News & Trends: IDPF's Digital Book 2010 - More Standards Than Woodstock
- Erica Lazzaro, general counsel, OverDrive Inc. (distributor of e-book and audiobook catalogs to retailers and libraries worldwide): "The challenges we've had to deal with are contracts and [other things on the] operational side, tax implications, reporting." With the agency model, the publisher is the seller of record; it communicates a required retail price. The agency model is limited currently to the United States and Canada, but Lazzaro expects "it to roll out to other international territories." Fixed pricing for print and e-books is already being done in Germany, and is in effect in the music industry. The goals: pricing parity among retailers; simultaneous availability channelwide at retailers; publishers want to see that the price they're setting is being respected.
Some new requirements under the agency model are that, since the retailer is no longer the seller of record, sales-tax reporting is no longer the retailer's domain; publishers are discussing this and what data needs to be communicated with retailers and distributors.
- Andrew Weinstein, vice president and general manager, retail solutions, Ingram Content Group (a print and digital content distribution and services provider): Ingram partners with more than 1,500 publishers on more than 250,000 titles. The "good parts" of the introduction of the agency model are: that is has "brought a lot of attention to the space"; consumers have a breadth of choice in devices, format, price, etc.; and "innovation speeding up in the race to consumer adoption," said Weinstein.
The "not so good" aspects: "The agency model brought about a change in a 10-year business model in about one month, and the rushed implementation brought about a problematic transition where some titles were pulled from sale and their future availability is uncertain." Ingram now manages multiple contracts—a contract for each agency partner (publisher)—versus one contract per retailer. Catalog updates must be done daily. "Sales-tax policies and jurisdictions, once based on the retailer's business, now are based on each publisher's requirements." And retailers are accustomed to using price to merchandise to the consumer. The agency model will exclude publishers from retailer/consumer loyalty programs and other discounts. Weinstein would like to see best practices established for ISBNs, price, currency, business models and territories, with goals of "balancing unfair competition with potential disruptions to [the] consumer," and considering international implications and processes. The model has the industry in flux, but some developments are already in the works; for example, the Book Industry Study Group is currently working on best practices for sales and sales tax reporting.
- Bob LiVolsi, CEO and founder, BooksOnBoard (a global e-book retailer): The agency model "is part of a cure for predatory pricing of Amazon, Barnes & Noble and others." But the model "isn't done sorting out yet. Will it go across to [print] books as well?"
LiVolsi's million-dollar question: "Did we apply a neck tourniquet as a way to stop a nosebleed?" He said his company was given one week's notice to implement the back-end changes like taxes and blocking agency titles from loyalty programs, etc. "We went without product for about seven weeks due to the transition."In regard to the immediate impact of the agency model, he said, "They overlooked the wholesale channel … which has been the backbone for publishers. It hurts our customers, with prices up, no loyalty programs for these titles. Random House sales are up by more than 40 percent at BooksOnBoard (they did not choose to go the agency route) … and Harlequin as well. … Customers appreciate the perception of discount, not as much as how much you're discounting. … Discounting will continue on non-agency product."
Also, publishers guaranteed margins to Apple. "Apple does two times in revenue what the book industry does in one year. … What will happen to traditional bookstores, and do we care? I do."
LiVolsi ended with the question: Are there other alternatives to the agency model?
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