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By Paul Biba

DSCF1003.JPGErica Lazzaro, Overdrive; Bob LiVolsi, Books on Board; Andrew Weinstein, Ingram.

Lazzaro: what new model meant to Overdrive. Expect that the agency model will be extended into international markets beyond Canada. Several countries around the world already use fixed pricing, i.e., Germany. Some new requirements: agent must enforce required ebook price; agent collects sales tax. Sales tax is a huge amount of work. Must display that the seller is really the publisher. Must deal with price changes from publishers and effective dates of price changes. Never had to do this before. Had to renegotiate all the wholesale contracts they had with publishers. Retail partners had to capture a lot of new information to report back to the publishers, especially around taxes.

LilVolsi: were without product for 7 weeks and that was on products that accounted for 51% of product in Q1. Agency successfully addressed the predatory pricing of Amazon and B&n and others. Forced industry to bend to Apple as part of the cure. Pulled key demand building tools from retailers. Did we apply a neck tourniquet to stop an nosebleed? Had to change revenue recognition on P&Ls. Publishers overlooked the wholesale channel and they acknowledge it. Our market basket prices up about 18% plus sales tax. Hurts our customers. Our customers loose benefit earned in loyalty problems. Random House sales up by 40% and Harlequin and Sourcebooks sales up because they didn’t go to agency model. Results of a survey of their customers on buying influences other than content: loyalty to retailer; perception of discount and price point. Margin is more predictable now and this is good for ebook retailers. Publishers brought Apple into the market by guaranteeing Apple margins. Apple and Amazon now both each bigger than the entire book industry. As a retailer want more independent publishers and will promote them. Sourcebooks, for example, was not a much on our radar, but after agency model brought them to the front and has been beneficial for both. Think their margins will go down by a point and a half and think that average selling price will go up. At end of the day will be OK as an ebook retailer.

Weinstein: Ingram still in the middle in the new model, but now doing it in multiple business models – agency for some and wholesaler for others. Problems: changes a business model that has been operating for over 10 years in just a month; rushed implementation/transition, had to pull some titles for sales and pull some books from download. Uses to sign one contract with a sales outlet, now must have multiple contracts – one for each agency publisher. Metadata must now absolutely updated daily. Sales tax requirements different for each publisher. Retailers can no longer use price to market to consumers and Ingram must monitor this. Too new for there to be any best practices yet.

 
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