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E-books and the Agency Agreement

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Sometimes it seems to me that the thing publishing does best of all is to get itself into a terrible mess.  New technologies always bring with them significant challenges to accepted custom and practice.  For years the music industry has spectacularly failed to control the development of the digital media, which, at different times, it tried to ignore, to outlaw, to appropriate and to exploit.  Many commentators believe the record companies have come to embrace it too late and will never now catch up with its onward march.

Book publishing hasn’t really gone about meeting its own digital challenges any better.  For years the e-book was talked about, often as something that would never materialise and, if it did, would never take off.  But even then, publishers were concerned enough to make sure that contractual provisions were made at least acknowledging possible future digital formats and establishing the terms for future negotiations.

When e-books became a reality the sheer size of the task of digitizing written content meant that the marketplace filled at a trickle rather than in a flood, meaning that the brave new world had very few books in it for a while.  Not an auspicious launch.

But something else that immediately struck me as wrong was the pricing.  Those early e-books were being put on sale at the same price as the paper versions.  Why would people pay the same for a virtual book, with none of the graphic design, physical presence, production and distribution costs accepted as part of the printed kind?  I always thought that in those early days e-books should have been given away as an add-on to the printed book.  That would have made readers feel they were getting something extra as well as ensuring the new format received very wide exposure very quickly.

Still, eventually e-books sales did start to grow as the technology and the gadgets became more attractive.  Price parity continued, but since the price restrictions of the Net Book Agreement had long been abandoned, that parity was possible at heavily discounted levels.  With some books regularly selling for less than half price, bestsellers became a bargain, and if the download was just as cheap this seemed to solve the pricing issue.

Personally I’ve always thought it madness to discount new lines – the only other creative industry that does it is the music business, and look what a mess they’re in. However, the discounting is here to stay.  We must live with it.  Or must we? 

In what seems to me a stupendously ill-judged attempt to revive the ghost of the Net Book Agreement, several major publishers have announced their adoption of the agency model of selling e-books.  Online retailers will no longer participate as wholesalers, buying at discount and selling at whatever price suits their margins.  Now the price will be set by the publishers and the retailers will simply take an agreed percentage commission for generating the sale.

But the Net Book Agreement worked because it applied universally.  You couldn’t go somewhere else to get a book cheaper. Under the agency model we have the absurdity of Stephen Fry’s new book selling on Amazon at £10.04 in paperback while the Kindle version is £12.99.  If you visit other retailers you find even bigger discrepancies.  Howard Jacobson’s Man Booker winner is £10.03 in hardback on Amazon, but £13.28 as an ebook at Waterstones.  Ken Follett’s new novel sees the same split: £10.00 hardback, £14.00 download.  Just have a browse – you’ll find loads of examples.

A statement from Amazon UK discussing its US experience says “when prices went up on agency-priced books, sales immediately shifted away from agency publishers and towards the rest of our store”. If there’s any truth in this it can’t be good for publishing. 

And if the agency model spreads it risks two serious outcomes: the first will be the undermining of the whole, legitimate digital publishing market; the second, as a consequence, and more serious, is the open invitation to piracy.  We have to learn the lessons of the music business.  Digital technology doesn’t simply affect the way we buy and the way we read.  It must also affect the way we sell.

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