Publishing/Writing: Insights, News, Intrigue

07/17/2015

Is It Possible That Amazon Is Not ‘All’ Bad News For Publishers?


Might Amazon’s debilitating effect on local shops be about to change?

For the past 20 years Amazon has disrupted the publishing industry from stem to stern. Could it be that much of the resulting adaptation and metamorphosis has actually been good news for publishers?

Depends on what you consider. What kind of publisher? What kind of book? Book audience location. Book platform. Book distribution system access. Digital technology, etc., etc.

Hell, many of these considerations weren’t even in existence 20 years ago! And while Amazon didn’t create or discover all of the above mentioned ingredients, they were the first to mix them in a masterful menu – creating a smorgasbord of possibilities – the understanding of which is still being deciphered today.

Tonight’s topic will discuss the how’s and where’s of some of the possible positive changes that Amazon has wrought within the publishing industry and the reaction/attitude of the big five publishing houses as well as others (Bowker’s, etc.) in the overall industry.

Key excerpts from tonight’s research/resource article:

“It has been presented as a David and Goliath battle. This is despite the underdog status of the largest publishing houses in the world. As Amazon has become the primary destination for books online, it has been able to lower book prices through their influence over the book trade. Many have argued that this has reduced the book to “a thing of minimal value”.”

“Despite this pervasive narrative of the evil overlord milking its underlings for all their worth, Amazon has actually offered some positive changes in the publishing industry over the last 20 years. Most notably, the website has increased the visibility of books as a form of entertainment in a competitive media environment. This is an achievement that should not be diminished in our increasingly digital world.”

Presenting:

Amazon is 20 years old – and far from bad news for publishers

By , as published in The Conversation (UK). Academic rigor, journalistic flair  

It has now been 20 years since Amazon sold its first book: the titillating-sounding Fluid Concepts and Creative Analogies, by Douglas Hofstadter. Since then publishers have often expressed concern over Amazon. Recent public spates with Hachette and Penguin Random House have heightened the public’s awareness of this fraught relationship.

It has been presented as a David and Goliath battle. This is despite the underdog status as the largest publishing houses in the world. As Amazon has become the primary destination for books online, it has been able to lower book prices through their influence over the book trade. Many have argued that this has reduced the book to “a thing of minimal value”.

Despite this pervasive narrative of the evil overlord milking its underlings for all their worth, Amazon has actually offered some positive changes in the publishing industry over the last 20 years. Most notably, the website has increased the visibility of books as a form of entertainment in a competitive media environment. This is an achievement that should not be diminished in our increasingly digital world.

Democratising data

In Amazon’s early years, Jeff Bezos, the company’s CEO, was keen to avoid stocking books. Instead, he wanted to work as a go-between for customers and wholesalers. Instead of building costly warehouses, Amazon would instead buy books as customers ordered them. This would pass the savings on to the customers. (It wasn’t long, however, until Amazon started building large warehouses to ensure faster delivery times.)

This promise of a large selection of books required a large database of available books for customers to search. Prior to Amazon’s launch, this data was available to those who needed it from Bowker’s Books in Print, an expensive data source run by the people who controlled the International Standardised Book Number (ISBN) standard in the USA.

ISBN was the principle way in which people discovered books, and Bowker controlled this by documenting the availability of published and forthcoming titles. This made them one of the most powerful companies in the publishing industry and also created a division between traditional and self-published books.

Bowker allowed third parties to re-use their information, so Amazon linked this data to their website. Users could now see any book Bowker reported as available. This led to Amazon’s boasts that they had the largest bookstore in the world, despite their lack of inventory in their early years. But many other book retailers had exactly the same potential inventory through access to the same suppliers and Bowker’s Books in Print.

Amazon’s decision to open up the data in Bowker’s Books in Print to customers democratised the ability to discover of books that had previously been locked in to the sales system of physical book stores. And as Amazon’s reputation improved, they soon collected more data than Bowker.

For the first time, users could access data about what publishers had recently released and basic information about forthcoming titles. Even if customers did not buy books from Amazon, they could still access the information. This change benefited publishers as readers who can quickly find information about new books are more likely to buy new books.

World domination?

As Amazon expanded beyond books, ISBN was no longer the most useful form for recalling information about items they sold. So the company came up with a new version: Amazon Standardized Identifier Numbers (ASINs), Amazon’s equivalent of ISBNs. This allowed customers to shop for books, toys and electronics in one place.

