Thursday, March 25, 2010

Agency Pricing; The Great Leveller?

Publishers Lunch raised an interesting aspect of the new Agency Model yesterday. Their report claims that the new agency model will be applied equally to all, irrespective of size, channel whether they sell direct or indirect. The implication is that wholesalers such as Ingram will be treated no different to resellers such as Apple.Apparently, Ingram have sent a letter to some 65 retailers that the company serves alerting them that they will have to discontinue the availability of ebook titles from all publishers wishing to do business under an agency model and enter into new agency agreements.

In one move, major and minor ebook outlets could be effectively marginalised. The move means that wholesalers will have to move to the same agency model and terms as others such as Apple and Amazon and if they supply resellers they have to do so within the same agency share. Ingram expects to continue serving its ebook retail clients under the new agreements with publishers. However, they now expect to have to share the 30% agency commission with no movement.

So when some stand on their pulpits and say that the agency model makes it a level playing field for all, they appear to have forgotten the existing trade channel. So much for publishers supporting the existing channel and in enabling resellers to participate in ebooks and the digital world. This channel can’t afford to build the repositories to be independent and they rely heavily on the wholesaler model to supply them economically. Equally the wholesalers rely on the wholesaler model to justify their huge digital investments. Some would conclude that agency publishers only are focused on supporting the big digital channels and not in supporting the existing channels in a digital world.

We hope that in a few years time they don’t look around the digital lansdscape and wonder who killed to independent and medium chains and prohibited them from participating in the ebook market.


Chris Nicholl said...

Interesting post. Thanks. Realistically though, was the existing sales channel of physical books ever going to get into ebooks in a major way.

p.s. I think the last sentence of your first para should read - ...from all publishers wishing to do business under a WHOLESALE model and enter into new agency agreements.

Martyn Daniels said...

Chris thanks

The premise of the Brave new World report was to establish if and how resellers could participate. The wholesale route is both logical and feasible and there is NO reason why any reseller should not sell ebooks today.

It is no different to the white label facilities many enjoy on the internet. The wholesale operations facilitate both physical and digital aggregation and trading terms should be consistent.

What is being suggested is that digital books flow through Apple, Amazon, B&N, Google - i would suggest to be careful what you wish for.

The other issue is that these new aggregators all gain form the agency model and loose under the wholesale model.

Is it

Unknown said...

Very interesting.

I think that traditional resellers can have their mission in the digital world if they create value in the chain and extend their current role with the digital mindset.

There is a phenomenal tissue of thousands of entrepreneurs, independant publishers and resellers worldwide involved in the chain since centuries. Why would that change dramatically in the digital world if they succeed in reinventing themselves and create value for their customers?

I think that thousands of smaller booksellers will contribute in having a wider range of products available and make sure that we have diversity in the offer and not only a best-seller driven market.

They however need tools to be able to enter the digital world and have access cost-effectively to the same tools that major groups have.

We have developed at De Marque ( a set of tools for independant publishers to enter the digital world. It currently works very well in the French world and we are thinking of launching the offer (based on SaaS) on the global market.