Publishing/Writing: Insights, News, Intrigue

04/04/2012

Looks Like the Agency Model May Survive DOJ as a Valid Business Model


The Right Decision on Agency Model ?

Signs emanating from news sources point to the agency model (backed by the big six publishing houses) being judged a valid business model by The Department of Justice.

With one alteration — Apple must drop its MFN (most favored nation) designation. MFN status meant Apple could not be undersold by other retailers.

What does this mean?

To me it means that all the best content, known authors, bestsellers, etc. will probably be available only through sites employing the agency model. Why? Simply because authors/creators can make more money with the 70%/30% revenue split — and at a price set by the author/publisher not a third-party retailer.

This also means that all the best new content, authors, bestsellers, etc. will probably leave Amazon with its cheapo book model, unless they make some changes.

That some of its titles in iBooks are uncompetitive probably won’t worry Apple much. It cares a hell of a lot more about upholding agency terms and MFN with magazine and newspaper publishers, where the market structure is totally different. 

What tomorrow may look like:

    For quality content go to Apple iBooks and other agency model sites.

    For lesser, second-rate, cheapo content go to Amazon.

More details here by  at Digital Book World:

Breaking Down the Apple-DoJ-Agency Five Saga and Its Ramifications

What could the actions of the Department of Justice mean for e-books? Here’s a breakdown with some scenarios as I understand the situation. 

Apple’s Agency Model

Publishers selling through Apple can only do so through an agency agreement (a uniform 70%/30% revenue split across all categories and digital products). That is true for all assets – games, music, video, movies, etc. – sold through Apple.

Based on the recent news reporting, the DoJ might accept agency as a valid business model. In an interview with the Wall Street Journal, Sharis Pozen, the top antitrust official at the Department of Justice states “we don’t pick the business model”, and is focusing its efforts on a settlement under which Apple drops the “most favored nation” clause form contracts according to a report by Reuters.

This means Apple’s business model for iTunes – including iBooks – may remain largely untouched. Apple does not have to worry about price-matching, does not need buyers or merchandisers to come up with the right price, and does not need to change its technical or e-commerce infrastructure. 

Most Favored Nation

To be competitive under its retail model, Apple originally insisted on a Most Favored Nation (MFN) clause to make sure its goods (and its processes for pricing these, where the publisher set the retail price) were competitive (i.e. Apple would not be undercut on the same goods in the marketplace).

Being forced by the DoJ to drop the Most Favored Nation (MFN) clause means that Apple could no longer insist that the retail price agreed between Apple and publisher is the lowest in the market at all times. 

Agency and the Big Six (Penguin, Macmillan, Hachette, Simon & Schuster, Random House and HarperCollins)

The big-six publishers (except Random House, which followed the “agency five” to this business model one year later) had agency agreements in place with Apple when iBooks launched and more importantly were able to force these agency agreements (RH included) on Amazon, too. Due to their market position and the popularity of their books (and authors), the big-six publishers prevailed in negotiations with Amazon (remember the outcry by authors and customers when Macmillan books disappeared from Amazon? Amazon caved inside of 3 days.)

It is likely that nothing will change for the big six if Apple is forced to drop MFN. It will be agency terms as normal with all retailers be they Apple, Amazon, BN, Google, Kobo or others. This is probably a very happy outcome for the big six.

However, at the same time, the big six are less constrained when doing short-terms promotions and will only be able to do these promotions selectively, i.e. only in certain channels and on certain titles. Regardless, I think the big six would be very happy with this outcome. 

Agency and the Second Tier

Many publishers in the “2nd tier” (all those outside big six – this in no way refers to quality of the output, it is just a reflection of size and market-share) have agency agreements with Apple, but wholesale agreements with Amazon, because Amazon had the upper hand in negotiations along the lines of “you are not willing to sell on wholesale terms? O.K. we will not sell your books” and swoosh these publishers would have lost the potential of selling to 60% to 70% of the now very large e-book market (as much as 50% of the total market for many titles).

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03/21/2011

Is Amazon Becoming Too Amazonian?


Will Amazon slay writers in the future?

There are a lot of signs out in publishing land that indicate Amazon is positioning itself in a pretty complete vertical business structure ( acquiring both print-on-demand Booksurge and e-book tech software company Mobipocket as well as building and selling the e-reader Kindle) to become the dominant player (read that as monopolizer) in the current materializing publishing industry.

That, in and of itself, is not threatening…and they are playing somewhat fair (so far) with the true lifeblood of the industry: the content creators (writers and authors)…

But BEWARE! Do not let Amazon go completely unfettered or unchallenged because human nature and greed, being what they are, will succumb to complete dictatorship and the abuse of the content creators…Mark my words! Remember how out of whack traditional publishing became before being brought down.

