Here it is, April Fools’ Day 2010 – a day that will go down in eBook history. Today is the day that five of the top NYC publishers (Hachette, HarperCollins, Macmillan, Penguin and S&S) change their eBook terms of sale, for better and for worse. Here’s our quick take on all the ongoing madness:
HOW DOES THE AGENCY MODEL AFFECT THE DIESEL eBOOKSTORE AND WHY?
1) Diesel doesn’t cater to that NYT-reading crowd. We ain’t that classy.
Oddly enough, the agency model *might* potentially have a very positive benefit for Diesel – mostly because, lately, our sales have been shifting towards the Indies. And let’s face it, folks, our fastest growing publishers are the more resourceful and innovative among them. Plus the Indies (bless their cotton socks) tend to be more receptive to current customer demand and taste.
2) Diesel is not supported by multi-billion dollar corporations and thus can’t sell a lot of the big name titles at $9.95.
Tons of folk outside publishing don’t understand nor care (and why should they?) about how the traditional publishing terms of sale work between a publisher and a digital retailer. Take Dan Brown’s THE LOST SYMBOL, which sells for $29.95, as an example. It is common knowledge within the industry that RH’s TOS (terms of sale) translate to 52% of the digital list price (retail price). Therefore, every time a retailer sells a copy of that title, they owe RH $15.57. Many among our multi-billion dollar competition have been selling that title for $9.95, eating “customer acquisition” costs of $5.62 per title, as a result. Multiply that by the 1000s of copies sold of however many NYT bestsellers there are, and that could easily add up to 100s of $1000s per month, per retailer. As an independent, the Diesel eBook Store simply does not have the capital to keep up with our mega competitors on such a grand scale. We would literally be out of business in less than a few months. Under the agency model, the playing field would definitely be leveled so that we can compete against stores with a lot more resource$. Practically overnight, the quality and personal rapport that’s inherent in the eBookstore experience becomes all the more important.
WHY NOT RANDOM HOUSE?
There has been a lot of discussion about why RH decided not to join the ranks of the Agency Five. We have two theories.
1) Why rush into a potential “golden handcuff” deal, like the one the music industry fell into with Apple in the early 2000s? Just for the mere benefit of saying, “Our eBooks were at Apple first!”? Throughout the long and mundane board meetings we’ve endured during our lengthy eBook careers, more caveats than we care to remember have been muttered in reference to “the sins of the music industry” – about how book publishing needs to avoid those same mistakes, at all costs. But, whenever we asked “What exactly, pray tell, are these so called sins”, no one seemed to know. (BTW, Kirk Biglione has a great PowerPoint about this. Check it out here.)
Are the Agency Five secretly sizing up their own golden handcuffs and throwing away the key? Only time will tell. Will RH look back up on April fool’s Day 2010 in retrospect and feel a little bit of pride, and perhaps even some glee, about their initial hesitation and reluctance? The jury’s not in . . . just yet.
2) Kelley used to work at “The Big House” and can personally say that “things don’t happen that fast” over there. As with any mammoth enterprise, it tends to be a little slow on the draw. Bottom line, RH has always been a methodical and cautious house.
WHO ARE THE LOSERS IN THIS DEBACLE?
1) CUSTOMERS, first and foremost. Literally overnight, thousands of titles will become unavailable to eBook lovers around the world – all because five publishers want to be on the Apple iPad when it first launches (and also to some large part, to tick off Amazon). We have been reading a lot of posts on the various blogs and message boards, and man, there are a lot of PISSED OFF folks out there who are blaming the publishers for their lack of concern. Also, many of our competitors have or will shut down their loyalty and rewards programs. They’ll also discontinue their use of coupons. Another slap in the customer’s face. On top of it all, one of the favorite customer practices – Bundling – will be severely limited. (Take note that, at the moment, Diesel has no plans to discontinue its loyalty or coupon programs.)
2) eBook Retailers – With only 30% of the pie, there’s not a lot of room left over for retailers, especially if they work with third parties like Ingram or Overdrive. This could potentially kill off a lot of healthy competition, outright. But then again, as the old industry jokes goes, “How does one make a small fortune in publishing? Why, you start out with a large one!”
3) Authors — We could write a thesis on this one. Most authors earn between 25% and 15% of DLP per eBook sold. Not sure if these terms will be renegotiated, but in our limited math skills, there’s less for the author under the agency model.
So there you have it. That’s our take on Agency. Don’t ever think we’re reluctant to ruffle a few eFeathers, if that’s what we have to do to get the facts out there.
Stay tuned for more digital diatribes but, right now, we gotta split. We have a business to run.