Is the agency model battle over “price”–or “worth”?

There’s been tremendous interest surrounding the DOJ investigation into collusion between Apple and five publishers after they adopted the agency model. Which got me wondering who actually has the RIGHT to set the price of a book?

My answer is: the seller.

Notice I did not say retailer. I said the seller. Which at first is the publisher. So they get to set the price of the book to whatever they want. What really makes the difference is HOW they sell it to the retailer.

The way I understand it,* agency pricing allows the publishers to set the price, and then Apple (and other agency retailers) get a certain percentage of the sale. This is much like how consignment works. Think of when you post something on eBay. You, the seller, set the price, and once it sells eBay takes a cut. Although I should point out that in the agency model, publishers (and therefore authors) get LESS money per sale than with the wholesale model.

On the other hand, the wholesale, or pre-agency, model is that the publishers sets a list price for the book. Amazon (or whoever) would then pay the publisher half that list price. The retailer would then keep the other half when the book was sold. This means that if the retailer chooses to take a loss by selling it for less, they can—because they have already paid the publisher the publisher’s asking price.

In my view, once someone has paid you the price you want, then they are free to resell it at whatever price point they choose, even if you disagree with it. If you sell a stack of old CDs at a yard sale for the price you asked for, and then see that same person selling them again, that’s their right—you got paid in full what you wanted.

So if the publishers got paid what they were asking for in the wholesale model, then Amazon was free to sell the books for whatever they wanted. It was their choice to take a loss. But the publishers got their slice of the pie, so they were not harmed in the process. If they don’t like the way Amazon sells their books, the answer is simple: Don’t sell your books through Amazon.

Of course, we all know that this is not really about which model of pricing to use. This is about the fight for public perception of what an e-book is worth, and publishers worried that Amazon is taking over the book world. It is obvious that other booksellers without Amazon’s deep pockets cannot match e-book prices with them and take a loss on every book. This is fact. This is business, even if some people feel this is somehow “not fair”. But again, I will leave it to the law to determine if “not fair” equals “not legal” in any of this.

The other, perhaps more important to authors, part of the equation is public perception of what an e-book is worth. If the public gets used to all e-books being cheap, then the authors stand to make less and less money per sale no matter which pricing model is used. For a while, lower prices may move more units, but there is a tipping point where lowering the price will no longer sell more units OR where the royalty on a low price would be so low that the author would have to sell an impossible number of books to make a living. What’s 17.5% of 25 cents? Yes, I said 25 CENTS. Because that’s the promotional price some books were selling for on Google Play—and were being matched on Amazon. And even 70% of 25 cents? Is that what your years of work on your book are worth?

That’s the real battle here—what is the value of writing in our society?

*I do not claim to be an expert on bookselling, so if any of my facts are in error, please note it in the comments and I will correct as needed.