In all the hullaballoo over agency ebook pricing and how terrible it is to not allow ebooksellers like Amazon to discount ebooks and sell them at whatever price they want, even if it is at a loss, ebookers haven’t questioned the lack of dynamic pricing of ereaders themselves, especially that of Amazon’s Kindles.

Consider this: Every store that sells an Amazon Kindle sells it for exactly the same price as Amazon and every other retailer. And when one retailer has it on sale for $20 off, so does every other retailer. (This is also true of the Sony, Kobo, and Nook devices.)

Why aren’t ebookers complaining about this price-fixing? No, I’m not suggesting there is collusion between the companies to prohibit discounting of the devices. Rather, I find it disingenuous that agency pricing, which is a form of price-fixing, is so disliked among some ebookers that they complain about it and want it banned, yet no one has complained about the lack of price competition when it comes to the device to read the ebooks. Why is it OK for Amazon to price fix but not Macmillan?

I’m sure the immediate response will be that there is no complaint because the prices on these devices have dropped to where they are now half or less of the original cost. If that is the key to salvation, then all Macmillan needs to do is drop the price of an ebook from $12.99 to $10.99 and ebookers should be satisfied — after all a drop in price is a drop in price — but I know that would not satisfy. Why? Because the argument would be made that the ebook price would be even lower if true free-market competition were allowed.

So why isn’t that the ebooker argument when it comes to the devices? I could see, for example, Staples offering a free Kindle with the purchase of a $150 paper shredder, or Target offering a 50% discount on a Kindle with the purchase of Stephen King’s newest novel. But we don’t see those sales because Amazon is not ready to sell at those prices itself and no one is allowed to undersell Amazon.

If the argument against agency pricing is legitimately one against price-fixing, why doesn’t the argument carry over to the devices? What makes it OK in one category of product but not in a related category of product? When agency pricing is attacked, it is usually on the basis that it has caused ebook prices to rise.

There has been no comprehensive pricing study done, that I am aware of, to determine whether the cost of ebooks has risen, fallen, or stayed the same since the introduction of agency pricing across the entire spectrum of ebooks published by agency-pricing publishers. I know, for example, that many of the ebooks I buy cost less under agency pricing and I also know that the prices of bestsellers that Amazon sold at $9.99 have risen under agency pricing. What I don’t know is whether across the spectrum of agency-pricing publishers’ ebooks, as opposed to niches, prices have risen, fallen, or stayed the same. I think this is important information to have so that we can intelligently determine whether agency pricing is consequential or inconsequential.

It seems fairly clear to me that opponents to agency pricing fall into a few groups. There is a small group of ebookers who are free-marketers and believe everything should be priced elastically, based on demand — the libertarians of the marketplace who oppose agency pricing because it is controlled pricing. A second group of opponents are those whose reading now costs more because they only read/buy books that fall into the niches where agency pricing has caused prices to rise, such as the Amazon bestseller niche. It isn’t so much that they are opposed to agency pricing as they are opposed to the increase in pricing and assume that Amazon would, if it could, charge a lot less for the books they want to read and buy in the absence of agency pricing. The third group assumes that because prices in one niche increased under agency pricing that all prices increased and thus are opposed to agency pricing because it caused a rising tide of prices.

These same arguments can be made when it comes to the devices: In the absence of Amazon price-fixing its Kindles, WalMart would sell the Kindles for less; there would be a Kindle price war between WalMart and Target; Staples would offer package deals; and so on. On this, I would think all of the anti-agency-pricing ebookers would unite to lambast the device price-fixing. But here silence reigns.

I’m sure someone will point out to me how different these products are; how one doesn’t have to buy a Kindle to read an ebook bought from Amazon; how, instead, one could download a free app and read the ebook on one’s computer or tablet. I’m sure the point will be made that you don’t need the Kindle but you need the ebook in order to read it. It’s all true, but doesn’t change the fundamental points:

  1. There are no objective data to demonstrate whether agency pricing overall has raised, lowered, or done nothing to ebook prices except in niches.
  2. There are no objective data to demonstrate that in the absence of Amazon’s device price-fixing that the Kindle would not be available for less, even free.
  3. Whether price-fixing is OK or not OK should not be dependant on who is doing the fixing; that is, OK if Amazon is doing it, not OK if the big publishers are doing it.

Never discussed are what obligations the price fixers have, if any, to the consumer. Do publishers have an obligation to sell ebooks at price points that consumers want? Does Amazon have an obligation to free-market its Kindles?

