Ready or Not, Here Comes The Agency Model for ebooks

It's almost time for the iPad to jump into hot little waiting hands and publishers are making the migration to the agency model for ebooks because of this catalyst. Gotta love Apple Computer! Since both of these events are happening on the same weekend, here's a great explanation from the folks at Publishers Marketplace:

There are a lot of crossed fingers, late hours, furrowed brows and open questions as at least part of the publishing business prepares for an April 1 to April 3 switchover to the agency model for ebooks. (Yes, even the day of change is unclear, since some of the Agency Five--now an accepted term of art--are switching models tomorrow while others are reportedly not doing so until Saturday, April 3.)

Among the latest supply chain players to communicate with accounts is Overdrive, which powers a number of ebook retailers. Company ceo Steve Potash tells us they "are adapting as best we can" in "getting the information and making sure it's good to go" from those publishers switching models, while warning that "there will be holes in [some publishers'] catalogs starting tomorrow."

Among the issues with the Agency Five, Potash says, is that "some of the imprints and subsidiaries that may have not been initially identified" as changing models "are now also confirming that they are switching over," such as Harper's Zondervan division.

Calling it a "dynamic" situation that will have "people busy all day late into the night" getting ready, Potash notes "we are still getting input and data..from one or more" of the Agency Five. On the retail side as well, their "retail channel partners are in various states of adapting" to the new terms.

Potash notes that "the fire drill is around retail ebook sales in the US," with very little effect on their international and institutional/library sales. He expects that "there are going to be pros and cons from this exercise," saying that "in 6 or 9 months, we'll see if this strategy was the right one." He does believe that "by leveling some of the pricing we'll see some new etailers come into the market offering ebooks."

Over at Kobo, Michael Tamblyn blogged that they have "been blasting through new contract paper for agency publishers at a fairly frantic pace." Across the market, he warns that "some retailers and wholesalers may not make the transition to agency in time. Publishers may not be able to close all deals by the beginning of April. Retailers may find themselves presented with terms they can't agree to. There are a lot of system changes that have to be made on just a few days/weeks notice."

As for Kobo, under agency "we lose most of our ability to issue coupons, promotions, special discounts, kickbacks, buy-X-get-one-free. We could still do it for non-agency titles, but then we end up in a weird situation of 'Get $1 off, but only on these books, and definitely not on these other ones.' That's not fun. And worse, it's confusing to consumers."

While the company "hasn't seen the opportunity to provide loyalty or reward programs that users would find especially compelling" under the new agency contracts, Tamblyn tells us that going forward "one of the areas where we are going to be sitting down with publishers post-agency is to look more closely at issues related to consumer incentives" that might pass muster. He says publishers have indicated that after executing the fundamental transition, "this is something they might allow" as long as it isn't a new way of providing a direct title-by-title discount. Tamblyn says that rather than trying to create a new loyalty/reward program on the fly, they are waiting to "take a look at where consumer incentives might be needed on both sides" once the agency model is established.

As we've written previously, we have had very little firm confirmation that many publishers outside the Agency Five will be making the switch across all ebook accounts in time for the iBookstore launch. Potash told us "I think we'll see an ongoing rollout" over "a period of several weeks" or more.

Among the many significant complexities both publishers and retailers are dealing with are the sales tax compliance responsibilities, which we're told shift to the publisher under the agency construct.