Smashwords is the Real Threat to Agency Pricing of eBooks

Smashwords and ebooksellers like Smashwords (such as Books for a Buck) are the real threat to agency pricing and the Agency 5 (Macmillan, Hachette, Simon & Schuster, Penguin, and HarperCollins). The reason is simple: the combination of quality and low price.

I find it hard to justify paying $14.99 for a fiction ebook unless I am absolutely enthralled with the author, and even then I am more inclined to pass on the ebook than spend that kind of money on a read-once-throwaway ebook. No need to repeat all the reasons; they have been bandied about the Internet and the magazines for months. And if I don’t know the author, I certainly wouldn’t pay the agency price. Amazon may have had it right when it set a top price of $9.99.

But look at Smashwords and similar sites. They sell ebooks in many categories from authors with whom I am not familiar for a reasonable price. I’m much more likely to spend $3.99 on an unknown author than $14.99. Of course, that isn’t enough to be a threat to the Agency 5. The Smashwords threat comes by Smashwords’ authors also being available in the iBookstore and Amazon, but primarily in the iBookstore.

It is in the iBookstore that the Agency 5 are face to face with competing books that cost significantly less. In publishing, it isn’t the publisher who sells an ebook; it is the author, the story synopsis, the ebook itself. No one goes around and says “I bought a great Hachette ebook yesterday.” Publisher branding value among ebookers is nearly nonexistent and I suspect noninfluential in the decision whether or not to buy an ebook.

For agency pricing to succeed, by which I mean the Agency 5 at minimum do not see a decrease in ebook sales from the pre-agency days, ebookers have to equate quality reads with the names of the giant publishers. Otherwise, all that will happen is that the blockbuster bestseller from the Stephen King-/Dan Brown-recognition-level authors will sell at the agency pricing and less-recognized authors down to unrecognized authors without the Oprah kick will have less-than-stellar ebook sales.

It is these second- and third-tier authors who have to compete against the Smashwords authors and for whose readers price is a major component of the decision to buy or not. In a bricks-and-mortar world, the Smashwords authors stand little chance, but in the Internet world they stand an equal chance — the Internet is the great sales leveler.

The playing field is level because all books display a cover, offer a sample read, have similar story blurbs. The differences are price and publisher name, but the latter has little, if any, swaying power, especially when you get down to the subsidiary names with which few readers are familiar. (Can you tell me who owns Ballantine? DAW? Basic? Do you care?)

The advantages that the Agency 5 do retain really relate to the level of professionalism in putting together the ebook — the professional editing, the professional cover design. But that advantage is easily eliminated by Smashwords authors who could hire these services independently [see, e.g., Professional Editors: Publishers and Authors Need Them (Part 1) and Professional Editors: Publishers and Authors Need Them (Part 2)], and with the right pricing, is readily overlooked by ebookers. Even though I am an editor and find amateurish errors annoying (see On Words & eBooks: Give Me a Brake!), I am more forgiving of them in a $1.99 ebook than in a $14.99 ebook, where I won’t forgive them at all. (Perhaps the Agency 5 should rethink offering a warranty of quality; see A Modest Proposal II: Book Warranty.)

The big gamble that the Agency 5 is making is that ebookers will associate quality reading with their brands and be willing to pay an inflated price for that quality. The reality that will strike home eventually is that such thinking is delusional. eBookers do not equate quality with the Agency 5 brands; if anything, the Agency 5 have done such a poor public relations job with every aspect of ebooks that any association of their brands with quality have long disappeared. eBookers, as is true of most readers, look first for an interesting and seemingly well-written story. Then they look for pricing and production quality.

Combine an interesting and seemingly well-written story with a reasonable price and you have an ebook sale. The ebooker doesn’t care if the ebook is from Smashwords or Hachette. Consequently, Smashwords-type ebooksellers are the real threat to agency pricing and the Agency 5. The more Smashwords and its companion ebooksellers, like Books for a Buck, do to increase quality of the books they offer and the lower the prices they offer those books for, the more in trouble agency pricing and the Agency 5 are. I’ve yet to meet an ebooker who only buys Simon & Schuster ebooks. And we haven’t even touched upon the all the places that offer free ebooks, such as Feedbooks.

Smashwords, Books for a Buck, Feedbooks, and other smaller, independent publishers or ebook outlets are squeezing ebook pricing. eBookers want a good read at a reasonable price, which is what they get from these alternatives. The Agency 5’s plan to force ebookers to “value” ebooks by keeping pricing artificially high will not withstand the assault. Yes, the very top authors — the most popular authors — will probably be able to command the Agency 5 ebook prices, but they are not enough to sustain traditional publishers. There are too few Stephen Kings and JK Rowlings to build a business around the popularity of their books.

If iBookstore sales aren’t significant for the Agency 5 at the higher end of the agency pricing scheme, and if iBookstore sales for the Smashwords-type publishers/sellers show growth, the Agency 5 are doomed. Of course, it doesn’t help the Agency 5 that Random House is sitting on the sidelines. Imagine if its ebook sales continue to grow while the Agency 5’s sales decline.