Thursday, October 14, 2010
Agency Pricing: Amazon UK Tells its Customers Who Is To Blame For Higher Prices
Below is a letter from the Kindle team in the UK to their staff. Its a pity its not taken as an advert page in the broadsheets as it clearly states the case from the consumer perspective and that is a hard one to argue against. The case for mid and back list authors would be just as compelling.
Recently, you may have heard that a small group of UK publishers will require booksellers to adopt an "agency model" for selling e-books. Under this model, publishers set the consumer price for each e-book and require any bookseller to sell at that price. This is unlike the traditional wholesale model that's been in place for decades, where booksellers set consumer prices.
It is indeed correct that this group of publishers will require Amazon and other UK booksellers to accept an agency model for e-books. We believe they will raise prices on e-books for consumers almost across the board. For a number of reasons, we think this is a damaging approach for readers, authors, booksellers and publishers alike.
In the US, a few large publishers have already forced such a model on all US booksellers and readers. You can read the thread we posted about that change here:
As we're now faced with a similar situation in the UK, we wanted to share our thinking and some details about what we have observed from our experience in the US.
First, as we feared, the US agency publishers (Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster) raised digital book prices almost across the board. These price increases were not only on new books, but on older, "backlist" books as well (in the industry, "backlist" books are often defined as books that have been published more than a year ago). Based on our experience as a bookseller setting consumer prices for many years, we know that these increases have not only frustrated readers, but have caused booksellers, publishers and authors alike to lose sales.
There is some good news to report. Publishing is not a monolithic industry - there are many publishers of all sizes taking a wide range of approaches to e-books. And most publishers in the US have continued to sell e-books to us and other booksellers under traditional wholesale terms. They make up the vast majority of our Kindle bookstore - as a simple proxy, in our US store 79 of 107 New York Times bestsellers are priced at $9.99 (£6.31 GBP) or less, and across the whole US store over 585,000 of 718,000 US titles are priced at $9.99 or less.
Unsurprisingly, when prices went up on agency-priced books, sales immediately shifted away from agency publishers and towards the rest of our store. In fact, since agency prices went into effect on some e-books in the US, unit sales of books priced under the agency model have slowed to nearly half the rate of growth of the rest of Kindle book sales. This is a significant difference, as the growth of the total Kindle business has been substantial - up to the end of September, we've sold more than three times as many Kindle books in 2010 as we did up to the end of September in 2009. And in the US, Kindle editions now outsell hardcover editions, even while our hardcover business is growing.
In the UK, we will continue to fight against higher prices for e-books, and have been urging publishers considering agency not to needlessly impose price increases on consumers. In any case, we expect UK customers to enjoy low prices on the vast majority of titles we sell, and if faced with a small group of higher-priced agency titles, they will then decide for themselves how much they are willing to pay for e-books, and vote with their purchases.
Thank you for being a customer,
The Kindle UK Team
Comments are already being posted against the letter. To read the letter and comments posted