Digital music, e-books…it’s all the same, right? Technology drives content. The medium is the message. There’s no hope for brick-and-mortar stores in a digital world.
Not so fast. That likely isn't the case.
What Macmillan did recently in challenging Amazon’s e-book monopoly by changing the business model is the chink in the techno-dragon’s armor. It’s not a mortal wound to the flame-throwing Amazon, but it’s a spot to throw more spears and tear the killer to pieces. More importantly, it’s part of a larger trend to destroy the monopoly of single-delivery options ─ the oppression of the reading device ─ and democratize how content is delivered.
If you’ve been cowering in a cave and avoiding the heat, what happened in the Macmillan-Amazon skirmish was the publisher changed terms for e-book purchases, moving Amazon to the agency model. Different from the current publishing model that wholesales titles based on discount from the publisher’s suggested retail price, the agency model sets the price and pays a commission to the retailer who sells it (thank you Michael DiMarco for the clarification). That sets the minimum retail price. That’s assuming retailers won’t discount or sell below cost ─ an assumption that doesn’t always play out, of course. We saw that last fall when Amazon and its rival dragons Wal-Mart and Target tried to dominate the territory with price-war flame-throwers. Turning reason to ash for the sake of market dominance and potential monopoly, the predators priced book sales at about half of their alleged wholesale cost. But that’s another story.
With publishers more involved establishing retail price, the business model for covering costs and making profits is more workable -- something that the digital-music business model didn’t do. When you kindle the fires of more e-reading devices, it makes content delivery itself a commodity and the content more valuable with more price elasticity.
This should mean savvy publishers will have more options to better manage their sales channels and not cannibalize one to placate the hysteria of the other. And brick-and-mortar booksellers don’t have to be fire-breathing dragons to sell e-books. They can just take care of their customers.
Check out my column in CBA’s March Retailers + Resources magazine for more of my take on the Amazon-Macmillan flare-up.
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