The ASIN is central to any Amazon catalogue record and with Amazon’s expansion into selling eBooks and second hand books, it connects various editions of books. ASINs are the glue that connect eBooks on the Kindle to shared highlights, associated reviews, and second hand print copies on sale. Publishers, and their supporters, can use ASINs as a way of directing customers to relevant titles in new ways.

Will Cookson’s Bookindy is an example of this. The mobile app allows readers to find out if a particular book is available for sale cheaper than Amazon in an independent bookstore nearby. So Amazon’s advantage of being the largest source of book-related information is transformed into a way to build the local economy.

ASINs are primarily useful for finding and purchasing books from within the Amazon bookstore, but this is changing. For example, many self-published eBooks don’t have ISBNs, so Amazon’s data structure can be used to discover current trends in the publishing industry. Amazon’s data allows publishers to track the popularity of books in all forms and shape their future catalogues based on their findings.

While ISBNs will remain the standard for print books, ASIN and Amazon’s large amount of data clearly benefits publishers through increasing their visibility. Amazon have forever altered bookselling and the publishing industry, but this does not mean that its large database cannot be an invaluable resource for publishers who wish to direct customers to new books outside of Amazon.

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04/06/2015

Amazon Is Winning at Publishing – Here’s Some Reasons Why


Winning The Publishing Race

Tonight’s post will get into why Amazon is so much better at marketing and selling than the book publishing industry.

Briefly, the answer lies in push marketing versus pull marketing, timing (being late to the dinner table) and true innovation.

Tonight’s research/resource article is from The Digital Reader (Ink, Bits and Pixels) written by Nate Hoffelder:

 

The Ubiquitous Bookstore, Or Why Amazon is Winning at Publishing

Scholarly Kitchen posted an article yesterday which explains why Amazon is so much better at marketing and selling than the book publishing industry.

Joseph Esposito uses the post to lay out his vision for a new type of bookstore – one which could compete with Amazon. Describing Amazon as a destination site, Esposito sees its success as primarily due to pull marketing. In other words, Amazon draws people in by offering a huge warehouse of books and a great shopping experience.

To compete with Amazon, Esposito thinks publishers need to adapt to the new nature of the internet:

But the Web is now being brought to us; it’s evolving into a push medium. All that time we spend looking at the news feeds for Facebook, Flipboard, and Twitter point to where the Web is going and where new bookstores will have to be. To build a bookstore that goes head to head with Amazon is foolhardy. It would be easier to carry the ball into the defensive line of the Chicago Bears.

So a new bookstore is going to have to bring its offerings to where people are rather than the other way around; a new bookstore has to be ubiquitous. A recent example of this comes from HarperCollins,which has created an arrangement with Twitter to sell copies of the bestselling Divergent series of young adult novels from within individual tweets.

The fact that this is a topic of discussion in the publishing industry, in 2015 no less – folks, this is why Amazon is winning whatever war publishing feels it is fighting with the retailer.

It’s not that Esposito is wrong so much as that he is five years late to the discussion. Both Amazon and authors started push marketing at least 5 years ago.

 

Authors have been on social media since at least 2010, and they’ve been pushing people to bookstore to buy books. This concept is so well established that there are dozens of blog posts by indie authors which discuss the nuances of how to go about it.

What’s more, Amazon mastered the concept of push marketing even further back. I don’t know exactly when Amazon launched its affiliate network, but that was explicitly designed to give other websites a financial incentive to push customers to Amazon (h\t to Marshall Poe for making a similar argument in TSK’s comment section).

Tell me, can I make more money by pushing people to HarperCollins’ bookstore than by sending them to Amazon? No? Then why would I bother?

Speaking of HarperCollins, they are a great example of a publisher trying and failing to market and sell directly to consumers. Have you visited HarperCollins.com, and tried to browse, search, or buy an ebook?

I have, and so have several commenters on The Passive Voice. It’s terrible. If, as Esposito posits, direct retail is the future of publishing, then HC literally cannot build a retail site to save its life.

But never mind HarperCollins; let’s consider what Esposito wrote next:

From a conceptual point of view, the most interesting project I have stumbled upon for “post-destination” bookstores is that of Chris Kubica, who explained his work in two articles in Publishers Weekly, which you can find here and here. Kubica gathered a group of publishing people in New York to brainstorm about a post-Amazon bookstore. The conclusion was that each individual potentially could be the site or source of a bookstore–a bookstore of one. With seven billion people on the planet (and growing), that’s potentially seven billion bookstores. Now, how can Amazon compete with that?

