BEA: A conversation about the agency model

Michael Cader, Publishers Lunch; Bob Kohn, Royaltyshare; Dominique Raccah, Sourcebooks; Scott Lubeck, moderator, Book Industry Study Group

Raccah: we must experiment with business models, different approaches, royalty structures. Unclear that this should be called an agency model. Remember that Google Editions will enter the market soon and this may cause more model changes. Clearly in transition and evolving. Wants to test this model with all sorts of different businesses because this is very new and don’t how it will work out in different segments and markets. Google Editions will be acting as a real wholesaler in their model.

Kohn: comes from the music industry. He’s the guy who started eMusic. Was never really adopted in the music industry. Model is good for Amazon, Apple and other retailers because it levels the playing field. Amazon was losing money on ebooks and now is making money on them. From a theoretical perspective is a good mode from the perspective of publishers and retailers. Publishers who haven’t it feel that it isn’t a clear model yet: can’t fully control prices, 30% commission is too high, publishers not getting the information about the consumers that they would normally expect. Publishers can only set the price within certain bands and then if book hits bestseller list have to comply with another pricing band. Google will be forced to join agency model as well and this is a good reign Google in as well.

Cader: very complex to implement because completely new and so being worked out on the fly. The “agent” doesn’t buy the book, act as a commission sales rep and the first consequence of this was sales tax. Some publishers collecting everywhere and some have different interpretations of what is necessary to collect. Raises problems on author royalty side and how to interpret that amount payable. Theoretically, a wholesale model doesn’t make sense in world of digital goods because wholesaler doesn’t do any of the things a normal wholesaler does. Publishers didn’t get the full control over prices that they wanted from Apple. Agency contracts that have been negotiated are relatively short term and so may see some changes pretty soon. Publishers taking over liability and customer service requirements that they are not accustomed to. Model is causing major problems with publishers who have most favored nations clauses in other contracts. Apple has no book experience so don’t know that they will do in the future.