On Wednesday December 1st in an epic Blog Post, Smashwords founder Mark Coker outlined his business moving into an agency model for eBook pricing. We can’t help but wonder if it is best for customers.
As of Wednesday publishers and authors will now be the people sole determining the price of eBooks under this new business model and increased the royalties distributed per each sale.
Smashword owns and operates their own independent ebook store, which allows newer authors to cultivate a loyal following in their little ecosystem. Smashwords also functions as a middle man to get your book listed in the Sony, Kobo, and Barnes and Noble for an added fee. Right now they boast 10,000 authors and publishers , with around 20,000 original ebooks.
Right now Smashwords will increase the royalty payout to around 60%, which is on par with Apple and Diesel books, but falls short of Amazons %75 percent. Mark Cowen had this to say about the immediate changes “With this change comes new responsibility for authors and publishers to price their books at a level customers want to pay. Here, I think indie authors and small publishers do a much better job than the big publishers. Already, the average book at Smashwords is priced under $5.00. At $5.00, a Smashwords author earns $3.00 profit for every book sold at retail. Large publishers can’t compete against that (a traditional mass market paperback sold for $8.00 earns the author about 40 cents), which is one of the reasons I firmly believe the future of publishing lies in the hands of indie authors and small publishers, and in the years ahead we’ll see more and more big-name authors go indie. They can earn more money per sale while serving their readers with a lower cost product. It’s a win-win for the author and reader.”
The agency model might be a very positive factor in the future success of Smashwords, and to stay relevant and on the radar of major and minor publishing companies, and might further help entrench the company in the ever evolving landscape of electronic book distribution. Although, this could be a preeptive move to combat Google Editions, which allows authors and publishers to DIRECTLY sell eBooks from their website and eliminate the 2nd party.
For those of you that do not know what the agency model is all about, simply put; the agency model is having the eBook store let publishing companies determine the prices of the eBook, rather then the company themselves. The Agency model is a new term coined for a movement in 2009 and 2010.
Macmillan on a blog post explained the agency model as thus; The “retail model” of selling e-books (publishers sell to retailers, who then sell to readers at a price that the retailer determines) to the “agency model” (publishers set the price, and retailers take a commission on the sale to readers).
The move to an agency model was directly arbitrated by the bitter Amazon and Penguin feud. Amazon currently dominates the ebook market by buying the rights to an ebook for around $14.99 and takes a loss of about $5.00 in order to undercut the market and take a net loss. The Agency model seeks to dispel the monopoly by Amazon to dominate the entire market and allow competition to foster. Before the Agency model came to fruition, the only way to compete with Amazon was to offer your eBooks in a proprietary format, such as Sony.
Stay tuned for our upcoming article that looks at the eBook Agency Model and gives an entire history of the publishing industry in the modern era and how the agency model plays a major part in the evolution of the digital publishing world.
Michael Kozlowski is the Editor in Chief of Good e-Reader. He has been writing about audiobooks and e-readers for the past ten years. His articles have been picked up by major and local news sources and websites such as the CNET, Engadget, Huffington Post and Verge.