The eBook Wars: Agency & Winners

winners.jpgAs the dust continues to rise from the dispute that originated with Macmillan’s demand to Amazon to switch to an agency relationship, and to which Amazon quickly caved, I began wondering who are the winners and whether there are any losers. Contrary to popular perceptions, I think ebookers are the winners. There was, of course, an instigator to this mess. That award goes to Steve Jobs and Apple. Seeing an opportunity to give Amazon a black eye, returning the favor from the music days, Apple grabbed it, offering publishers the “agency” model. Although Macmillan and cohorts portray this as a battle for the soul of publishing, it really is a game of comeuppance between Apple and Amazon. But in doing so, I think Jobs, unwittingly, gave power to ebookers for the first time — a power that may ultimately haunt him and Apple, at least if they are serious about becoming a major player in the ebook-selling world.

I know that seems counterintuitive, but let’s look at the situation carefully. Before the agency model publishers were insulated from consumers by interveners, the wholesale distributors like Ingram and the retailers like Amazon. In one fell swoop, that protection, those insulating layers, were swept away, creating a direct link between publishers and ebookers. Now when ebookers squeeze, publishers will squeak.

When the intervening layers existed, consumer complaints about quality and price were directed at the bookseller, who could do nothing about the former and little about the latter. The idea of an ebook being unreturnable for any reason was tenable because the seller with whom the ebooker had a direct connection had no way to warrant anything to the ebooker. Retailers were insulated other than hearing low-key griping because there was nothing they could do; publishers were insulated because their “customers” were the retailers, not the ebookers.

This has now been turned topsy-turvy. Now it is the publisher who is directly warranting (even though impliedly rather than directly in so many words) to the ebooker that the product is reasonably fit for the purpose for which it is intended – not that the story is one that the ebooker will enjoy, but that there are minimal numbers of errors and that the ebook is readable and properly formatted. There are now implied warranties of merchantability and of fitness for use that go directly from the publisher to the ebooker, warranties that didn’t exist before because there was no direct connection between publisher and ebooker.

It won’t be long before a sharp lawyer sees the class action possibilities and starts circling. And even if this doesn’t become a matter of litigation between ebookers and publishers, raise enough noise on the viral Internet about how poorly edited or formatted a particular book is and you will see the author and the author/agent circling, because the publisher owes a duty to the author to produce a quality product.

Will this happen overnight? No. But it will happen because of the viral nature of the Internet. No publisher can afford to defend against the deadly combination of poor quality and unreasonably high price, when the combination spreads across a publisher’s line. Poor quality and high pricing seem to be more the rule than the exception in ebooks; it is easy to defend an exception but not rules — just ask Toyota.

Publishers defend high price by pointing out the extraordinary quality of the book; but when one is lacking the other has to give. Publisher margins are thin to begin with; imagine how much thinner they will be when the publisher has to start answering directly to ebookers about pricing and quality disequilibrium. Returns will become acceptable, although some mechanism will have to be worked out for it to occur. After all, the idea of a return is that the buyer gives up all possession of the returned item, something that is not so easily done with a digital file.

eBookers are probably less unified about pricing than they are about quality. I am more elastic about pricing than about quality. I am not opposed to paying a price higher than $14.99 for a high-quality ebook that I want, although I am unwilling to pay $5.99 for a poor quality ebook regardless of my interest in it. I believe that is true of most ebookers. There will always be a group who cannot be satisfied, but most ebookers are more middle-of-the-road — that is, more elastic about pricing than about quality.

Of course, as long as ebooks are greatly burdened with restrictions and as long as there is no assurance that the ebook purchased today will be readable on tomorrow’s ebook device, pricing is not as elastic as publishers would like (and it doesn’t help that publishers constantly ignore ebookers and refuse to address in open dialogue ebooker complaints).

eBookers are the winners under the agency model. They now have a direct connection with the publisher and can insist that price and quality be in equilibrium. Under the previous model, booksellers like Amazon didn’t care whether a particular ebook sold or didn’t sell — they had no investment in it. Under the agency model, the publisher who does have a direct investment in whether an ebook sells or not is the decision maker and is directly connected to ebookers and subject to ebooker pressure. Publishers need look no further than Toyota for a wakeup call.

