How the DoJ Changes the Agency vs. Wholesale Argument


How the DoJ Changes the Agency vs. Wholesale Argument.

Don Linn, president of Firebrand Associates, offered the paradox concerning the wholesale vs. agency discussion running through publishing circles: “Publishers (often) earn more with wholesale than agency–so what’s all the fuss about Amazon?”

The statement took place during a discussion with Joe Wikert, president and publisher at O’Reilly, during O’Reilly’s “Agency vs. Wholesale Model: Which One Is Best?” webcast. In reviewing how the industry came to this point, Linn observed that Amazon, which is not directly involved in the DoJ case, is still the elephant in the room. The e-tailer was at the center of the debate, including directly and indirectly, in the recent responses from the ABA, the Authors Guild, and Barnes & Noble, among many others. Linn said that the comments from the organizations showed that clearly “people felt very strongly” about the ruling, especially as it pertains to protecting bricks and mortar bookstores and a fair market.

In closing his statements, Linn also discussed where publishing goes from here. He said publishers need to figure out how to make money using wholesale, which he said is certainly possible and, in some cases, easier to accomplish using a wholesale model rather than agency. (Most publishers use the wholesale model to sell e-books). “The big six have to figure out if they can live in a lowerprice environment. Are they going do that? Are they going to withhold books from Amazon?” And despite seeing the publishers’ response to this lower price environment as the key to doing business going forward, Linn said he’s just as curious as everyone else to see how it plays out. “I don’t think any of us know how that’s going to be addressed.”

During the Q&A portion of the webcast, Linn and Wikert agreed that publishers have to adapt to publishing’s new environment of lower priced books, including by reducing overhead. But both were optimistic that there will be more avenues from which to profit in the industry’s future including, Wikert pointed out, opportunities for publishers to charge more for richer content. Linn added: “Clearly we have to find a way to take costs out of the business model. It has to be done through workflow.” To Linn, publishers must demonstrate the value of their books as prices decrease. “We’re not entitled to a certain price for our books,” he said. “We have to demonstrate value. We need to figure out ways to make these books as valuable as possible.”