Easy. Amazon thought of it first, they thought of it ages ago, and they do it better than anyone in publishing.

Folks, if you want to beat Amazon then you need to come up with an idea first. You can’t decide to adopt an SOP five years after it becomes an SOP. That’s not innovative; it’s reactionary.

 

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08/05/2013

Amazon’s Bezos’ New Mission? Perhaps to Prove Print Isn’t a Dinosaur Headed for Extinction


Bezos interested in much more than just Amazon!

Most have heard by now that Amazon Head Honcho, Jeff Bezos, has bought The Washington Post newspaper for a cool $250 million smackaroos 🙂

I suspect that Mr. Bezos might have a nostalgic soft spot, as do I, for the dynamic, constant deadline publishing style of newspaper journalism; but, his interest in a print newspaper probably goes to a higher motive than just nostalgia.

He does want to become a big media player as evidenced by his current involvement in streaming movies available to its Prime members in an ongoing competition with Netflix — and Bezos’ Kindle has been delivering videos, music, news and books; a media-consuming tablet put in-place to push device sales.

BUT, can he save a print industry plagued by declining print advertising sales? OR is he going to redefine that revenue source with something entirely different (imagination needed here)? Remains to be seen.

Don’t forget, though, that Bezos is somewhat of an advertising guru himself — just look at the money he attracts with Amazon (which is detailed and tracked more by eMarketer in tonight’s feature news article drawn from USA Today).

He is also interested and has ambitions in many things outside of Amazon, retailing and books. Bezos is still heavily involved in his 2000 startup, Blue Origin, which intends to provide a human spaceflight company for space exploration — with a goal of developing space hotels, amusement parks and colonies for several million people orbiting the Earth.

High ambitions, indeed!

From Scott Martin, USA TODAY:

Amazon’s Bezos: Retail revolutionary, news tycoon?

Amazon founder Jeff Bezos has done a number on brick-and-mortar retailers, defied Wall Street for years in eschewing profits for growth, taken on Apple in tablets and now holds a new title: newspaper owner.

Amazon’s CEO agreed to acquire The Washington Post for $250 million today.

The 49-year-old Bezos — who is famous for a honking laugh and gregarious nature — is No. 19 on Forbes‘ list of the world’s richest people, with a net worth of $25.2 billion. Bezos started Seattle-based Amazon in 1994 as a bookseller and rapidly expanded its categories and has swallowed many more.

Bezos is not the first billionaire to become a major media player. AOL founder Steve Case merged AOL with Time Warner. Facebook co-founder Chris Hughes picked upThe New Republic. And IAC/InterActiveCorp CEO Barry Diller bought Newsweek, which ceased printing last year. Given how troubling advertising has been to publishers, Bezos has his work cut out.

“The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs,” Bezos said in a letter to Washington Post staffers.

Bezos has already displayed a proclivity for endeavors far outside of the confines of e-commerce.

One of his interests is space exploration. He captured the public’s fascination with his startup Blue Origin, a “human spaceflight company,” with a goal of developing space hotels, amusement parks and colonies for 2 million to 3 million people orbiting the Earth.

Read complete USA Today article here

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09/10/2012

DOJ’s E-Book Price-Fixing Case = Publishing Intrigue to the Max


 

Blind Justice

Intrigue, indeed — But, is the whole case based upon misconceived intentions, misunderstanding and misplaced justice?

And, just WHO is to blame for letting this price-fixing debacle spawn into a full-blown clusterfuck?

This insight is provided by Jonathan Berr in InvestorPlace.com :

Publishers Have Themselves to Blame for Amazon’s Triumph

The recent ebook price-fixing settlement clearly proves it

Amazon (NASDAQ:AMZN) CEO Jeff Bezos has won the e-book price wars and will leave his competitors in the dust. The publishers that are complaining now have no one but themselves to blame.

Last week, U.S. District Judge Denise Cote approved a settlement between three U.S. publishers — Hachette Book Group, Simon & Schuster and HarperCollins —and the Department of Justice over allegations that they were in cahoots with Apple (NASDAQ:AAPL) to fix the prices of e-books. Apple and two other publishers, Penguin Group USA and Macmillan, have refused to settle. Their case will go to trial next summer. Officials in the publishing industry, who urged Cote to throw the case against them out of court, were appalled by the ruling.

