecting to discounts given to the chains and the independent booksellers won. But how this applies to ebook (non-agency model), I'm not sure, since that pricing is probably based upon number of downloads and I don't know if Amazon's pricing structure (pre-agency model) was originally tiered.
- you don't need the Agency model to control pricing, because the Supreme Court ruled several years ago that manufacturers can indeed set not only "minimum advertised price", but "minimum selling price" although few have elected to do so. So you don't need an agency model to force everyone to sell at list price. (Apple gets everyone to sell at their list price by making the margins so short, you don't really have a choice.)
- the publishers objected to Amazon's discount pricing because Amazon was selling e-book titles at a loss in order to gain a market for the Kindle and to gain overall market share. They were afraid that this discounting would decrease the value of books in the customers' minds. What they probably should have done was compromised and let the backlist sell for less than the frontlist.
- in many cases, publishers did not have automatic ebook rights from authors. And under the wholesale model, where Amazon could sell an ebook at any price, even below their cost, authors would receive minimum royalties and therefore, would not give the publishers the rights. That's one of the reasons some publishers also pushed for the agency model - it was the only way to get the ebook rights.
- while low selling prices might benefit consumers in the short run, they don't necessarily benefit consumers in the long run because if the publishers (in this case) can't make a fair profit, they stop publishing and trade publishing has never been very profitable in the first place, which is why the largest U.S. publishing companies have been bought and sold numerous times in the last five decades. Bertelsmann, a German conglomerate, owns Random House (which was owned by RCA from 1965 to 1970) and Bantam-Doubleday-Dell, comprising over 20% of U.S. trade publishing and CBS now owns Simon & Schuster. (CBS used to own Holt, Rinehart & Winston, part of which was sold to Harcourt around 1986. Harcourt was sold to General Cinema in 1991, to Reed-Elsevier in 2001 and most pieces to Houghton-Mifflin in 2007).
- And for those who think that a decline in major print trade pubishing will never happen, look at the recording industry, which is now less than half the size it was at its peak. While the recording industry shares some of the blame, the main factor in its destruction aside from the fragmentation of the market and the demise of decent radio is that the download market is primarily a singles market, which is economically unfeasible both from a cost perspective and from the standpoint that music prices have in no way kept place with inflation. In the mid-1960s, a 45-rpm single (albeit a 2-sided single) listed for $1 and generally sold for 64 to 66 cents. That 64 cents in 1965 is the equivalent of $4.46 today. The labels are dumping back-catalog CD albums (with up to 20 tracks) for $5.
- So it's a mixed bag: there are advantages and disadvantages to both the traditional wholesale model and the agency model. But the lawsuit is completely bogus and should be dismissed. There's nothing illegal about the agency model and it's certainly not price-fixing. What would be price fixing is if the big publishers got together and said, 'let's charge $22.95 for all front list ebook titles from major authors." But they would never do that. I've been at negotiations with distributors and the FIRST thing that's always said in the meetings is that "we cannot talk about retail price in any way."
A few things:
- contrary to popular hype, sellers such as Amazon do not get better pricing because of what they buy overall - they can only get better pricing based upon the number of copies of a single title placed in a single order. There was a lawsuit against the publishers about 10-15 years ago by independent booksellers objecting to discounts given to the chains and the independent booksellers won. But how this applies to ebook (non-agency model), I'm not sure, since that pricing is probably based upon number of downloads and I don't know if Amazon's pricing structure (pre-agency model) was originally tiered.
- you don't need the Agency model to control pricing, because the Supreme Court ruled several years ago that manufacturers can indeed set not only "minimum advertised price", but "minimum selling price" although few have elected to do so. So you don't need an agency model to force everyone to sell at list price. (Apple gets everyone to sell at their list price by making the margins so short, you don't really have a choice.)
- the publishers objected to Amazon's discount pricing because Amazon was selling e-book titles at a loss in order to gain a market for the Kindle and to gain overall market share. They were afraid that this discounting would decrease the value of books in the customers' minds. What they probably should have done was compromised and let the backlist sell for less than the frontlist.
- in many cases, publishers did not have automatic ebook rights from authors. And under the wholesale model, where Amazon could sell an ebook at any price, even below their cost, authors would receive minimum royalties and therefore, would not give the publishers the rights. That's one of the reasons some publishers also pushed for the agency model - it was the only way to get the ebook rights.
- while low selling prices might benefit consumers in the short run, they don't necessarily benefit consumers in the long run because if the publishers (in this case) can't make a fair profit, they stop publishing and trade publishing has never been very profitable in the first place, which is why the largest U.S. publishing companies have been bought and sold numerous times in the last five decades. Bertelsmann, a German conglomerate, owns Random House (which was owned by RCA from 1965 to 1970) and Bantam-Doubleday-Dell, comprising over 20% of U.S. trade publishing and CBS now owns Simon & Schuster. (CBS used to own Holt, Rinehart & Winston, part of which was sold to Harcourt around 1986. Harcourt was sold to General Cinema in 1991, to Reed-Elsevier in 2001 and most pieces to Houghton-Mifflin in 2007).
- And for those who think that a decline in major print trade pubishing will never happen, look at the recording industry, which is now less than half the size it was at its peak. While the recording industry shares some of the blame, the main factor in its destruction aside from the fragmentation of the market and the demise of decent radio is that the download market is primarily a singles market, which is economically unfeasible both from a cost perspective and from the standpoint that music prices have in no way kept place with inflation. In the mid-1960s, a 45-rpm single (albeit a 2-sided single) listed for $1 and generally sold for 64 to 66 cents. That 64 cents in 1965 is the equivalent of $4.46 today. The labels are dumping back-catalog CD albums (with up to 20 tracks) for $5.
- So it's a mixed bag: there are advantages and disadvantages to both the traditional wholesale model and the agency model. But the lawsuit is completely bogus and should be dismissed. There's nothing illegal about the agency model and it's certainly not price-fixing. What would be price fixing is if the big publishers got together and said, 'let's charge $22.95 for all front list ebook titles from major authors." But they would never do that. I've been at negotiations with distributors and the FIRST thing that's always said in the meetings is that "we cannot talk about retail price in any way."
You've got it exactly right.
