Frequently Asked Kindle Questions: special Agency Model edition

Frequently Asked Kindle Questions: special Agency Model edition

Q. What is the agency model?

A. It’s a new arrangement between publishers and booksellers.

Q. How does it work?

A. Rather than publishers selling copies of books to booksellers, and booksellers selling them to customers, publishers are selling the books directly to customers. 

Q. So, I’m going to buy my books directly from Simon & Schuster and Macmillan?

A. Yes, but you’ll do it through stores like Amazon and Barnes & Noble.  The booksellers will process the sale, but you’ll really be buying it from the publisher.

Q. I can just shop through Amazon for my Kindle just like I did before, then?

A. Yes.

Q. If that’s the case, why does it matter to me?

A. Some publishers have publicly stated concerns about the $9.99 price point Amazon was using for many New York Times bestsellers and current releases.  Since the publishers are now setting the price you pay, prices have gone up in many cases.

Q. But Amazon can still discount them, right?

A. No.  Amazon is just processing the sales for the publisher.  Under that system, Amazon can not charge a different price.

Q. Won’t places like Apple and Barnes & Noble just undercut Amazon then?

A. No.  They are also under the agency model.  The price will be the same at all the bookstores under the agency model.

Q. Wait…so I can’t shop around for a better price?

A. No.  Books under the agency model will cost the same, regardless of your “sales channel”.  Whether you pay for them through Amazon or Apple, you are buying from the publisher.

Q. Isn’t that illegal price-fixing?

A. No.  Price-fixing is when “like entities” get together and decide on a price.  If all the gas stations in your town, regardless of brand, got together and decided to charge ten dollars a gallon, that would be illegal.  You wouldn’t have any choice what to pay.

Q. But I won’t have any choice what I pay in the agency model, right?

A. Not for a specific book from a particular publisher.  But you could buy a different book.  If one publisher charged $25 for all new e-books and another one charged $12.99, you could choose to buy the e-books from the second publisher.

Q. But if I wanted a specific book, like the latest book in a series I’m reading, I’d pay the same price wherever I got it?

A. Yes. 

Q. What stops the publisher from charging me $100 for that book?

A. Competition with other publishers.  You might stop buying a particular author and switch to another one. 

Q. What if all the publishers charge $100 for a book?

A. They can’t get together and decide to do that.  That would be illegal price-fixing.  They would also lose sales.

Q. Are all the publishers part of this agency model thing?

A. No.  Five of the six biggest publishers in the US are part of it.  Random House has not signed with Apple, and it is a very large publisher.  In addition, many smaller publishers and independent publishers are still under the old “wholesale model”.

Q. Will their prices go up as well?

A. That’s the same situation it was before.  The small publishers and Random House will suggest a price to Amazon and the other retailers, but Amazon can discount it if they want to do that.

Q. Does the agency model affect paperbooks as well?

A. No. 

Q. Why not?  If the publishers want it for e-books, why not for paperbooks?

A. The process is different, which presumably makes it different legally.  With a paperbook, the retailer (Amazon, for example) buys the copies from the publisher, and owns them.  They can do whatever they want with them, including selling them to customers.  With e-books, you are dealing with licenses to read the book on a certain number of devices.

Q. Is that the same reason I can’t sell my e-books after I buy them from the Kindle store?

A. Yes.   When you buy a copy of a paperbook, you own that copy.  When you buy an e-book, you are actually buying a non-transferrable license.

Q. But I can loan books with my nook, right?

A. If the publisher allows it, and with several other restrictions.  Not all publishers allow it.

Q. So, paperbooks will still be cheaper at some places like Costco, and may still be discounted at Amazon?

A. Yes.

Q. I noticed I was charged sales tax when I bought a Kindle book.  That’s never happened before.  Is that part of the same thing?

A. Yes.  If your state collects sales tax on e-books, and the publisher has a physical presence in your state (a building or a sales force), Amazon (as a sales agent) can be compelled to collect sales tax for that state.

Q. Wait…how can the publishers tax me?

A. They aren’t taxing you, it’s a question of when the tax is collected.  States ask you to report internet purchases on your tax form and pay the taxes on them if you haven’t already.  They may call it a “use tax”.