“To say the least, we are colossally disappointed that the judge failed to understand how consumers will be negatively impacted by a decision that does not take into account the realities of the book business in 2012,” said Oren Teicher, CEO of the American Booksellers Association, in a statement posted on the group’s website.

Indeed, the publishing industry argues that it — not Amazon — is the aggrieved party given the Seattle-based company’s dominant position in the e-book market by selling electronic books below cost. Though their fears were understandable, their solution to it was illegal. It’s not even a close call.

Both Apple and the publishers didn’t want to compete with Amazon’s $9.99 price point for e-books. In 2010, they agreed to switch to a new “agency” model whereby publishers would sell titles directly to the public as opposed to the “wholesale” model, in which electronic books were sold to retailers. Agreements between Apple and the publishers were in place ahead of the 2010 launch of the iPad.

Read and learn more

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08/29/2012

Bookworld to Compete with Amazon


More intrigue in the publishing kingdom!
 
The company says its new Bookworld.com.au site is aiming to compete with Amazon on price and delivery, offering free shipping with two-to-three day delivery to any capital city on Australian books. Bookworld has about 100,000 e-book customers and a total of 750,000 customers on its database.” — Global publisher Pearson
 
Pearson publishing bought failing Boarders (after Boader’s owner REDGroup’s collapse last year), turned it into ‘Bookworld’, and is taking the first step in providing what they feel will be real competition for Amazon.
 
Many who have visited the Bookworld site feel they still have some hurdles to clear.
 
I believe Bookworld is a good first step in bringing much needed, real competition to the digital book industry — and Bookworld should improve with time. 

Chris Zappone, reporting for Business Day in The Sydney Morning Herald, has this to say: 

Global publisher Pearson has internet giant Amazon in its sights with the launch of an Australian-based online bookseller.

The publisher has rebranded the Borders.com.au site which Pearson bought for less than $5 million after owner REDGroup’s collapse last year. The company says its new Bookworld.com.au site is aiming to compete with Amazon on price and delivery, offering free shipping with two-to-three day delivery to any capital city on Australian books. Bookworld has about 100,000 e-book customers and a total of 750,000 customers on its database.

“You’ve got to have a price that will get you to market and clearly Amazon are the benchmark,” said Bookworld chief James Webber.

“We compete with Amazon very effectively that includes no shipping costs.”

Mr Webber said that 50 per cent of Bookworld’s stock was sourced in Australia.

REDgroup was unable to compete with global retailers like Amazon and Book Depository because of higher book prices in Australia.

Under current pricing offers, the cost of Christopher Hitchens’ book Morality is $23.95 from Amazon with delivery taking up to a month. Bookworld offers the same book at $19.99 to its club card holders with three-day delivery.

Bookworld said it has sold more e-books than physical books in the past month in another sign of how quickly the book industry was changing.

Read and learn more

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07/27/2012

Amazon: Exploding Revenue, Tiny Profit


Exploding Revenue

Amazon’s second quarter numbers reflected $12.8 billion in sales — but a chump-change net income of $7 million (now,I wouldn’t mind a profit of $7 million, but, against sales of almost 2000 times that amount I would be in the dumps 😦

Of course, for those that didn’t know (and I was one), these numbers are status quo for Amazon.

The reason ? Amazon is re-investing revenues in its future expansion plans. That’s a lot of do-re-mi for expansion, no ?

David Streitfeld, New York Times, has some interesting insights and forecasts:

Amazon Delivers on Revenue but Not on Profit

Leaping revenue, little profit.

That is the long-established Amazon story, and those who expected to hear it again Thursday were not disappointed.

The company reported sales of $12.8 billion, up 29 percent, in the second quarter while it eked out net income of $7 million, or a penny a share.

Those results essentially matched expectations. Analysts had estimated the Seattle-based retailer would earn 2 cents a share, down from 41 cents a share in the second quarter of 2011.

In what is becoming a routine warning, Amazon said that profit in the current quarter would remain elusive. Revenue might grow as much as 31 percent, the company said, but it was expecting a loss. Losses at Amazon were routine in its early years but in recent years it has made a profit, albeit a small one.

This would be devastating news from some Internet companies. But Amazon bulls were unfazed, saying the retailer was investing, as always, in the future.

