Judge Cote approves DoJ Agency Model settlement
In a strikingly expeditious decision, Judge Cote has approved the proposed settlement between the Department of Justice and three publishers (Hachette, HarperCollins, and Simon & Schuster) over the Agency Model:
That’s it…for those three publishers, the Agency Model will end.
Judge Cote could have waited until Apple, Penguin, and Macmillan to have their day in court (probably next year), but significantly, did not do that.
I think that before the end of September, we’ll see prices for e-books from the settling publishers on the New York Times Bestseller Hardback list drop.
It wouldn’t surprise me to see Amazon do some big sale on some books from these publishers, to celebrate.
We may see a price war between Barnes & Noble and Amazon on frontlist books from these publishers this holiday season…now that it will be possible again.
I’ll reiterate something I said recently…I think that Macmillan and Penguin are in danger of losing significant marketshare during what could be a year of discounting on their competitors’ titles. Could Macmillan and Penguin lower their prices to compete? Sure, but under the Agency Model, the publisher takes the hit.
With the Agency Model, the publisher gets 70% of the consumer price. If they lower the consumer price, they make less money.
With the Wholesale Model (where the retailer sets the price), the publisher gets 50% of the list price of the book…regardless of what the consumer pays for it.
Let’s say the Agency Model publisher had the book priced at $12.99. The publisher gets about $9.09.
If the Agency Model publisher lowers the price to $9.99, they get about $7. They lose more than $2 per sale by lowering the price.
With the Wholesale Model, let’s the publisher set the digital list price at $18, and Amazon pays them $9 for it. If Amazon sells the book to the consumer for $12.99, the publisher gets $9 for it. If Amazon sells the book to the consumer for $9.99, the publisher gets that same $9 for it. If Amazon sells the book for $1, the publisher gets that same $9 for it.
Amazon takes the loss, not the publisher.
It’s more complicated than that, because of how prices can affect other prices, but that’s how the direct sale money generally works.
It would not surprise me to see Penguin and Macmillan flip and decide to settle in the next couple of months…and maybe before the holiday season.
It has been costing publishers a ton of money to fight this battle.
Apple will probably stick it out…they are confident in their legal prowess.
The judge quoted an Emily Dickinson poem about the value of books, and I’m going to close this post by quoting part of what Judge Cote said in approving the settlement:
“…there can be no denying the importance of books and authors in the quest for human knowledge and creative expression, and in supporting a free and prosperous society.”
This post by Bufo Calvin originally appeared in the I Love My Kindle blog.