There are other online entities and booksellers such as Apple’s iPad, Smashwords, Lulu, Barnes&Noble , etc…but, none have as complete a vertical package to go from publishing to reader as Amazon.

Let’s hope, for the sake of maintaining healthy competition and remuneration for all in what can be a great industry, that some of these other online enterprises (and complete newcomers) build their own self-contained verticals to save Amazon from itself and attract, nurture and grow great writers!

At least that’s the way this humble writer sees it.

Now, this by Anna Richardson from TheBookseller.com

Amazon could phase out publishers

Forbes.com looks at “how Amazon could change publishing”.

The first major technology-enabled change in the books industry came when digital print-on-demand presses started becoming affordable, but for authors looking to gain serious readership, the big question still remains unanswered: How would they market and distribute their books?

“Enter Amazon.com,” writes entrepreneur Sramana Mitra. “Some surveys suggest that online booksellers could become the largest channel for book sales by 2009, and Amazon is certainly the 800-pound gorilla in that market–it’s the largest bookseller in the world” and “what really keeps customers coming back is the outstanding user experience”, in great part due to its recommendation system.

In addition, in 2005, Amazon acquired the print-on-demand company BookSurge and Mobipocket.com, an e-book software company, and in November, it launched the e-book reader Kindle. According to Forbes, Amazon is now poised to revolutionise the book printing business through vertical integration.

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01/31/2011

Amazon (Kindle store) Trumping Apple (iPad store) in eBook AND Print Sales


Amazon is still king of the book-sales world, both e-books AND printed books…and shows no sign of slowing down!

Amazon had a respectable market share of printed-book sales in the pre-Kindle era. In the post-Kindle era, sales of e-books went ballistic, as expected…but, strangely enough, Amazon held on to the same per centage of printed-book sales also, despite the supposed decline of print!

This article bt Jim Milliot of Publisher’s Weekly offers a clear (with graphics) analysis of the Amazon and Apple book sales market share… with explanations by Peter Hildick-Smith, president of the Codex Group, an industry study and analytical group:    

Amazon Ups Its Edge
Apple notwithstanding, trends point toward more market power for the e-tailer

Apple caused a stir last week when it announced that it sold 7.3 million iPads in the quarter ended December 25, bringing the number of devices it has sold since it released the iPad last April to nearly 15 million. But even as the iPad gains traction among book buyers, the clear winner in the first stages of the book industry’s digital transition is Amazon. A survey of 6,250 frequent book buyers conducted by the Codex Group in early November found more book buyers acquiring their e-books for the iPad from Amazon’s Kindle store rather than through Apple’s iBookstore, with the Kindle store accounting for 40% of e-book sales for the iPad and the iBookstore 29% (one factor limiting sales through the iBookstore is that Random House e-books are not directly available there because RH is not using the agency model). John’s Note: I have posted on this and other issues with Random House on my Writers Welcome Blog (WWB)  

While Apple has already sold over three times more iPads in just nine months than Amazon is estimated to have sold Kindles in three years, the sale of Kindles has had a huge impact in increasing Amazon’s “share of wallet” among book buyers, the Codex survey found. Before acquiring a Kindle, book buyers made about 14% of their unit purchases at Amazon, a figure that tripled to just over 37% after they bought a Kindle. “It’s the most amazing retail share growth strategy I’ve ever seen,” said Codex president Peter Hildick-Smith, who has also worked extensively in developing retail growth strategies for stores ranging from Wal-Mart to Harrods. The increase in market share came entirely from book buyers’ added purchase of e-books, with 28.1% of all unit buys of frequent book buyers coming from the Kindle store. But Hildick-Smith said it was equally impressive that Amazon was able to hang on to almost the same market share of book buyers’ print purchases even as buyers were substantially increasing their e-book purchases.

While e-book purchases do not appear to be cannibalizing print sales at Amazon, the Kindle store has to be taking sales away from somewhere, and Hildick-Smith believes it is from bricks-and-mortar stores. With the decline in the number of bookstores, publishers are losing not only the top sales channel but the most important showcase for their new titles. According to the Codex survey, bookstores remain, by far, the most important way book buyers learn about new books: 28% of all book buyers said they learned about the last book they bought by browsing in a bookstore or through a bookstore display, while 14.5% were discovered through a friend’s recommendation. Even among iPad users, 32% of device owners learned about their last book purchased through digital sources (an e-bookstore, author Web site, and other sources), but 23% discovered the book they bought at a bookstore.

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