Why the agency model is flawed

When the 'agency model' agreement landed on my desk last week, I was reminded of the conversations I had with music publishers 5 years ago.

Music publishers were trying to grab as much control over distribution (via DRM) and pricing in the hope it would then take longer for the market to take back control of things.  A rather Pyrrhic victory as it turned out, it just created a boom in piracy. Furthermore, musicians and their publishers have more options than authors when sales are threatened, they can go on tour and earn money outside of album and single sales. I don't think tours and gigs will work for authors, but you never know, it could be fun.  So there are differences.

The problems with the agency model really boil down to:

First, Price Fixing, illegal at worst, highly suspect at best and not really in the interests of the consumer.  I would say that at least 50% of emails to our customer services are "Why are ebooks more expensive than paperbacks, are you mad?" The next 49% are complaints about DRM and Digital Editions...

There you have it, the two biggest hurdles for our ebook customers to jump, unrealistic pricing and fiddly restrictions. This is made worse by consumer experience of music downloads.

To be fair, the current book industry practice of having an RRP and setting a "discount from the RRP" pretty much dictates the selling price of a book anyway, based on perceived value to the consumer. It all seems a bit arbitrary. As an independent, small, ebookseller, price fixing is actually quite handy for us as it levels the playing field and we don't have to compete on price. But this is beside the point.

Secondly, this agreement makes a retailer an agent. An agent does not to have to run expensive customer service operation and has limited requirement to add value. This is a bit like an affiliate in the online world.

Will Hachette (and others) provide a full customer service operation to support their "agents"?
Why don't they just set up a glorified affiliate scheme and we just direct traffic to them and they pay us a commission that way?

Finally, there is an argument that Agency agreements protect authors. Authors really do get a raw deal out the existing setup, but fixing prices is not the way to make it better, unless the same approach is applied to physical books (God forbid).

The cost price of a book to retailers should reflect a fair level of remuneration for an author, the balance being a fair assessment of publisher costs and profit expectations.

Removing the concept of RRP and working off a basic cost model would be much more effective in protecting authors. Discount off RRP is a silly way of doing things and opens publishers to massive amounts of pressure from retailers. This is purely because a discount off a stated RRP gives the retailer a yardstick by which to push for more discount.

If retailers were presented with a set cost price that was non-negotiable and allowed to sell at a price they want, it would be much fairer on the author and publisher. From personal experience this works rather well in most other retail industries.

Comments

ebook pricing

Matt, I think you are spot on here.  Agency model seems a short term backward step by publishers to protect against cannibalisation but if they "get" how to position and market e-books and/or market forces, i.e. customers (and possibly authors), will probably force them back to cost plus pricing model.

What is also interesting is that earlier this month WH Smith announced ebooks sales would only be made to UK residents "due to taxation and contractual issues"  Is this being forced on them by publishers or distributors (I think Overdrive is their main supplier of ebooks).  Is someone trying to divi up the ebook market by territory - rather like they tried with DVDs?  What happens to suppliers ,like Book Depository who are Guersney based (no VAT) - who can they sell to?

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