In an announcement that is certain to bring a sigh of relief to authors and readers, HarperCollins announced yesterday that it has reached a multi-year agreement with Amazon over its recent pricing dispute. While HarperCollins, like several other publishers before it, has been gunning for an agency pricing model in which the publisher sets the price of its books and basically forbids discounting on the part of the retailer, Amazon has long dug its heels in and refused to budge with the publishers in terms of its demand for a wholesale model. Under that pricing model, Amazon would pay publishers an agreed upon price for their titles and then could sell them for whatever it wants to, including at a loss.
On the surface, the wholesale model would seem to be the best form of pricing, at least as far as consumers are concerned, and certainly where publishers and authors are concerned. The publisher makes its agreed upon royalty–which it goes on to divide with the author according to their contract–and the consumer stands to benefit from an all-out price war among the retailers. The retailer gets to entice customers with the best deal possible, while using their interest in one product (the book) to encourage the sale of other items. It sounds like the American dream, capitalism at its finest.
But a recent interview with Smashwords’ CEO Mark Coker helped explain why that might be mutually beneficial in the immediate sense, but over time will lead to a break down of the entire publishing industry. A look at the history of corporations in the US shows a pattern of prosperity and decline, a system in which major companies go through stagnant years and are forced to reinvent themselves in order to climb back up to the top. The wholesale model means that one or two key players will have the power to sell books at a loss, driving out the smaller competition until there is no competition. Whether or not that’s the intended outcome when major players get to control the purse strings is irrelevant; once the competition is gone, where do readers turn for books when the major players also shutter their doors?
It comes as no surprise that HarperCollins and Amazon have reached an agreement, as the clock is ticking on one of the most important literary milestones of the century: the release of the long-awaited sequel to one of the most widely read books in modern history. If HarperCollins wants to sell Harper Lee’s Go Set a Watchman and Amazon wants to benefit from that sale, a meeting in the middle had to take place. But as of this writing, Amazon is offering the book for pre-order–something that many mom-and-pop independent bookstores aren’t even set up to do–for less than $13 for the hardcover; the Kindle edition is priced just over $11, while Barnes and Noble and Kobo are offering the ebook edition for pre-order for more than $16. While those are the major players in the online bookselling and ebook selling space, how many independent bookstores or online startups will be able to even come close to those prices?
While the terms of the deal haven’t been disclosed, it is a multi-year agreement in which HarperCollins will set the prices of its ebooks but allow Amazon to offer incentives to its customers. The most important statement made on the agreement comes from the publisher, who stated that its books will continue to be available from Amazon, a fate that was called into question if an agreement couldn’t be reached.