Selling books through a single retailer

Andrew Wylie has decided to become a publisher…I am appalled, however, that Andrew has chosen to give his list exclusively to a single retailer.

That is from the president of Macmillan, Wylie is a famous agent, the topic is eBooks, and the retailer of course is Amazon.  The authors in this newly consummated deal include John Updike and Philip Roth.

Giving Amazon exclusive rights boosts their incentive to market the book.  For books there is significant "spillover" demand through consumer word-of-mouth, but in this case all the recommendations will lead to purchases at Amazon and none to Barnes and Noble.  On the downside, you lose sales to people who don't buy through Amazon, but for eBooks how many people can that be these days?  You also lose spillover sales from the marketing of other, now-excluded retailers, such as Sony eBooks.  Maybe that's small potatoes.

If the president of Macmillan is upset, he fears the Amazon marketing will drain demand from his titles.  (Bookstores are upset too.)  If I were Wylie, his letter would have me cackling with glee. 

For a while.  Does Wylie know he is the next middleman to be cut out of the deal?  His agent-like services are more valuable to the extent there are competing bidders for the book rights.  The only question is whether the authors (or their estates) will squeeze him or Amazon will squeeze him, or both.

(You might think that Wylie would gain by extending the market power of the authors to market power at the retail level.  The economic theory of "double marginalization" shows this won't work and that the market power of Amazon cannot benefit the upstream rights holder, who does best by seeking out competitive retail and charging a higher transfer price for the IP rights.)

Antitrust aside, does competition constrain Amazon from acquiring ever more eBook titles in this fashion?  It works for Amazon only if their (potentially) stronger marketing increases net sales and thus increases output.  It's easy enough for that marketing to work for any single set of titles, especially when accompanied by all this publicity.  It's much harder for that marketing push to work for books as a whole and therefore there is a natural check on how much of the market Amazon will lock up in this fashion.

Got eBook, anyone?

I thank S. for the pointer.

Comments

There is no antitrust issue here.

There is no market power in the market of authors, such that exclusivity by one of them could even come close to a foreclosure problem.

If, as to music, someone like an ASCAP or BMI were to do an exclusive with a publisher, that would be a problem, but they are prohibited from doing so by consent decrees.

What is more interesting is that authors are disintermediating book publishers. What makes this interesting is that there might be a chicken and egg problem: some publishers promote authors, and, if later, if the author is sucessful, the author could go direct. I would expect to see contingency contracts between publishers and authors if publishers promote authors: with book promoting publishers either demanding long term contracts with new authors if this happens, option contracts, or cost sharing contracts with authors for promotion.
Book publishers, record labels, and in the future television networks, are being disintermediated by distribution technologies that permit authors to go direct.

In an e-book and print-on-demand world, maybe an agent and a publisher are the same thing: filters who read a load of manuscripts, point out the best ones, and hype them.

words mean something. the title of the post is wrong. amazon does not sell e-books. at best it rents them, though not quite. licenses is more accurate. selling something to someone means that they now own it, can re-sell it, can give it away.

eBook? Why the capital B? It's not a proper noun, is it?

Does Wylie know he is the next middleman to be cut out of the deal?

hmmm, you mean like US corporations outsourcing manufacturing of appliances to the Asia firm selling those same appliances after being taught how to make them by the US corporations under the Haier brand?

I wonder if Tyler will answer whether he would get more as author selling his books directly through Amazon as ebooks than he gets for his print copies. Two text books for $9.95 on Kindle only plus the price of a Kindle would be cheaper than the two textbooks from the school bookstore.

Selling books through a single retailer usually never finds you the most you could get for your books. I personally have used a site called http://www.bigwords.com and they search all the online textbook resellers. So your chances of finding the most for your books are so high. It's awesome. Great site and recommend it for anyone.

Hmmm, as Amazon's domination approaches 100%, the cost to publishers of granting exclusivity to Amazon falls to 0. Does the cost to Amazon of gaining this exclusivity also fall? Does Amazon's next exclusive deal cost them less than this one?

Now if only we could get more eBooks in Canada. If Amazon corners the market and can't or won't distribute their entire catalog to people with Canadian ISP addresses, I'll have to figure out how to get a permanent US ISP address for buying eBooks.

Its always a problem with AD. Why doesn't anybody look at AS? The AS curve is shifted to the right by the excess of imports over exports. That might cause a problem, huh?

"Does Wylie know he is the next middleman to be cut out of the deal?"

I am always astonished with how few middlemen end up being 'cut out' in various industries over time. Professional services, for the most part, resemble higher and higher rents for middlemen... all in the name of better allocation of resources - sometimes at least superficially, often with no justification at all.

Would be interested in a long Tyler-style list for why this is - from regulatory & political capture to market power to IP related reasons to, well, middlemen actually providing 'valuable' services.

Does Wylie know he is the next middleman to be cut out of the deal?

Does Amazon know that closed ebook formats are the next middleman to be cut out of the deal?

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