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TBI Research reports that not all major book publishers are enamored with the “agency model” being pushed by a number of publishers inspired by Apple’s forthcoming iPad tablet device and iBookstore online store to assert more control over their content.
However, one major book publisher we spoke with sees no reason to shift to that model right now or anytime in the near future.
The reason is that book publishers make less money from the agency model than they do from the traditional wholesale model (in which Amazon buys a book license at the full wholesale price, and then sells each copy for whatever it wants, often losing money on the sale). The agency model, therefore, also leaves publishers less money to pay authors and agents.
Despite the lower costs to consumers and higher revenues to publishers available under the existing pricing model, some publishers feel that the loss of control over their own content threatens the long-term viability of the publishing industry and have been striving to set their own pricing by adopting an agency model, with a 30% share of the sales price for each unit going to the distributors such as Amazon and Apple instead of selling units for a flat price and allowing distributors to set their own retail pricing. Rumored price points for new releases from publishers moving to the agency model have been in the $12.99-to-$14.99 range, while Amazon currently offers such releases at a maximum of $9.99.
The resistance on the part of at least one major publisher to the agency model could result in differing distribution arrangements with its partners, potentially allowing Amazon to undercut Apple’s prices for certain titles. But at the very least, the future of eBook pricing and Amazon’s dominant market position remain in flux as Apple prepares to enter the arena as a likely major player in the industry.