“If they keep this up, there’s a good possibility that you’re looking at shopping malls going the way of the record store and the bookstore and the video rental store,” said Jason Moser, who covers Amazon for the Motley Fool investment site.

Amazon shares Thursday were up $3 to $220 during regular trading. The stock is trading only about 10 percent below its record high, with a stratospheric price-to-earnings ratio of about 170. In after-hours trading, shares continued rising.

Since its founding in 1994, Amazon has been focused on broadening its product and customer bases, not pumping up its profit margins. And the growth has been tremendous — it is now one of the country’s largest retailers. Even in North America, its most established market, it has been growing consistently more than twice as fast as the e-commerce market as a whole, a Forrester Research report released Thursday noted.

Read and learn more

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04/28/2012

Amazon vs. Publishers – Round Two


Amazon vs. Publishers STILL

Amazon still has mucho shelves full of print books for sale. And they want desperately to clean up that stock with their print on demand capability. But, the publishers are reluctant to allow Amazon to use POD.

Do you know the reason ? Can you guess ?

, Business Week, explains :  

Amazon vs. Publishers: The Book Battle Continues

There’s a glaring anachronism at the center of most Amazon.com (AMZN) fulfillment centers: aisle after aisle of old-fashioned books. Amazon stocks these volumes for the many customers who still favor the tangible pleasures of reading on paper. Yet the company is relentless about increasing efficiency and has at the ready an easy way to remove some of those bookshelves: on-demand printing. With an industrial-strength printer and a digital book file from the publisher, Amazon could easily wait to print a book until after a customer clicks the yellow “place your order” button. The technology is championed by those who want to streamline the book business—and it might turn out to be a flash point in the hypertense world of publishing.

The book industry isn’t eager to embrace any more wrenching changes. The introduction of the Kindle in 2007, and Amazon’s insistence on a customer-friendly $9.99 price for new releases, has set off a multifront fracas. Efforts by the largest publishers to sidestep Amazon’s pricing strategy attracted the attention of the U.S. Department of Justice, which recently filed an antitrust lawsuit against Apple (AAPL) and five book publishers over their alleged collusion to raise e-book prices. (Three publishers have settled the lawsuit.) The issue of print on demand has taken a backseat as this e-book drama plays out.

Yet executives at major New York-based book publishers, who requested anonymity because of the legal scrutiny of their business, say Amazon regularly asks them to allow print on demand for their slower-selling backlist titles. So far they’ve declined, suspecting that Amazon will use its print-on-demand ability to further tilt the economics of book publishing in its favor. Asking publishers to move to print on demand “is largely about taking control of the business,” says Mike Shatzkin, founder of Idea Logical, a consultant to book publishers on digital issues. “It adds some profit margin, but it also weakens the rest of the publishing universe.”

Print on demand has been around for more than a decade. In 1997, the largest book wholesaler in the U.S., now known as Ingram Content Group, started a division called Lightning Source to serve publishers who wanted to print limited copies of certain books. In 2005, Amazon acquired a rival print-on-demand provider, BookSurge, and began offering publishers the option of supplementing inventory with print-on-demand copies when physical volumes of a title sell out. Now called CreateSpace, the Amazon subsidiary mostly caters to small publishers and self-published authors. The technology has gotten better over time, and print-on-demand books are now indistinguishable from most paperbacks.

Read and learn more 

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04/24/2012

Digging Further Into the Intrigue RE the DOJ Investigation of the Big Six Publishers


Looking Into DOJ Intrigue

Have you ever asked yourself the question “If the DOJ had evidence against the big publishing houses, why didn’t they indict them criminally instead of just civilly?”

Hmmmm.  

Well, according to a former prosecutor for the DOJ, they could have prosecuted them criminally (seems he had prosecuted successfully on less evidence).

Could it be that some white-collar crimes are treated differently than others due to who is involved? A kind of class privilege pass, so to speak.

Of course this is true ! Especially to those living in the ‘real’ world.

Some intriguing details of this case are offered by former DOJ prosecutor, Carl Steinhouse in Naple News dot com:

The Humorous Side of the Law: No indicting an Apple?

The Department of Justice recently announced that it has sued civilly Apple, Barnes & Noble and a whole bunch of book publishers for conspiring to fix the price of e-books (digital books) to the consumer reader.

