With the advent in agency model in April 2010, a lot of retailers lost the advantage of pricing ebooks aggressively. Before the EBook Agency Model, the publisher typically offered the ebooks at 50% of the hardcover price, and then allowed the retailer to sell them for whatever price they liked. So if a book had a list price of $30, the publisher would sell it to say Amazon for $15, and in turn, Amazon might sell it for $9.99 taking a $5 loss, but attracting a lot of people to buy from them. Some wonder why Amazon would want to take a $5 loss on every ebook sold under the old arrangement. Our guess is that Amazon wants to dominate the market and basically crush the competition by making it impossible for them to compete over the long-term as well as also make money by selling more Kindle readers. Regardless of the motivation, it is a great deal for consumers and not such a great deal for authors.
With the Ebook Agency Model, the publisher sets the price for the ebook, takes 70% of the sale, and leaves 30% to the retailer. Using the same example above, the publisher sells the ebook for $15, and then takes 70% or $10.50. They actually make less than they were making before. Amazon then gets $4.50. This is actually more than they were making before but it forces Amazon to sell the book for $5 more than they normally would ($15 Vs $9.99). The consumers don’t want that and neither does Amazon.
At Inkmesh, we wanted to find out how the big vendors stack up against each other after the agency model came into effect. We decided to dig into our database to get some answers, and found several things that were interesting enough to share on our blog.
For the purpose of this analysis, as with a similar analysis we did in Nov 2009, we pulled up ebooks that were available at the US websites of all three retailers – Amazon, B&N and Sony. To filter out noise, we only retained those books which had a non-zero sales rank and non-zero reviews at Amazon. We ended up with 16937 top-selling titles available at all three vendors and calculated our numbers on this set. Pricing of ebooks changes with time, so this analysis reflects the state of ebook prices on 20th August 2010.
Here is a chart that plots the number of books for which each retailer had the lowest price amongst all the 16931 books that we considered for our analysis.
The first thing that stood out was that Amazon is no longer as dominant in ebook pricing as it used to before the agency model. Out of 16931 titles we looked at, Amazon had lower prices than everyone else for only 876 (5.17%) of ebooks. And when we say everyone else, we also looked at 30 other ebook vendors that we index. A full list of these sites is available here
. Amazon tied with the best price elsewhere for 7332 books. That basically means that Amazon had best prices for 8208 (48.5%) of the top selling ebooks in circulation today. Non other vendor did as well as Amazon.
Barnes and Noble was a clear, but not distant number two as in our previous analysis. It had the best price on only 441 (2.6%) of the top ebooks in circulation and it tied for the best price on 6783 (40%) of the top ebooks. This implied that they had the best price for a total of 7224 (42.6%) top selling ebooks. This was a much better showing for B&N in terms of ebook pricing. This also means bad news for Amazon since post the agency model they have clearly lost the big advantage they had w.r.t ebook pricing.
However, Sony failed to impress yet again, which was surprising to say the least. Sony had the lowest prices on only 71 (yes, only 71!) ebooks, and had the best price for only 4826 (28.5%) of 16931 top selling ebooks. Even Kobo books beat them by having the best price for 5603 (33.09%) of the books. Thus if you have a Sony reader then you are still better off buying ebooks from other vendors like Lulu, Kobo, BooksOnBoard, Diesel and so on which had lower prices on 100’s of epub books as compared to Sony.
Borders also recently opened up it’s new ebook store, but they are not as competitive as Amazon and B&N either. They had the lowest price for only 3835 (22.7%) of top selling ebooks.
Some other stats we found interesting:
As we found with our previous analysis, there were only 1270 (7.5%) ebooks that were free amongst these top selling ebooks. Thus, contrary to popular belief most of the top selling ebooks are actually not free.
Along with Amazon, and B&N, BooksOnBoard and Kobo put up a strong showing by beating Sony and Borders in terms of ebook pricing. Another interesting fact was that unlike before when Amazon had lowest price for 74% of the ebooks, this time the number dropped to 48%. A possibility could be that some smaller ebook vendors are yet not following the agency model and pricing their ebooks more aggressively than Amazon. A deeper analysis would be the subject of another blog.
Im summary: when it comes to ebook pricing, Amazon is still the best, but B&N is close on heels. Sony is much better than before, but still far behind and needs to tighten up it’s pricing to start making a big impact. Borders is coming up, and Kobo had a surprisingly good showing. The landscape will continue to change as both newer and more established ebook vendors continue to lure readers to their sites.