Apple pitching its agency model to book publishers

Apple pitching its agency model to book publishers

Summary: Publishers being courted by Apple for their content indicate that the Cupertino firm is positioning it's agency model as superior, and more profitable, than Amazon's wholesale model.

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Special Report: Apple Tablet

http://mapsinternational.co.uk/blog/wp-content/uploads/2009/07/apple-ebook.jpg9 to 5 Mac spoke with two New York-based publishing sources that claim to have been contacted by Apple about providing content for its upcoming tablet computer.

My takeaway from the several bullet points made in the piece, is that Apple is pushing its "agency model" to distinguish its tablet computer from other e-book devices, like the Amazon Kindle.

The agency model is defined as projects funded as a fee-for-service by clients, who either use or re-sell the content. Apple uses the "agency model" now with the App Store, taking a 30 percent cut of whatever the developer charges for an app.

Michael Shatzkin writing for Idealog agrees that Apple's “agency” model is better suited than Amazon's “wholesale” model for e-book sales.

The “agency” model is based on the idea that the publisher is selling to the consumer and, therefore, setting the price, and any “agent”, which would usually be a retailer but wouldn’t have to be, that creates that sale would get a “commission” from the publisher for doing so.

The wholesale model, on the other hand, is when the publisher “sells” the book to an intermediary (i.e. Amazon, Borders, B&N) based on the publisher’s established retail price and a discount schedule, typically around 50 percent. Then the purchaser resells that e-book at whatever price they like.

Apple's pitch to publishers appears be to that selling their books through the iTunes Store for a 30 percent commission is much better than selling them through Amazon at a 50 percent discount.

How long can it be before Amazon follows suit?

Topics: Apple, Amazon, Hardware, Mobility

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4 comments
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  • IMHO the model that will win

    Is the model that puts books in the hands of readers for the lowest price. There will be competition on the back-end as Amazon, Apple, and others cut deals with publishers to lower the distributors "cut". But to assume that Apple is going to have luck selling ebooks at $20 a pop when Amazon (and their Kindle App) has books available for $9.99 is wishful thinking on the publishers part. Of course publishers could delude themselves by thinking "Hey we'll just release ebooks to Apple and not Amazon" yeah, we just need to peek at the music industry to see how that game ends.
    oncall
  • RE: Apple pitching its agency model to book publishers

    I thought we had read that Amazon had followed suit with
    the 70% margin? - at least in certain cases.

    And one suspects that margin% aside - the freedom to set
    the end user price is a huge issue for publishers.
    michael@...
    • I agree

      I am sure price control is a big issue. But publishers should look to the iPhone app store. It's one thing to dictate prices when you have some control over what's on the shelves like in a regular book store, it's quite another thing when the field is open to all-comers. Take, for example, a typical B&N store. They may carry anywhere between 60,000 to 200,000 titles. The ones B&N wants to sell (because the publishers have pushed it) get put in big, attention grabbing stacks at the entrance to the store, Costco and Walmart carry a few dozen or few hundred titles at any given time. Amazon has 400,000+ ebooks and counting, all instantly available, all pretty equal (of course all books are not equal in quality) and fighting for your attention. One ebook is relatively indistinguishable from another except by sales (keeping a book on the bestseller list) and reviews.

      Publishers will have to figure out a price structure that works for ebooks, I personally do not think it's going to bear any resemblance to what DTB prices look like.
      oncall
  • RE: Apple pitching its agency model to book publishers

    Devices come and go--it's the format that matters. Smashwords e-publishing offers my ebook 'Pilate's Cross' in 10 formats--certainly one for every ereading devices out there. Also, if you buy direct from Smashwords authors get 85% of the royalties. No middle man. No fealty to Apple or Amazon.
    PilatesCross