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.