Last week, the U.S. Department of Justice threatened to sue both Apple and the five publishers it originally signed up for agency agreements. This news has been covered widely, so rather than rehash the story, I thought I’d return to a post I wrote two years ago, which said in part:
I understand that the current business model makes it quite hard for traditional publishers to survive if the majority of digital content is sold for less than $10. But I do think that the majority of digital content is being sold for less than $10 for a reason, and it’s not because Amazon said so.
Despite what Scott Turow claims, “agency” is not synonomous with “higher prices”. As Mathew Ingram fully covers in a post on GigaOm, it is possible to actually earn more money pricing digital books at much lower prices.
Nor is agency the only way to deal with Amazon. There are options to put a dent in Amazon’s market power, and they actually could increase the price that people are willing to pay for content that is open, accessible and interoperable. But publishers would have to trust readers.
These aren’t new ideas. I used to empathize with publishers whose business models (and legacy agreements) were built on assumptions about the number of hardcover books they could move for a given set of titles.
I’m not empathetic any more. We’re five years into the viable age of eBooks. Purchase behavior over that time demonstrates that readers buy the lion’s share of eBooks at prices well below what traditional publishers want them to pay.
Using agency terms may defend the price and saleability of physical books in the short term, but it has also brought a host of new entrants into the low-price eBook market. That’s a wholly predictable, if unintended, consequence.