Q. Who does that?

A. Apparently, not as many people who should.  That’s why the states want to make someone collect it at the time of sale and send it to them.  They could go after people who don’t report it, but that’s expensive.

Q. So, does this mean Amazon will start collecting sales taxes on my other purchases from them?

A. No.  The agency model means you are buying just e-books from the publishers, so if the publisher has a physical presence in your state, Amazon will have to collect the sales tax on just those purchases.

Q. Amazon is in Seattle, right?   So, have they been collecting sales taxes from customers in Washington before this?

A. Yes.  Also in Kansas, Kentucky, New York, and North Dakota.

Q. But I live in New York and bought something from Amazon and I didn’t pay sales tax…why is that?

A. You may have bought an item that isn’t taxed by New York state.  Not every item is taxed in every state.  Amazon is only compelled to collect the sales tax the state would have collected.

Q. How do I know if Amazon is going to collect sales tax when I’m buying the book?

A. Currently, I believe it is not indicated until after you click the 1-click button. 

Q. That seems sneaky…what if I think that makes the book cost too much?

A. Amazon is not choosing whether or not you pay the sales tax: just whether or not they collect it, so it doesn’t technically make a difference in the price. You can always “return” a Kindle store book within seven days of purchase for a refund by contacting Customer Service. 

Q. How did this whole agency thing get started?

A. Apparently, it came about when Apple offered the deal to the publishers in conjunction with the iBooks store, which is connected to their new iPad.

Q. Why would Apple do that?  Don’t they want to set the prices, like Amazon does?

A. There is a lot of speculation as to a reason, but Apple hasn’t publicly stated one.   Steve Jobs had stated that the prices would be the same at Amazon and Apple. 

Q. I don’t like this whole agency thing.  What can I do about it?

A. You could write to the publisher or buy other books.  For more information, see this previous post

Q. How can I tell if a book is in this agency agreement?

A. At Amazon, it will say, “This price was set by the publisher.”

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

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23 Responses to “Frequently Asked Kindle Questions: special Agency Model edition”

  1. David Says:

    Bufo,

    Thanks for your excellent FAQ about the Agency model.

    It strikes me that with both Apple and Amazon insisting that no one else can sell a book at a lower price, and the publishers setting the prices, that this amounts to a variation on price fixing. That may be stretching a bit, given the small market (relative to the entire book market) that electronic books represent.

    An awful lot has happened in the past couple of weeks regarding this mess, and it looks like the consumer has been left out in the cold.

    At the moment, I have over 300 books to read on my Kindle. At my current pace, that would last over 2 years. It is easy for me to just keep reading until this fiasco has settled in the dust.

    Maybe the major publishers will just have to price themselves out of the market for a while to figure out that people with electronic books prefer to purchase electronic books, and will not purchase paper books even if they are left no acceptable electronic choice.

    Oh well, I guess they will either figure it out or shoot themselves in the foot. In the meantime, I have plenty to keep me busy.

    Dave

    • bufocalvin Says:

      Thanks, Dave!

      I think the traditional publishers (tradpubs) are slowing down the transition to e-books, because it is easier for them to dominate the paperbook market. However, as soon as it starts to shift, they’ll jump back on it to crush those upstart market share whippersnappers. ;)

      That’s my guess, anyway. :) I do think some independents and small publishers will carve out and hang onto a slice during that time, and some tradpubs will be too slow.

  2. Kathy Says:

    I just checked the price of CHANGELESS from Gail Carrieger and saw that the ebook is the same price as the paperback book – $7.99. Usually the ebook is $6.39. Why isn’t Amazon discounting it? How long do you think it will be before there might be a drop in price? (if ever?)
    I’ve decided that I’m going to “vote” with my pocketbook and not pay more than $9.99 for a new ebook. I’ve had it with companies that try to push me around. I can wait to read a book or I’ll buy a used paper copy on Amazon and the publisher will be completely out of luck.
    I have issues with poor eyesight and love the Kindle for allowing me to play with type size and its portability beats carrying the Large Print hardcovers that weigh a ton. When I bought my Kindle the speech feature was usually always turned on by the publisher and I could go back and forth depending on whether my eyes were working. Despite what the publishers say I don’t think the lack of this feature is going to “drive” me to purchase an audiobook.
    Thanks for a great blog.
    K

    • bufocalvin Says:

      Thanks for writing, Kathy, and thanks for the kind words!