The target of this alleged conspiracy was Amazon, which had the temerity to discount e-books down to $9.99 and lower, and often at a loss to itself. This, of course, put competitive pressures not only on Amazon’s competitors having to match Amazon’s low prices, but upon the competitors’ suppliers, the book publishers, to lower their prices as well. This price cutting of Amazon had to go, they decided.

Before the alleged conspiracy, on the sale of an e-book, Amazon would pay the publisher the wholesale price for that title, with Amazon free to charge its customers whatever it wanted. Publishers were unhappy because their other customers, mostly bookstores, were screaming bloody murder about the unfair competition from Amazon. This put a publisher in a quandary. It could, on its own, refuse to sell to Amazon. But just one publisher refusing to deal with Amazon would not make much of an impression on Amazon and that publisher would stand to lose a lot of business from the world’s largest e-book reseller. But if a group of publishers did the same thingnow that would be a different kettle of fish, depriving Amazon of its stock in trade, at least in e-books.

Enter Appleand Steve Jobs. Apple, with its new entry into the digital landscape, the iPad, became part of the equation because it now offered e-books on its devices in competition with Amazon’s Kindle. As we all know, Jobs, may he rest in peace, was no blushing violet and not one to ever sit on his hands and let someone take a bite of his Apple. Apple was not in business to lose money on any of its products, and e-books, in its iBooks store, Jobs determined, were not to be the exception.

According to the Justice Department, Jobs got the publishers and some of Amazon’s competitors to meet in the private dining rooms at upscale New York restaurants and by emails to discuss how to stop Amazon from steeply discounting their e-books on Kindle. The government says the defendants hatched a plan to band together to force Amazon to change from buying under the traditional wholesale pricing to a so-called “agency pricing” where the publishers set the price and pay Amazon and all e-book sellers a 30 percent commission. If all of the major publishers did this, Amazon would be required to raise its price from the $9.99 and lower, that it had been charging.

Read and learn more

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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).

Read and learn more

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03/11/2012

Is the Justice Department’s Antitrust Division Allowing the Buying of Publishing Monopolies ?


Buying Publishing Monopolies?

It’s publishing intrigue time again 🙂 This time in the form of the wholesale model versus the agency model in digital publishing — OR, in other words,  Amazon versus Apple. 

Both models are monopolistic. The wholesale model allows the e-book retailer to fix a below cost (to them) flat price of $9.99 (very suspicious for future price gouging). The agency model allows the publishers to price-fix a higher, colluded price range. So, pick your poison or your monopoly. 

Which is better for the industry as a whole ? For the consumer ? For the financial sustainability of good writers and attracting future talent ? Etc., Etc., Etc. 

There are points on both sides of this issue, but one thing should remain clear while the Justice Department is trying to sort it all out:

Open and aggressive competition always promotes ingenuity, improved products, promotes quality industry growth AND  is the only safe and fair way to set prices. Something we have forgotten in a greedy rush to set or protect an unfair advantage or status quo.

 Washington Post columnist   gives an in-depth explanation of the publishing wholesale and agency models along with an insight into the industry politics and nuances involved in this flushing out of the new publishing landscape: 

Pick your monopoly: Apple or Amazon

As a general rule, we don’t prefer monopolies. We know that, over the long run, monopolists tend to raise prices, reduce choice and stifle innovation.

But are monopolies so bad that we might want to tolerate a little price-fixing by customers or suppliers in order to break them?

Could a little anti-competitive behavior actually be pro-competitive?

That is what five leading book publishers are arguing in explaining why they simultaneously accepted an offer from Apple, just before the release of the iPad, to change the way e-books are priced and distributed. Their actions moved the industry from a “wholesale” model, in which they sold e-books to retailers and let them set the retail price, to an “agency model,” in which the publishers set the retail price and pay the retailers a fixed commission on every sale. In the process, they managed to break up Amazon’s e-book monopoly and raise the price of online books by 30 to 40 percent.

Now you might ask at this point why breaking up a monopoly would raise prices rather than lower them.

The answer has to do with how Amazon went about building its e-book monopoly in the first place — namely, by setting a price that was lower than what Amazon was paying publishers for the book. What looked to consumers like a great bargain at $9.99 a book looked to others in the industry suspiciously like predatory pricing, or selling below cost today in order to gain a monopoly and raise prices in the future.

So which is better: a market in which Amazon uses low prices to maintain its e-book monopoly and drive brick-and-mortar bookstores out of business, or one in which the major book publishers, in tacit collusion with Apple, break Amazon’s monopoly and raise prices?

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