Macmillan CEO John Sargent on the agency model, availability and price
After the events of the past several weeks, I have been in touch with many of you. It has become clear to me that there is far too little accurate information available in this time of unprecedented change. The issues we all face together are complex, and no news story or 140-character snippet can adequately address them. Therefore, I propose to write you occasionally, when I get a sense that there is a need for direct information.
The first topic is the e-book agency model, and how it will affect our business in the near term. Starting at the end of March, we will move from 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). We will make this change with all our e-book retailers simultaneously.
Rather than address the long-term or author royalty consequences of the change (I’ll save that for next time), I’ll focus on the two major effects at retail. Note that these changes will apply to every e-book retailer with whom we do business:
1. Availability. All the new adult trade books for which we have the rights to publish in e-book format will be available at the first release of the printed book. We will no longer delay the publication of e-books (read: no windowing). Readers were clearly frustrated at the lack of availability of new titles, and the change to the agency model will solve this problem. We are also working hard to make more books available in digital editions. The consumer will have broader choice and much greater availability.
2. Price. We will price our e-books at a wide variety of prices. In the ink-on-paper world we publish new books in different formats (hardcover, trade paperback, and mass market paperback) at prices that generally range from $35.00 to $5.99. In the digital world we will price each book individually as we do today. Generally e-book editions of hardcover new releases will be priced between $14.99 and $12.99; a few books will be priced higher and lower. This is a tremendous discount from the price of the printed hardcover books, which generally range from $28.00 to $24.00. E-book editions of New York Times hardcover bestsellers will be priced at $12.99 or lower while they are on the printed list. E-book editions of paperback new releases will be generally priced between $9.99 and $6.99.
For physical books, the majority of new release hardcovers are published in cheaper paperback versions over time. We will mirror this price reduction in the digital world. It is too early to estimate the timing of the price reductions for those cases in which we do not issue a paperback edition. If we do issue a paperback, we will drop the digital price to $9.99 or lower at publication date (if not before). The price differential between the book and the e-book will become smaller at the lower price points.
There has been a lot of concern from e-book readers that $9.99 books will no longer be available. Most Macmillan e-books will still be priced below ten dollars. Our e-book sales over the last year clearly indicate that only about a third of our e-book business is in the digital versions of new release hardcovers. Unit sales of older books far exceed our new release hardcover sales, so the $9.99 and lower prices will continue to represent the largest portion of our business.
In short, we will continue to do what we have always done: provide the reader with a vast selection of great books over a wide range of prices.
I have not addressed illustrated books or books for young children. That will be a topic for the future as the technology advances beyond e-ink screens. I hope this has been in some way helpful. Please remember that I can’t tell you how other publishers will handle availability and pricing. I can only speak for Macmillan.
Meanwhile, there are millions of you and one of me. So, please feel free to post questions or comments below.
Thanks!
John
I’ll be in touch…
142 Comments to “Macmillan CEO John Sargent on the agency model, availability and price”
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I can’t ever validate in my head having to pay a large price for an ebook. There’s no paper, no press, no distribution fees… Avid readers will be inclined to buy more books if they are cheap and easy to get.
I believe your business model will be very effective. Thought ebooks are in high demand and have a good profit margin you can deny the tactile nature of a real book.
Good luck.
I like to give some reasons why we should go for e-books:
1.They are delivered almost instantaneously. You purchase and download and start reading them within minutes without leaving your chair. No need to wait for them for days, weeks and sometimes more to arrive by mail. If you buy books online you have to pay packing and shipping cost, but ebooks no packing, no shipping.
2.Go GREEN – Save the Forests – No trees are required to manufacture paper for the pages of an ebook.
3.Many ebooks are sold nowadays with bonuses, which you usually do not get with a printed book. This adds value to your purchase.
4.They can show links for easy access to more information and relate you directly to websites.
The bare fact is for every product and service there is a magic price that a customer will readily pay with almost no selling on your part.
I won’t even attempt to guess why, but for ebooks that price appears to be $7. You’ve probably by now seen the rash of $7 dollar ebooks everywhere
on marketing web sites and blogs and all over the web.
Too bad you didn’t tackle illustrated books or books for young children. Printing illustrated books, especially in hardcover is a very expensive business and usually the author is left with almost no margin. And since pretty much anyone who owns an iPad and has kids knows, they will take over that gadget pretty quickly. If there were more preschool books in e-formats, there would probably be a pretty big market for them. Everyone wins.
I just love the oblique swipe at the Twitter fad! Your comment about the “140-character snippet” shows that there are still some “thinking” people left in this world.
I can also see that MacMillan is well-adjusted to change, rather than being intimidated by it.
Kudos!
I have recently moved away from my native country and my book collection was far to large and heavy to take with me because we travelled with our caravan. I thought about getting digital versions to put on an SD card but the cost was horrific.
There should be some way of being able to buy an ebook cheap if you already own the hard copy.
I know…it’s impossible, but it made me mad because I could not afford to buy them.
In software, you get a good discount or even a free license if you change computing platforms. But of course they have the info in place to enable all that.
Shame ain’t it!
I have a few questions and hope somebody answer: Why does the agency model make windowing less attractive? and also, If two thirds of the e-book sales are from backlist titles, why does the agency model make it any more likely that those will be available?
Thanks.
The “agency model” sounds quite promising since it will allow retailer to carry more inventory at no cost. BUT the major problem I see with this is more paperwork & communication in terms of getting the publisher to send the book to the retailer. For every order the retailer makes, he’ll have to make sure that the order is being fulfilled by the publisher. There will be constant back and forth and I believe it will create a huge bottleneck in the end.
How does all this affect an author? Do they lose out in the long run?
Without authors you have nothing.
Like most people in the book business, I’ve seen a lot of demand from authors who want an e-book edition of their book. It is still way too early to tell how much effect doing it automatically will have on book sales. However, it is a necessary step and thank you Macmillan for giving it a try.
How do you consider a model of monthly submission fee with unlimited (or limited to some extent) access to an e-book library?
Something like “Amazon-Kindle” model with variations. Do such models have a big future?
Thank you.
Ultimately, e-book prices will settle at what the market will bear, not where publishers wish or “need” them to be. While what the market will bear is fundamentally a decision made by consumers, publishers who market their titles better to create higher perceived value will win this game.
[...] March, I wrote an article quoting Macmillan’s CEO John Sargent’s blog entry on the ‘new’ Agency Model the publishing giant was adopting, in which he briefly [...]
I think this can be a big thing. Traditional companys need to develop towards the market and new publishers or writers can directly sell to their readers.