      Amazon is unable to discount this book, since it is one of the books under the agency model. It is published by Orbit, which is part of Little, Brown, which is part of the Hachette Group.

      If you look at the current product page, you’ll see that it says, “This price was set by the publisher.”

      Hachette is also one of the publishers that block text-to-speech.

      As to what will happen on Thursday, I’m a little suprised your pre-order hasn’t been canceled already. Amazon does not have their “pre-order” guarantee on e-books, and if the sale counts as happening on Thursdsay, they won’t be able to charge you less than the publisher’s price on that day.

      I also don’t think they’ll charge you $7.99 if the pre-order was $6.39. If your credit card was already charged, the payment was made before the agency model went into effect, and you’ll be okay. If not, I expect your pre-order to be canceled and for you to be given the “opportunity” to buy it at the higher price.

      Amazon is basically requiring independent publishers not to block text-to-speech to get a higher royalty rate…but that doesn’t happen until later this year. You’ll find, though, that most (if not all) independents are not blocking it.

  3. Kathy Says:

    I apologize for the second question: I realized that when I pre-ordered CHANGELESS the price quoted was $6.39. The invoice I just looked at has that price on it. Doesn’t Amazon have to give it to me for that price when the ebook is published on Thursday?

  4. Christine Says:

    Great post. Thanks for taking the time to explain that so clearly.

  5. patty valldeperas Says:

    Dear Bufocalvin
    just wanted to tell u that i love
    your blog can’t say enough about it.
    when my husband got me a kindle for christmas i was so surprised i cried. i have been wanted
    one
    since Oprah had it in her show for the fist time.
    I have to saythat the first thing i downloaded
    was ILMK blog. You have helped me so much to
    understand my kindle. All of ur posts have been
    informative, specially the freebies, thank you
    soooo much! let us know if they are more tricks, like games, special techniques, etc. keep them coming.
    Sincerely,
    Patty V.

    • bufocalvin Says:

      Wow! Thanks, Patty, that’s wonderful of you to say!

      I’m glad you love your Kindle :) , and I’m happy you are enjoying the blog.

      I’ve started doing a Tip of the Day, so even if the big post isn’t a tip, there’s always something along those lines. :)

      It’s interesting, because I think I’ve written about all the games and a lot of the special techniques…but of course, they do keep upgrading things and I try to refer back to those posts.

      Thanks again!

      Bufo

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    […] House was the last of the Big Six US trade publishers to go to the Agency Model, which they did yesterday.  That means they, rather than Amazon, are setting the price you pay for […]

  7. Why are Ebooks Often More Expensive than Printed Books? « Dependent on Gadgets Says:

    […] and what it means, there is a very useful FAQ on ’I Love My Kindle’ – just click here to read.  Are publishers getting enough money already? What do they do with it […]

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  9. A Tale of Two Middles « I Love My Kindle Says:

    […] In April of last year, five of the six largest US trade publishers implemented the Agency Model. […]

  10. eBook Market View: “unprecedented drop” in Kindle bestseller prices « I Love My Kindle Says:

    […] Random House joined the Agency Model. […]

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  12. Round up #55: AMZN vs CA on The Daily Show, EU vs Agency Model « I Love My Kindle Says:

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    […] due to something called the Agency Model. […]

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    […] some fear that Random House was going to put some big restriction in place. They stayed out of the Agency Model for almost a year, but then joined it in March of 2011. ..some were concerned that a similar about […]

  16. WSJ: U.S. Warns Apple, Publishers: Justice Department Threatens Lawsuits, Alleging Collusion Over E-Book Pricing « I Love My Kindle Says:

    […] (Department of Justice) is letting Apple and five publishers (the five that initially agreed to the Agency Model) know that they will take legal action against them for collusion if a settlement can’t be […]

  17. Bloomberg: “U.S. files antitrust suit against Apple, publishers” « I Love My Kindle Says:

    […] the Department of Justice has filed suit against Apple and the “Agency 5″ publishers (Hachette, Penguin, HarperCollins, Sinon & Schuster, and Macmillan) over the Agency Model. […]

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    […] Frequently Asked Kindle Questions: Special Agency Model Edition […]

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