Random House finally decided to adopt the agency model. It’s the last of the big six houses to switch from the wholesale model, but now that it uses the agency model all 17,000 Random House ebooks will be directly available through the iBookstore—which is good since the iPad2 made its debut on March 2.
The agency model is “when the publisher sets the price and designates an agent, in this case the bookseller, who will sell the book for 30 percent commission.” With this model, publishers typically make less money than with the wholesale model—the model where the publisher sells to a retailer at a discount.
A Random House spokesperson said that the company decided to adopt the agency model partly as commercial motivation for customers, partly as an investment in digital sales growth, and partly to ensure their e-books will be more widely available anywhere anytime. With the agency model comes higher eBook prices, which is a good thing for publishers and independent retailers, because low eBook prices tend to devalue books and cannibalize hardcover sales, according to PW. The agency model means that “once a price has been set it cannot be changed or discounted by the retailer and independent e-book retailers believe the higher prices of the agency model allow them to compete with big e-book vendors.”
What does this mean for publishers? It’s confirmation that for now at least, the agency model is the best way to sell e-books. But what about other ways to ensure that print books are still valued? Bundling seems to be a good option. Just as DVDs and Bluerays often come in a pack, publishers can offer hardcovers and eBooks together. They can price the package at a slightly higher rate than a stand alone hardcover or eBook, and that way customers will see value in both forms.
Random House Switches to Agency Model for E-Book Sales
HarperCollins has decided on limiting e-book lending capabilities for libraries to 26 loans. Basically, this means once an e-book has been lent 26 times, the license expires and the library has to buy a new license. Obviously, libraries are frustrated with these new restrictions, especially since ebooks are already so difficult to loan. Currently most ebooks can only be lent for up to two weeks.
This new limitation addresses the bigger issue regarding ebooks. With ebooks, there is a much higher risk of plagiarism than with print books, yet deeply engrained into our culture is the idea of being able to lend our books to friends. With print books, it’s no big deal how many people you lend your book to; you own that book. But with ebooks, it’s more like you pay for the right to keep it on your hard drive, right now you can only lend a book once in its life, and only for two weeks. After two weeks, the file on your friend’s hard drive stops working.
Right now, there is no good solution to this problem. HarperCollins seems to be experimenting with new ideas, but unfortunately that hurts libraries with shorter loan periods. Still, if ebooks had no restrictions in libraries, then there is the chance that people would stop buying books altogether.
Maybe publishers could over a larger number of loans, say 50 or 100. And libraries could extend their loan periods. Or, if that doesn’t work, maybe publishers should turn to a subscription model. Libraries could pay a certain amount each month and license the unlimited use of a specified number of books, or even just an unlimited use, period. Right now, the best way seems to be experimentation. And even though HarperCollins recent decision is unpopular, it is just a first step.
HarperCollins Announces 26 Loan Limit on E-Book Circulation for Libraries