Frank Fiore – Novelist & Screenwriter

August 3, 2010

Putting the Genie Back into the Bottle

Filed under: On Writing — Frank Fiore @ 12:03 PM

I’m reposting a blog entry from my publisher TrapDoor Books. We authors will have to understand the seismic shift that is happening in our industry today.

In a Wall Street Journal article posted yesterday, Connecticut Attorney General Richard Blumenthal raised the specter of anti-trust laws about the new “agency” pricing used by Apple and Amazon for their e-book titles.

Although there is some merit in debating whether the agency model – requiring that publishers do not undersell the e-book retail giants on other websites – is fair to all retailers, there are subtler forces at work here. And, not to be a conspiracy theorist, but the goal is not to protect the consumer – sorry Mr. Blumenthal.

There is a minimum price to produce and publish books – and with declining sales for hardcover books which generate the highest margins, the price of electronic books has an absolute floor. Whether that is $9.99 or $7.99 is not the point. The point is that consumers are not going to get free books because of anti-trust legislation. How long can Amazon be expected to lose money on $9.99 e-book titles?

Established publishers may want to see e-book sales retarded as much as possible (to keep those juicy hardcovers selling), but this is not a long-term strategy. It simply buys time for them to get their own e-book strategies in place.

More threatened by the new technology are wholesalers. E-book technology does not require wholesalers. Publishers (like Trapdoor Books) can work directly with retailers (like Apple) under a 70% – 30% arrangement. This cuts out a multi-billion dollar wholesaler industry including the two titans (Ingram and Baker & Taylor). While these behemoths provide some value in the paper book chain, they really don’t bring anything to the table for e-books. I have long wondered what strategies they would use to insert themselves back into the supply chain.

Technology is moving forward, and the old guard will be challenged to meet the demands of e-books. Small publishers support the agency model, and it seems that most large publishers do too. I’m hoping that industry players on the outside looking in will devise new ways to add value to the process instead of just trying to put the genie back into the bottle.

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