Tonight a little hard data showing that the free market ecosystem would not allow the agency pricing model to cause book prices to rise.
Why not? One main reason is because authors and publishers would use price as a competitive tool, and this would naturally lead to lower prices.
Does Agency Pricing Lead to Higher Book Prices?
According to a March 9 story in the Wall Street Journal, The U.S. Department of Justice is considering suing Apple and five large US publishers for allegedly colluding to raise the price of ebooks.
At the heart of the issue, I suspect, is concern over the agency pricing model. Agency pricing allows the publisher (or the indie author) to set the retail price of their book.
Although Smashwords is not a party to this potential lawsuit, I felt it was important that the DoJ investigators hear the Smashwords side of the story, because any decisions they make could have significant ramifications for our 40,000 authors and publishers, and for our retailers and customers.
Yesterday I had an hour-long conference call with the DoJ. My goal was to express why I think it’s critically important that the DoJ not take any actions to weaken or dismantle agency pricing for ebooks.
Even before the DoJ investigation, I understood that detractors of the agency model believed that agency would lead to higher prices for consumers.
Ever since we adopted the agency model, however, I had faith that in a free market ecosystem where the supply of product (ebooks) exceeds the demand, that suppliers (authors and publishers) would use price as a competitive tool, and this would naturally lead to lower prices.
I preparation for the DoJ call, I decided to dig up the data to prove whether my pie-in-the-sky supply-and-demand hunch was correct or incorrect. I asked Henry on our engineering team to sift through our log files to reconstruct as much pricing data as possible regarding our books at the Apple iBookstore.
We shared hard data with the DoJ yesterday that we’ve never shared with anyone. I’ll share this data with you now.