This weekend, Borders (BGP) let their creditors know they'd be holding off on paying rent at the end of January, in a bid to preserve liquidity. Sure, many have known for some time that Borders was in bad financial shape, but telling your landlord you're skipping rent is a sign things have gone from bad to worse and that the end—or at least a formal filing of bankruptcy—is nigh.
With a major book retailer—and e-book storefront—in danger of insolvency, this raises some interesting implications for book publishers. What would, for example, happen if Borders were to simply vanish? Right now it's unclear, and this question is even more complicated with the arrival of the agency pricing model.
Apple Starts the E-Book Pricing Revolution
When Apple (AAPL) released the iPad, they not only set off a revolution in mobile computing, but they also created a huge wave of change in e-books. Two big changes were increasing the awareness of e-books among the general consumer public and introducing the book-as-app (also known as enhanced e-books) category, but perhaps the biggest change was how Amazon (AMZN) upturned the e-book pricing Apple cart with the introduction of the agency pricing model.
Agency pricing was a radical shift from the previous wholesale model, which let book retailers control pricing. In the past, retailers, including Amazon, could sell a book at whatever price they chose, but would compensate the publisher based on the list price. With e-books, this model was problematic for publishers because retailers—and Amazon in particular—discounted retail prices so heavily to gain market share that publishers worried they were permanently lowering consumers' expectations around pricing.
But with the release of the iPad, Apple forced everyone—including Amazon—to accept the agency model, which gave publishers the ability to set prices. But while the move to the agency model resulted in bigger margins for publishers, it also meant bigger responsibility in the form of a more direct relationship with the customer, and, as e-book blogger Mike Cane points out, should, say, a book retailer go out of business.
Could the Authors Themselves Be Responsible?
I asked Mark Coker, chief executive officer of indie book platform Smashwords, what he thought about the implications for publishers if a big retailer suddenly were to go out of business. He pointed out that a major bookseller like Borders, with lots of accounts, would no doubt sell its assets (and its liabilities) to another party in a bankruptcy, which means that someone—possibly even Apple, Amazon, or a Kobo—would inherit those consumer retail relationships.
He's right, but regardless, it's worth looking at whether book publishers and even independent authors themselves have some sort of increased responsibility with agency model e-book pricing. Remember, with e-books, an independent author herself can essentially become a publisher on Amazon or another platform. While Amazon isn't going out of business soon, there's no doubt that in the future some authors such as Seth Godin or others might act as their own publisher and sell through a multitude of different sales platforms, including many with less healthy balance sheets than Amazon or Apple.
Would these author-publishers themselves ultimately be responsible if an e-bookstore went out of business and a consumer's e-book disappeared? Kindle's self-publication terms of service indicate the author gives rights for digital distribution to the retailer/platform owner, but does that completely excuse the publisher from any and all complaint—or legal action—by the consumer should the retailer/platform disappear?
No doubt that's a question for the legal eagles to look into, and with Borders and its e-bookstore on the precipice of bankruptcy, it's probably time that book publishers, including the newly entrepreneurial author-publisher, start asking, too.
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