An American Editor

March 2, 2011

Waiting for Common Sense — Not: The Agency 6

It used to be the Agency 5, now it’s the Agency 6 as Random House has caved and instituted agency pricing. This further changes my book-buying habits.

Let me start by saying that I am not outright opposed to the agency system. What I am opposed to — and appalled by — is the pricing. Granted that Agency 6 pricing clearly demonstrates lack of competition bordering on price collusion (Isn’t it amazing how similar the Agency 6 ebook pricing is across the board?), but that isn’t the primary problem I have: The primary problem is that the selected price points are extortionate considering the restrictions imposed in the license (and note that it is a changeable, revocable license). Compound this with Rupert Murdoch’s greedy ploy, through his HarperCollins subsidiary, aimed at libraries, the last bastion for education of the poor, and what you have is a devil’s cabal.

(In an interesting aside, Murdoch’s Fox News has been denied access to Canadian TV because of its lack of impartiality. See Regulators Reject Proposal That Would Bring Fox-Style News to Canada. Maybe that is why he feels he needs to bleed American libraries — to make up for lost revenues and bias outlets.)

In the past I have spent significant sums of money building both my hardcover library and my cache of ebooks. It wasn’t so long ago that I could be counted on to spend $5,000 or more in a year on such purchases. The Agency 5 put a big dent in that spending. I felt compelled — if not honor bound — not to buy books, p- or ebooks, published by the Agency 5 (except where necessary because I already had several volumes in an ongoing series). So I focused my purchases on self-published, indie presses, academic presses, and Random House books. The consequence was that my expenditures on new releases dropped by more than 50% last year.

With Random House now part of the Agency cabal, my habits will shift yet again. If I want a new release in hardcover, I will wait to buy it on the remainder or the used book market, when I know that neither one of the Agency 6 nor their author will receive any compensation. But my ebook buying will (and has been) change even more dramatically.

A good example of the change occurred yesterday. Yesterday, the long-awaited second volume in Patrick Rothfuss’ Kingkiller Chronicles (the first volume was The Name of the Wind; the second volume is The Wise Man’s Fear) was released. My previous practice was to buy both the hardcover and the ebook versions; not this time, however. This time I bought just the hardcover because of the agency pricing (the ebook is virtually the same price as the hardcover and no ebookseller can sell it for a price lower than $14.99, which is exorbitant).

That is but one example. Increasingly, I am only “buying” free ebooks and ebooks that cost $2.99 or less, and those I am buying from Smashwords. The reason I buy from Smashwords is that most authors let you sample their work before you buy, some offering up to 75% of the ebook as a free sample. I admit that in the case of the free ebooks I don’t sample them, I simply download those that seem interesting, but for those that do cost some money, I generally read a portion of the sample before buying.

At Smashwords I discovered several self-publishing authors whose works are excellent. Granted they do not have the cachet of a Stephen King, J.D. Robb, or Robin Hobb, but they do know how to write a compelling story. A good example is Safina Desforges’ Sugar & Spice, a 99¢ mystery/thriller that compares well to any P.D. James novel.

The point is that the setting of exorbitant pricing by the Agency 6 has compelled me to look elsewhere for book purchases. Money that I previously spent supporting the traditional publishers is now going elsewhere — and it is costing me less yet giving me comparable enjoyment.

Yet there is one more thing that has to be said about the agency system. Currently, it is limited to ebooks. But that doesn’t make a lot of sense to me over the long run.

Under the more traditional wholesale system, the publisher sets a retail price for a book and the bookseller pays to the publisher approximately 50% of that wholesale price for each copy sold, regardless of the price that the consumer pays. (Yes, there are more wrinkles in the system, but I’m simplifying it for this discussion.) This is how it started with ebooks. The excuse for going to the agency system where the publisher sets the retail price below which no ebook can be sold and which pays the bookseller a fee for each sale was that low ebook pricing devalued the book and its content.

If that is a valid and sustainable argument, how does low pricing of the hardcover not devalue the book and its contents, too? Logically, there can be no difference. After all, a book is bought for its content, not for its package, and supposedly the content of the p- and ebooks are identical.

What this means to me is that we are the road to a major shakeup in the book industry. I think the agency system is only beginning with ebooks and will either have to be abandoned for ebooks or spread to pbooks. Although agency pricing has not been a big win so far, spreading it to pbooks could solve a major problem for publishers — the problem of returns, which would also solve the problem of excessive book print runs and remainders, and minimize the secondary market.

With the Agency 6 controlling more than half the publishing market overall and probably 75% or greater of the nonfiction market, the path they take could well become — and quickly — the path that smaller publishers take. The bulwark against the spread of agency pricing is the self-publishing market, but that market has to find ways of uniformly increasing its standards before it will supplant the traditional publishers.

In the end, it is clear that the Agency 6 lack common sense. At the same time that one or more of the Agency 6 publishers expects ebooks to grow to as much as 20% of all book sales in 2011, they try to thwart the one avenue of growth by imposing extortionate prices and limiting competition. Simultaneously, they allow the wholesale model to continue for pbooks, thereby devaluing their product and its content. Some day they will get it together; unfortunately, when that day comes, I expect it will not be to the consumer’s advantage.

In the meantime, I’ve changed my buying habits significantly and may well represent an unrecoverable customer loss for the Agency 6.

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