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Apple, Amazon, and the ‘agency’ model of selling

Archived news: 17 April 2012

We find it frustrating and worrying that the powers that be (in the US, the UK and Brussels) assessing the commercial impact of ‘the agency model’ (whereby publishers, rather than the retailer, set the selling price of an ebook) seem to regard Amazon as merely one of a number of retailers.

Amazon is of course far more than simply another online retailer: it has exclusive ownership of the Kindle, and the exclusive right to sell Kindle-formatted ebooks, and the Kindle is far and away the dominant e-reader (not to mention Amazon’s forays into publishing, and its dominance of the online second-hand book market).

We are also concerned about the notion that ever-cheaper ebooks is invariably a Good Thing. Amazon’s under-pricing of ebooks to loss-making levels risks distorting the entire bookselling economy. Publishers in the US may or may not have colluded in agreeing the agency model with Apple, but it is ironic that stamping down on alleged collusion between publishers (companies in often fierce competition with each other) will lead directly to reinforcing Amazon’s market dominance.

In our submission to the EC’s Investigation into Publishers’ Agency Pricing we said that although Amazon initially did much to galvanise and boost the popularity of books, especially ebooks, we have been concerned for some time at the damaging impact its increasingly dominant position is having on all aspects of the industry.

We said that in our view there is no question, in the UK at least, that other retailers are struggling to compete. Amazon’s ability to sell books - especially ebooks (which do not incur warehousing and distribution costs for the retailer) - at unrealistically high discounts also impacts more directly on publishers and authors. Without being able to sell books at realistic prices, publishers cannot afford to invest in new, speculative, or slower-selling titles. We stressed the importance of ensuring as wide and varied as possible a range of outlets for books (in all formats), in particular a strong and visible presence in the high street.

A recent survey looking at how readers ‘discover’ new books revealed that personal recommendations and bookshop recommendations between them account - almost equally - for 80% of such discoveries. Without the customised selections displayed by high-street bookshops, even Amazon's bookselling might implode under the weight of self-published items which, regardless of quality or merit, are being uploaded daily.

The fashion and habit of reading, and the physical existence of books (particularly in the form of bookshops and libraries) need to be a visible part of the environment. This is essential for the nation’s cultural health and as the principal means of nurturing literacy and communication skills. Regular reading for pleasure has been found to be the single most useful and effective improver of educational achievement.

In our submission we concluded that the agency system has given much-needed stability to the market for British and international ebooks, ensuring a level playing field so that everyone - established or new - can potentially make a good business from selling ebooks without fear of predatory pricing by any one highly dominant and wealthy competitor. To consider outlawing the agency system is highly ironic. Far from preventing a monopolistic position, it would in our view be a very substantial step towards ensuring the damaging domination of the book trade by a single company.

 

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