Isn’t it interesting that without meeting ebooker demands as regards agency pricing the sales of agency-priced ebooks steadily grow? Isn’t it interesting that the freedom Amazon wants to price ebooks as it wishes Amazon isn’t willing to give to retailers of its Kindles? Isn’t it interesting that ebookers see no conflict in their demand for the end of agency pricing and their willingness to accept Amazon’s control of Kindle pricing?

We live in fascinating times!

(Via An American Editor.)


  1. The difference is obvious: Amazon isn’t colluding with its competitors to keep the prices of their goods artificially high. Your example is apples to applesauce, at best.

    The issue that consumers have had with agency is not that the publishers get to determine their prices and that retailers have to honor them. It’s that the prices in which they’ve set them are perceived to be too high.

  2. I like the point of your article, but an appeal to consistency won’t get you far today. One characteristic of our culture is all the “Do as as I say not as I do.” Celebrities want you and I to get about in tiny cars powered by squirrels, while they fly in private jets. Amazon wants to end agency pricing for ebooks while fixing the price of its Kindles. We live in an age of hypocrisy.

    Odd as it sounds, while the threat of Amazon controlling the ebook market led the big six publishers, encouraged by Steve Jobs, to turn to agency pricing, what may keep in around despite the folly of DOJ lawyers, is the fact that small publishers and independent authors are coming to love it. That’s why Smashwords found its authors demanding it.

    For paper books, the final price of the book is heavily influenced by the cost of printing, storage and distribution. If that costs $5, it’s folly to sell the book for less that $5+ something-to-pay-the-rent. But ebooks don’t suffer from that restriction. Since each single copy costs nothing, what a savvy author focuses on total income. If selling it for 99 cents will earn him $1000 a month and selling if for $1.99 earns $800, the lower price actually makes more sense. That’s why agency pricing, contra the DOJ, doesn’t automatically mean higher prices. What it means is a balance in prices that makes readers and authors happy.

    And for authors, the key to optimal pricing is the ability to dictate the actual selling price. It does little good if an author’s price is a mere suggestion. He may try a lower price to see what effect it has, but if Amazon, B&N, and Kobo, all with robots looking at the other’s pricing, don’t cut prices, he won’t be able to test a new price. Any sales data he has becomes worthless.

    According to Mark Coker, what many authors, particularly successful fictional authors, are doing is give the first book in their series away. That allows readers a risk-free way to see if they like an author. If they do, Coker says, they’re typically willing to pay from $2.95 up for the sequels. Lousy authors, of course, get few repeat sales. The result is good for everyone. Talented writers get noticed and earn the income they deserve. Lousy writers fade away.

    But the key to this new way of marketing books is to pricing pricing in the hands of authors and small publishers. Amazon, B&N, and their kin aren’t interested in authors. They’re interested in their bottom line. If they can make more hyping a talentless celebrity author, they will. And if they do, then the quality of the books we read will go downhill.

  3. Apples and oranges. An individual producer can set their price to anything they like. What’s illegal is for a group of producers to collude to set prices, and that’s what the government is alleging.

    Amazon is an individual company, not a group of companies, so his argument does not apply.

    A better analog of the alleged price-fixing situation with books would be if Apple, Amazon, B&N, Sony, and the various Android companies came up with a “gentleman’s agreement” to sell no ebook device for less than $500. They haven’t done that or anything remotely like it.,

  4. Just hasn’t been a very reality-based week here at Teleread. First the (to be kind) misinformed rant about the Kindle Android app, and now this. I won’t bother to discuss the argument presented, since it’s fundamentally flawed – the Staples three blocks from my apartment is selling new-in-box Kindles for 50 bucks less than Amazon does, which rather renders the rest moot.

    If I wanted to “screw the facts, here’s my uninformed opinion” I’d be reading Murdoch papers.

  5. This is a pretty easy one. Amazon would love for retailers to mark Kindles below cost. They still make the same money AND it gets more Kindles in peoples hands to buy eBooks from them. How does that compare in the least way to Agency Pricing?

  6. vaughan – indeed so. At the end of this rambling moan one is left with really only one conclusion, which is that the author appears to have no meaningful understanding of commerce and business.

  7. My local Staples is selling the (ad-free) 3G Touch for $139 compared to $189 for the same model direct from Amazon (yes, I checked. Yes, it’s the 3G model. No, it’s not the ad-supported one). Rather torpedoes the rant.

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