Amazon vs. the Agency Model

May 2010
by Dave Marx

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Amazon vs. the Agency Model

by Dave Marx

As a publisher, I’m fascinated by the tug-of-war over e-book pricing that is taking place as this issue goes to press. In shorthand, it’s a conflict between the approach, in which the retailer has total control of the price, and the “agency model” championed by major New York publishers in connection with the new Apple iPad.

I think there’s a basic misunderstanding of what agency model means. It sounds like some new and exotic basic shift in the relationship between publisher and retailer. But in the world of e-books, a dramatic shift has already taken place.

In the print-books world, the retailer purchases physical goods from the publisher (or the publisher’s intermediaries), at a cost based on the publisher’s suggested retail price. At that point, the copyright law’s first-sale doctrine takes over. Once retailers own the goods (even if it’s only until they return them for credit), they’re essentially free to set whatever price they wish—list price, deep discount from list price, loss leader price, or anything in between. The publisher is isolated from the retailers’ pricing/discounting practices.

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