Editor’s Note: Rich Adin is an editor and owner of Freelance Editorial Services, a provider of editorial and production services to publishers and authors. This is reprinted, with permission, from his An American Editor blog. PB

7 Comments on The eBook Wars: Agency & Winners

  1. Rich I am normally with you but must disagree with you strongly on several grounds. Consumers will have the same if not less influence regarding ebooks under the new system as opposed to the old one. Secondly, there is less price elasticity with ebooks than you believe.

  2. Alex, I’m not sure I understand what you mean when you say there is less elasticity about ebook pricing than I think. On whose part is there less elasticity?

    I think consumers will have more power. When Macmillan sold an ebook to Amazon with a list price of $25, it received $12.50, regardless of whether Amazon sold the ebook at $25 or at $1. Amazon could induce more sales and thus more gross profit for the publisher byu lowering the price. But now there is no assured purchaser or gross profit. Macmillan will set the price and the lower it has to set the price to get sales, the lower its gross profit. It has lost its insulation.

    Consequently, when consumers complain about a Macmillan ebook, Macmillan has less ability to ignore those complaints. Yes, it still can ignore them, just as Toyota ignored owner complaints, but as Toyota learned, at some point it catches up to you.

  3. Rich, that’s a lot of assumptions that the publishers will respond to consumers, just because there’s one less layer between them. Industry is rife with examples of companies that ignore the complaints of consumers right at their door, and literally sell and market around those complaints as if they are not there. We can’t assume publishers will just “see the light” and Be Good from now on.

    One of the major reasons we can’t assume that is, as you pointed out, the difficulty in “returning” an e-book. Until that process is possible, there is no reason for a publisher to respond to customers. They can just lay low after a public “incursion,” wait until the public’s well-documented short memory wears off, and go back to doing what they’ve always done.

  4. it will happen because of the viral nature of the Internet.

    That is a very interesting thought. Complaints about paper books are inevitably isolated and easily dismissed by publishers, but ebooks are different. By their very nature they encourage online discourse. Such features as your Hall of Shame, together with trashing in forums like MobileRead, will put much more pressure on publishers to get things right.

    And by “publishers” I mean everyone who issues ebooks for sale.

  5. Rich, what you say might be true if, deep down, we felt like we owned the book. But we don’t. We can use it as long as the DRM provider is operating. After that, only those to hack the DRM can still read thier books.

    And second, as long as we’re renting our books, deep down we’ll only pay rent prices. So long as publishers insist on selling, and not renting, there will be a big problem. Amazon seems to have solved it with the $9.99 compromise. With the agency model, publishers will want to pull the price up, customers will want to pull it down, and without the moderator, the system will either break, or come to a new compromise. The bad thing is, the agency pricing model pits the publisher against the consumer. The publisher, instead of being our friend in bringing us the works of great authors, are now the greedy enemy of the reader as some organize price boycotts, others set personal per-book spending limits.

    Seems to me the publisher would want a middleman, if only to deflect the appearance of being greedy onto someone else.

  6. “Damn those publishers and authors for expecting to make a profit on their work!” Marilynn said sarcastically.

    Money is the fuel that runs business, and publishing is a business, not a public charity. If it doesn’t make enough money, the publisher goes out of business. If the author doesn’t sell enough books, the publisher won’t buy the author’s next book.

    If the prices are too high, buy from another publisher. Loads of publishers sell books more cheaply than the $9.99 Amazon sweet spot. Put book from Double Dragon or Mundania on the bestseller list instead of the big publisher’s SF novel.

    Much of this debate revolves around a fundamental misunderstanding of copyright. You never own the content of a book whether it be paper or digital. The only person who owns it is the owner of the copyright which in most cases is the author.

    You can resell a paper book because you are selling paper, ink, and glue, not the content. Scanning a paper book and putting it online is illegal because you are stealing somone else’s copyright. You can’t resell a digital book because you don’t own the copyright.

    The only content you will ever own is what you write yourself.

    All of publishing runs on leasing the content by buying the paper or the digital edition so nothing has really changed in what the reader gets for his money.

  7. Well-said, Marilynn. A lot of this discussion (and many others ebook-related) dances around the fundamental truths of writing, publishing and content ownership. The sooner we get these truths straight, the sooner we can solve most of the problems that plague e-books, and get publishing efforts back on track.

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