Google and Amazon have Bob Dylan’s wheel of change spinning fast right now. Amazon is rapidly gaining on China in the race to take over the world (I’m mostly joking of course), and the Department of Justice appears to be in cahoots with them (again, mostly kidding), while Google is pulling their ebook reseller program, cutting off independent booksellers (indies) as of January 2013.
In a letter released in April, the American Bookseller Association (ABA), an advocate and supporter of indies since 1990, said they were reviewing their options and planned to have a replacement system in place for indies to sell ebooks by the time Google yanks the cord on their database.
Even more concerning than the loss of Google’s support, however, is the Department of Justice’s (DOJ) challenge to the agency pricing model for e-books last month, by suing Apple and five big publishers–Penguin, Macmillan, Hachette, Simon & Schuster, and HarperCollins–accusing the group of colluding to raise ebook prices by taking $100 million from the reading public.
The DOJ alleges that Apple began conspiring with book publishers as early as 2008 to implement the agency pricing system and control ebook prices. (If this is proven to be true, I will be deeply disappointed and saddened.)
Supported by the ABA, the agency price model stipulates that a publisher establishes a flat retail price for a book, which is meant to level the selling field for bookstores. Previously, the wholesale model for selling ebooks was used, wherein publishers set a price for an ebook and retailers could independently discount them for customers.
In 2010, around the time Apple suggested opening negotiations for selling ebooks for the Ipad via the Apple store, the five co-accused publishers adopted this pricing system. In 2011, Random House also implemented this sales model, with a positive effect for the “brick and mortar” bookstores, according to the ABA.
The ABA explains, before the agency model was adopted for selling ebooks, Amazon absorbed 90% of ebook sales. Amazon was able to undercut other bookseller prices under the wholesale model of selling e-books, because under this pricing model, publishers suggested retail prices, allowing retailers to discount at their own discretion.
Since the adoption of the agency price model however, Apple, Kobo, Barnes & Noble and indies (including Bloomsbury) are able to offer the same product at an equally fair price because only publishers have the ability to discount ebooks, and all retailers must sell them for the same cost.
(I would like to add that other costs make selling ebooks more expensive for independent booksellers, including the on-line software that allows a store access to an e-book data base. Even if an alternative database were available through IndieBound by January, enough ebooks must be purchased through indies to justify the monthly access fees.)
Even though the agency pricing model is not directly under attack, the ramifications could be catastrophic for smaller and indie booksellers. Three publishers, Simon & Schuster, HarperCollins, and Hachette, have already settled with the government, agreeing to discontinue use of the agency pricing method for two years.
This means that for the next twenty-four months, at least these major publishing houses will be doing business on Amazon’s terms.
What are Amazon’s terms? Independent Publishers Group (IPG) president, Mark Suchome, wouldn’t say exactly, when Amazon pulled more than four thousand ebooks from their site after failing to get the books more cheaply from IPG back in February. However, Suchomel, said in the NY Times,
“They [IPG] are being offered a Hobson’s choice of accepting Amazon’s terms, which are unsustainable, or losing the ability to sell Kindle editions of their books, the format that constitutes about 60 percent of all ebooks.”
In sum, publishers may be forced into choosing between saving themselves and supporting small and independent booksellers. If publishers deal with Amazon under a wholesale price model, Amazon will be able to undercut other booksellers even more easily. However, if publishers choose to boycott Amazon and give indies a chance to offer something Amazon can’t, publishers risk losing more than half of their ebook revenue. If Amazon has primary control over the ebook industry for the next two years, there may be no wresting the power back.
For more information on ABA and Goggle’s ebook database, visit:
For more information on the suit between DOJ and Apple, or to learn how you can help support the agency pricing model, visit:
For Mark Suchome’s full interview in the NY Times visit: