Are The Sleeping Giants of Publishing Waking Up?

Are the sleeping giants of the publishing world finally waking up to realize someone stole their blanket overnight and they want it back? Macmillan and Hachette Livre seem to think so.
There is a new buzz word in publishing. It will not be the first this year, nor the last, but it might be the most significant and lasting one—AGENCY MODEL. No, much as it might be appealing to some, publishers are not going to drape their latest releases and market campaigns with seductively-clad glamour models. It is a new business strategy for publishers to deal with the development, pricing, timing and placement of e-books into the retail market for the reader. It is at the core of the dispute between Macmillan and Amazon over the past week. It is also reluctance on the part of large publishers to allow Amazon dictate terms of pricing to them. Amazon has their own gig—it’s called the Kindle, and Amazon have committed to the strategy of presenting e-books to the buying public at a standard price of $9.99.
The easiest thing in the world is to present Amazon as an e-tailer dictator, and some analysis over the past year has conveniently painted Amazon as the big corporate baddie in all this. The truth is Amazon’s natural vocation is to the development of their e-book platform – the Kindle. Their strategy reflects this and the overriding reason why the e-book reader has adopted it as the norm—for the most part over the past year—is because large publishers looked on e-books with uncertainty, lack of real commitment, and crucially, they lacked cohesion and a unified industry voice.
I have no doubt discussions by some of the largest publishing houses with Apple on their imminent launch of the iPad in March in the USA focussed corporate minds on the future of e-books in a way we would not have seen had it not been for Steve Jobs and his Motley Crew. We may have the issue of e-books continue to be pushed to the back-burner throughout 2010.
While Macmillan’s spat with Amazon may have accelerated things, David Young, CEO of Hachette US, made some comments in a round-table debate today at the American Booksellers Association’s Winter Institute conference which pretty much were a pre-emptive strike for the email communication he would send out later in the day to bookseller agents.

“There are many advantages to the agency model, for our authors, retailers, consumers, and publishers. It allows Hachette to make pricing decisions that are rational and reflect the value of our authors’ works. In the long run this will enable Hachette to continue to invest in and nurture authors’ careers–from major blockbusters to new voices. Without this investment in our authors, the diversity of books available to consumers will contract, as will the diversity of retailers, and our literary culture will suffer.”

David Young, Email to Bookseller Agents (courtesy of GalleyCat)

Young’s communication today is the first clear sign I have seen of a united strategy from the large publishers, and there is no doubt this was intended to present a platform of support to Macmillan in their dispute with Amazon.
So, what are publishers saying when they describe this Agent Model strategy?
Macmillan CEO, John Sargent, laid it out clear and simple last Saturday.

“Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.”

In simple terms, publishers are saying to Amazon and other bookseller agents; these are our books, you can have them at 30% commission, on our terms, not yours. We set the price on books individually, depending on our marketing strategy for each title. We will release the e-book (could be an enhanced edition) with the hardback, and decide when a standard e-book becomes available and at what price. The model Amazon uses for the Kindle is a classic retail product-line ‘lost leader’ approach. It is worth pointing out here that it is Amazon’s choice to sell books at the $9.99 standard. Books are sold to them from publishers based on the retail price less retailer discount. It is Amazon’s own business if they want to list a retail price for customers close or below their margin. Like all retailers, the greater discount given to Amazon, the greater terms you get back. But then, as I have long maintained, what destroyed the book industry throughout the 1990’s was allowing retailers dictate the terms of the publishing industry.
Here is a reminder of what I wrote on January 24th, ahead of the iPad launch, in relation to large publishers.

“Weinman is right to point to Amazon’s rigid restrictions on its new royalty initiative for authors and publishers, something authors may have a great deal more difficulty adhering to than they first might have thought on the wave of elation that greeted the announcement this week. The task for publishers to be the kingmakers in their own industry may be ultimately beyond them, but if there is one certainty on the rocky road ahead—publishers need authors on their side, and that includes the authors not on their lists, because the successful authors of tomorrow may very well turn out to be the self-publishing authors of today. That means publishers accepting they are no longer in charge of the keys to the gate. In the wake of a changing industry and the way we see publishing, with corporations like Amazon and Apple flexing their muscles, publishers need to embrace new models and platforms of publishing without dropping the ball. To retract to the stubbornness of attempting to apply an old model of business on to a new platform you don’t even own or control is tantamount to handing the industry to the wolves. To become a wolf – you must live with the wolves. May the battle commence…”

The Agent Model is only finding its feet. It will be interesting to see how quick its advocates can make the case in 2010.

The Wall Street Journal have just run with this story
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