Why I Never Trusted The Big Publishers with Ebook Agency Pricing

Posted on January 21, 2011
Filed Under books | 4 Comments

This subject has become my hobby horse lately. While we’ve got it out, I might as well ride it until I get splinters in my butt.

One of the rationalizations from the Big 5 publishers who are doing agency pricing with the ebook editions of their books was that “they would be able to better respond to the marketplace and adjust prices accordingly.” Macmillan’s John Sargent, he of the opposing side of the infamous Amazon delisting crisis of 2010, made a post to his blog that included this paragraph:

For physical books, the majority of new release hardcovers are published in cheaper paperback versions over time. We will mirror this price reduction in the digital world. It is too early to estimate the timing of the price reductions for those cases in which we do not issue a paperback edition. If we do issue a paperback, we will drop the digital price to $9.99 or lower at publication date (if not before). The price differential between the book and the e-book will become smaller at the lower price points.

That sounds great, if it were actually to be happen. My faith in that was close to zero. One of my takeaways of the whole struggle as someone totally on the outside is that the publishers wanted more control of the retail experience in the case of ebooks, and that this probably was going to end poorly for them. My take was and is that publishers think they understand their customers, but in fact have spent the 20th century isolating themselves from them through the layers of distribution. (For writers, add one step further away from the endpoint of the customer.) Their self-image of an industry is that they understand the customer and have a relationship with them, but in practice they don’t. Here’s an example – suppose Macmillan wanted to get in touch with people who have purchased a Macmillan book in the last year and offer them special deals. Could they do that? No? OK then. Could Amazon or Barnes and Noble? To some extent they could, the latter if you were a B&N club member I’m guessing and the former for books bought through them. The publishers, not so much.

Here’s another concrete example of price policy gone awry, since I’m enjoying presenting these. I’ve been a fan of Max Allan Collins since I was 12 years old and he was writing the Dick Tracy comic strip. His mystery novels are some of my comfort reading – not high art but they don’t have to be. I just enjoy them. I happened to notice that his novel A Killing in Comics is available on Kindle at the price of $11.99. This is a book that was published in 2007. Worse than that, I bought a paper copy in remainders for $2.99 right at two years ago. Whatever it’s reasonable print life might be, that is over enough that the publisher sold it to a book discounter for less than a quarter on the dollar yet at time of this posting the ebook is still priced at $11.99. Now, this book is Penguin so I’m not blaming Sargent or his organization directly as responsible for this particular instance. I am pointing out that agency pricing was sold by the big publishers as A Thing That Will Happen and It Might Smell Like Medicine But Is Good For You, You Fussy Children AKA “our customers.” It doesn’t take too many of these examples where I begin to build a brand contempt for the companies who claim they are ultimately helping me while clearly price gouging me.

I never believed Sargent’s statement because I doubt anyone at these publishing houses 1) cares much about lowering prices 2) is getting paid to lower prices of books or even make sure they are appropriate with the lifecycle of the print version or 3) even have that much control over their catalog. If I hazarded a guess as an uniformed outsider, they splat it out there and then generally leave it for all but the most high profile writers. The midlist writers like Collins probably don’t get a lot of attention in that process.

One of the big debates is “if books are self-published how do I know they aren’t crap?” Well, big publisher books can also be crap and the Kindle version can cost four times what a lot of the self-published books are. Maybe you come out to the good by getting four rolls of the dice for your money. That’s why the sample was invented.

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4 Responses to “Why I Never Trusted The Big Publishers with Ebook Agency Pricing”

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  1. Howard on January 21st, 2011 5:37 pm

    The Agency Pricing is a scheme designed by the Big Publishers (hereafter referred to as the ‘Publishers’) who are clueless and it was sold on the basis of a lie.

    What annoys the hell out of me is that the Publishers don’t even know what is good for them and their industry and their Authors. I don’t believe for a minute that Agency Pricing is good for either the Publishers, the Agents or the Writers. Tens of thousands of titles are being over priced and under sold. It’s insanity.

    Why don’t they realise ? because they are stuck in a mind set that is caked in the detritus of their 20th century business model, and the only strategy their so-called leaders can get their heads around is one of uber-safety.

    Keeping the price high ensures they have profits rolling in, which satisfies their investors and keeps their necks safe. The eBooks are costing them diddly squat and it’s all cream. Meanwhile masses of titles are underselling and authors are screwed.

    There appears to be a mix of causes that is feeding into this behaviour, imho. I suspect there is a calculation going on their minds that this is still the ‘early adopter’ phase and the early adopters have plenty of money to spend. Keeping the prices high rakes in super profits that are ‘satisfactory’. Another thing that appears to be feeding into this is the apparent disease of ‘value’ that we read about from authors on a regular basis. “Titles represent long hours of blood sweat and toil … and it is an insult to the writer to sell their precious title at any price under 9.99″
    Added to these two ingredients is of course the old chestnut of ‘control’. Suddenly they have control over customer pricing, after so long when customer prices were controlled by the retailer. It has gotten them drunk with power and it has gone to their heads.

    As a corollary, and commenting as an outsider to the Publishing business, I cannot help thinking that the RRP system used to calculate royalties to writers is contributing to mess. As someone who has spent several decades in the financial/ management domains of SMEs I cannot understand why this calculation method is persisted with in a modern wholesale/retail commercial world. It is a system that drives the Publisher to seek high retail prices because they are stuck with a high royalty rate. If the retail price is dropped the Publisher is stuck with the same royalty while it’s income stream collapses. It’s insane. And both the Author and the Publisher loses.

    ALL royalty contracts should have their royalty calculations based on one simple figure, the Net Income that comes to the Publisher after a list of agreed deductions are made. This allows prices to be raised or dropped by the people who understand the market, the retailers, and it allows prices to adjust to the ‘sweet spot’ we often talk about, without punishing either the Author or the Publisher. Sales numbers can then be maximised and earnings alongside.

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  3. Ken Kennedy on January 22nd, 2011 1:32 pm

    Keep riding this horse, Dave…you’re nailing it, and I’m right there with you. The publishers are mostly clueless, scared, and have their heads stuck in the sand. They don’t understand what’s happening (organizationally…many of them have very intelligent people inside who grok it all), and are running towards illusory “safety”. Safety that’s just hastening their irrelevance, IMO.

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  5. jill on January 23rd, 2011 6:17 pm

    In all reality, it doesn’t matter what we think of the ebook pricing but we do have the option of buying a paper book or ebook. Convenience to ebooks is grand but at present it is still somewhat limited. If the costs bothers you maybe you should purchase only paper books and keep them for future antiques. After all it does look as if they may become obsolete. God help students if this happens. The lack of funds and quality internet service will cause the education reform of today looking great.

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  7. Max Allan Collins on January 24th, 2011 11:01 am

    I couldn’t agree more about the ridiculously high pricing of A KILLING IN COMICS and STRIP FOR MURDER. I’m losing sales and readers every day because of this stupidity. Maybe they think they can kill e-books this way.

    I’m going to be reprinting some of my own stuff soon at a non-ridiculous price.