Digital Book 2010, the international Digital Publishing Forum’s annual conference on e-book publishing picked a “hot day for a hot subject,” according to e-book retailer Bob LiVolsi referring to the impact of the agency model, a new business model for selling e-books, on small and independent retailers and their customers back in April. The founder of the e-book retailer Books On Board, LiVolsi is always outspoken and used his time on the podium to criticize publishers for the rushed implementation of the new model while praising the work of wholesalers like Ingram and OverDrive who he said worked tirelessly to make sure small retailers would be ready for the changes.
Although LiVolsi was critical of aspects of the agency model, he actually delivered a comprehensive (and sometimes amusing) critique of its impact on the his business and on his customers spending habits as well as speculating on the viability of brick and mortar bookstores in the future. His presentation capped off a morning of discussion on the “e-book revolution” in the words of OverDrive CEO Steve Potash, who moderated Digital Book 2010, the first time the annual event has been held in conjunction with BEA.
Indeed, the session before the agency model panel focused on success stories from “The Global Digital Community” featuring presentations from LibreDigital’s Tyler Ruse, Daihei Shiohama from e-book developer Voyager Japan and Michael Tamblyn of e-book retailer Kobo. Ruse outlined the well known successes of romance publishers Harlequin and its Mills & Boon imprint and the effective use of embeddable book widgets that allowed readers to preview M&B titles.
Shiohama outlined a Japanese e-book market with 300,000 titles that had $600 million in sales in 2009. Eighty percent of the Japanese e-book market, Shiohama said, was via mobile phones and aimed at young women in their twenties. And Shiohama said he believes that digital manga, Japanese comics of all kinds, “offer a larger potential as e-books than text books. Text is limited but its possible to make manga available globally.” Tamblyn had a long list of international e-book accomplishments (one day Kobo sold books in 174 different countries) and a wish list for the category going forward: simpler territorial rights, simultaneous global release of print and e-books, more ePub in more places and global metadata with multi-territorial pricing and rights data.
LiVolsi’s presentation, however, was the heart of the morning event. He followed very capable presentations by OverDrive legal counsel Erica Lazzaro and Ingram v-p Andrew Weinstein who both outlined how the agency model—in which publishers set the price of books and designate an “agent” who sells for them—and the traditional wholesale book model. And they listed all the problems the switchover entails for them—the distributors—as well as for their clients the retailers. Lazzaro and Weinstein almost seemed wistful about the passing of the wholesale model, a business model that was simple in comparison to the complex changes and new requirements wrought by the agency model.
Publishers are responsible for sales tax, although distributors and retailers need to collect it—“now we have to be tax experts too,” Weinstein said--often on books that now may be governed by multiple contracts. The agency model prohibits any kind of discounting so costumer loyalty programs and discount coupons are banned, and as Weinstein said, “we’re still thrashing about on all these issues. There are no best practices as yet.”
But the rushed implementation also meant that some retailers, like Books on Board, simply were not allowed to sell e-books that did not have contracts, updated metadata or pricing data settled. Books on Board also had to discard all of its loyalty programs and some books were even removed from customers’ bookshelves although they had been previously purchased, but not yet downloaded. LiVolsi said agency model books were about 57% of his sales and he ended up going seven weeks without any of that revenue because the books were not ready. He said it was “pitiful” the way publishers treated the distributors and he thanked Ingram and OverDrive from he podium.
He said prices at Books on Board were up 18% overall; while Random House, which has not adopted the agency model, has seen its e-book sales rise 40%, along with other non-agency publishers like Harlequin. Yet LiVolsi was no fan of the $9.99 e-book price and he continues to call Amazon’s de facto price standard “predatory.”
While he also said the shift to the agency model likely means more predictable margins, he is concerned that the model will lead to “Apple and Amazon destroying brick and mortar bookstores, just like Apple did to music stores. I hope we can build a system that can put books in front of people and isn’t just about quarterly earnings and stock prices.”
Though critical of the agency model, Livolsi was certainly thoughtful and questioned whether it would last and suggested finding an alternative to the agency model that would protect independent retailers. ”We weren’t in the $9.99 game,” he said about Books On Board, “We’ll be okay but this whole switch could have been done better.”