The Current State of the Agency Model and Why It Matters: The Effect on Kindle Book Publishing

So, we’re back again to the conversation regarding the ever-unpopular Agency Model for pricing of Kindle and other eBooks.  For once we have some actual solid new developments, though not necessarily any major changes as a result yet.

First off we have Random House, the only major holdout up until this point, caving on the issue and joining the other publishers in abandoning the traditional wholesale pricing in favor of setting the price retailers can sell eBooks for directly.  While this isn’t precisely a surprise, it is a little disappointing.  The advantage in the short term is clear for the company, however, since it makes them eligible to sell their books through the semi-popular Kindle competition application, iBooks (more on the Kindle vs iPad situation another time).  The advantage may turn out to be less than useful in the long run, however, and not just because of the impact it will have on customer satisfaction.

This past week, European Union Antitrust regulators raided the offices of a number of publishers (at this time undisclosed) in furtherance of an investigation into potential breach of price fixing regulations by the adoption of the aforementioned Agency Model. Given the high levels of concern the EU has for avoiding restrictions of competition, these companies could be on the hook for enormous fines if they are found in violation.  While at this time there is no indication that anything more than investigation is happening, and certainly no charges are being filed, it has to be making people a bit nervous.

What amuses me most about all this is not the potential penalties that publishers may incur so much as how little I see them mattering in the long run.  See, the overall impact of the model seems to have been nothing more than an increasing interest in self-publishing and eBook piracy.  They’re really not doing themselves any favors.

The main argument in favor of the Agency model that I have heard seems to be directed specifically at Amazon and the Kindle.  Amazon’s known for taking new bestsellers and discounting them to near- or even below-cost and making up the difference on the bulk of other sales.  Given their success, probably good for business.  In order to improve their Kindle platform they were doing something similar with eBooks for a while.  It was just always cheaper to buy an eBook, which makes sense, right?  Publishers came to the conclusion that it was actually devaluing their property.  If customers came to expect eBooks to be cheap, then how could the publishing companies earn as much as they want?  Hence the current situation.

Do people actually pay for books that cost more digitally than they do in a hardcover, though?  Probably some, but you have to think it’s unlikely overall.  It isn’t all that hard to grab a copy of the book you want through alternate means when you feel it’s the only way to get the book you need without being taken advantage of, and I’m informed it’s becoming an increasingly popular choice. I don’t endorse piracy, but you can’t blame customers for this one.  You have to get value for your money, these days more than ever, and if the publisher doesn’t get that, then they’re responsible for costing both themselves and the author the sale.