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The Collective Insanity of the Publishing Industry

1 March 2016

From author and TPV regular Gene Doucette:

Unless you’re a writer, I imagine you haven’t been paying quite as close attention to the publishing industry and all its weirdness as I have, and that’s a shame, because it’s been really entertaining.

Actually, entertaining isn’t the right word.  It’s been insane, but the kind of insane that’s unreasonably fun to watch from a safe remove.  Like watching a man stop traffic to cross against a green light by shouting, “I’ll bite your car!”  As long as it isn’t your car he’s threatening, it’s sort of funny.

You might imagine that as an author with published works for sale, I am not at a safe remove when it comes to the publishing industry.  That’s sort of true, but only sort-of.

Here’s a superb example of the madness of which I speak, and why I’m not concerned that anyone will be biting my car.

In 2014, there was a drawn-out dispute between Amazon, and Hachette.  The latter is one of the largest publishers in the world, and Amazon is a company that sells things, such as books.  The essence of the dispute was that Hachette—and all the other publishers we affectionately refer to as ‘the Big 5’—wanted more control over the list price of their e-books on Amazon.

That sounds thoroughly reasonable, and it sort of is, but please let me explain because the crazy is in the details.  What was happening was that Amazon was discounting the price of the ebooks, and it may seem like this is something the Big 5 would want to stop, except the markdown was coming off of Amazon’s end.  In other words, if Hachette wanted to charge $15.99 for an ebook, and Amazon marked it down to $9.99, Hachette was still paid their cut of the full price of the book.

More people will buy a book at $9.99 than at $15.99, so essentially, the Big 5 was coming out ahead in this arrangement in every conceivable way.  They collected royalties at an unreasonably high price point while moving the number of units that corresponded to a lower price point.

So of course that had to be stopped right away.

Hachette fought for, and won from Amazon, the return to something called the Agency Model, whereby they set their price and Amazon wasn’t allowed to reduce that price.  So that $15.99 book stayed at $15.99 until Hachette decided to change it.

Soon after that contract was signed, the other Big 5 contracts came due, and they all asked for the same Agency Model arrangement.  Thus, the finest minds in publishing—or one might assume—negotiated themselves out of an arrangement whereby they sold more units at a lower cost without suffering the financial impact that comes with a lower unit cost.

On purpose.

This isn’t even the crazy part.

After securing the right to price their ebooks unreasonably high and having those prices stick, the first thing the collective brain-trust of the Big 5 did was raise their ebook prices even more.  Often, the prices were higher than the price of the print edition, which is just fundamentally insane.

. . . .

Here is why I can laugh at this from a save remove: I don’t have a contract with a traditional publisher.  If I did, I’d be hopping mad, because what I just described above is an entire industry trying to take away a viable (and lucrative) sales channel for their own authors’ work.

Link to the rest at Gene Doucette

Here’s a link to Gene Doucette’s books. If you like an author’s post, you can show your appreciation by checking out their books.

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Big Publishing, Ebooks, Pricing

4 Comments to “The Collective Insanity of the Publishing Industry”

  1. The only thing you missed was that one of the other qig5 signed an agency contract with Amazon before their old contract expired. This proved that Amazon was being reasonable with publishers and that Hachette had just been grandstanding. Hachette then gave up as they were looking even dumber than before and signed their own contract with Amazon.

    Of course after shooting themselves in the collective feet, they are trying to blame Amazon for the agency pricing Amazon never wanted (that was the qig5 and Apple, Apple not wanting Amazon to be able to beat them on price.)

    Agency, the gift that keeps on giving …

  2. Just an amusing note. you can buy buggy whips from Amazon

  3. The Publishers made their bed with the original price-fixing conspiracy. When they did come to negotiate with Amazon after the fall-out, I find it very plausible that Amazon would make them lie in the beds of their own creation. This post puts in very clear terms just how good a deal the Big 5 destroyed. To quote from the post;

    “They collected royalties at an unreasonably high price point while moving the number of units that corresponded to a lower price point.”

    For Amazon to allow a return to retail would likely reinstate this situation. And let’s face it, the evil to consumers from agency is not because of the agency model itself, but because of the intransigence and agenda of the Big 5. All else being equal, whoever is setting the price would wish to set it so as to maximise revenue. Apparently this point used to be $9.99 for new blockbusters. Now I suspect it is lower. Like it or not, Big 5 titles are not in their own superior category, and do compete with Indie/Self-Published works, which of course exerts downwards pressure on prices. The prices of Big 5 ebooks must come down, and not just to pre-agency levels. The question is who is going to pay for the “discounts”. I simply cannot see Amazon giving the Big 5 an easy way out of this.

    Having said this, I doubt Amazon insisted on agency at the time in question. I think this is supported by the raising of prices which took place shortly thereafter, thereby demonstrating that the Big 5 had not realised the implications at that point, though apparently, according to Mr Shatzkin, 4 of the 5 do now!

  4. I remember when this all hit the fan, the advertising in support of the publisher’s position taken out (ostensibly at least) by best selling authors to plead for their poor maligned publishers. James Patterson comes to mind as one who bought ads in the NY Times. The fact that these writers would be so willing to perform actions in various venues that went completely against their own bottom line best interests is amazing in its own right, but that they would work against the interests of all writers is what really got to me. I notice that it has been reported in a recent issue of Publisher’s Weekly, that the sales of eBooks are down by some 14% this past year, and I think the Agency Model (aka Price Fixing in other industries…) is the culprit. I know I won’t pay $15 for an eBook. So crazy is really an understatement!

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