Apple's Agency Model 'Good in Theory' But Jury Still Out, Says Analyst
As publishers, authors, retailers and every other other book business constituency continues to struggle with the issue of pricing, Michael Norris, the senior editor and analyst of Simba Information's trade books group, weighed in with the Publishing Business Insider on some data and intelligence he and his company have collected.
Norris will leading a session at the Publishing Business Conference called "Beyond the Price Wars: What's Really Happening in Book and E-book Retailing," where he'll look at the price-sensitivity of consumers, the effects of e-books and their pricing on print books, and more. He'll also take a look at Apple's new agency model which, as he points out below, bears watching throughout the rest of the year.
INSIDER: Based on the information Simba has been tracking, how price-sensitive are print book buyers?
MICHAEL NORRIS: It depends on the book and on the buyer, but in general we've seen a big gravitation toward paperbacks over the past year or so while hardcovers have been flat or declining. Publisher sales data mostly confirms this, and we've also seen booksellers reporting better luck lately with the lower-priced products. A part of the reason does have to do with paperback titles costing less than hardcover, and with the economy what it is everyone's looking for ways to save. When the economy starts to turn around we'll hopefully see hardcover [sales] tick up again.
INSIDER: How about e-book buyers?
NORRIS: There's limited evidence when you refer to e-book buyers as a whole; as we pointed out in [Simba's] "Trade E-book Publishing," there aren't nearly as many e-book buyers as there are print book buyers, and most of the buyers only purchase a handful of e-books a year which is similar to their print book brethren. When you talk about consumers that tend to consume a lot of e-books, they tend to be more likely to think e-books should be priced less.
Simba also has intelligence showing the slight decrease in the average price of bestselling e-book titles over the last 18 months or so, but we're not sure if price-conscious consumers are causing this or simply the glut of free e-books is just dragging the average price down.
INSIDER: Do you see evidence of Amazon's $9.99 e-book pricing affecting book buyers' perception of what books should cost?
NORRIS: Yes. We did a poll recently of Kindle owners and they are far more likely to agree that print books are overpriced rather than electronic books. We also have access to national survey data and have been able to compare the population of adults who consider themselves to be Internet addicts or at least very tech savvy with everyone else. The tech-savvy or Internet people are a lot more likely than the average person to consume electronic books, and the former displays some characteristics which suggest they are price sensitive.
But the thing is, a consumer's ideal world or ideal perception isn't the issue here. There are a lot of consumers out there who buy a car and pay more than they think they should have paid. But like a book, if a car is marketed the right way, and has the reputation of a quality product, there comes a point when the consumer desire wins out over whatever 'am-I-paying-too-much?' questions they might have.
INSIDER: What are the implications of the new "agency model," and Apple's latest entry into the book-selling business with its new iBook Store?
NORRIS: Apple's model sounds good in theory but I want to see how it works in practice—there's always a difference in what we hope something will do and what it actually does. The thing that I like right off that bat is that it finally made Amazon defensive on its self-serving $9.99 pricing model and empowered smart publishers like [Macmillan CEO] John Sargent to call Amazon's bluff. An entity saying they know how much a book or e-book should cost is pure nonsense. The market makes that call, not some company trying to buy its market share one loss-leader at a time.
From what Simba's Kindle survey told us, Amazon does a good job with the user experience, so there's no reason the company can't build on that instead of simply trying to compete on price.”
INSIDER: What else can attendees of your session at PBC expect to learn?
NORRIS: The session is all about what's going on in trade book retailing, both with e-books and with print books. The reason I’m covering both is we tend to talk about one, then we talk about the other without really getting into any perspective or scale about either or relationships the two have. What I want is for attendees to come out of this with knowledge of some trends in how books of all formats are sold and an understanding that this is always going to be an ongoing discussion.
*This article originally appeared in the Feb. 3 edition of Publishing Business Insider.
Matt Steinmetz is the publisher and brand director of Publishing Executive.