Macmillan, too, returns to agency pricing with Amazon

Book publisher Macmillan, like Simon & Schuster and Hachette before it, has signed a new contract with Amazon and will return to agency pricing on its ebooks starting in 2015. In a public letter to authors and agents, Macmillan CEO John Sargent also said Amazon’s dominance in the ebook marketplace is a problem and that the publisher will experiment with ebook subscription models as a way to diversify its revenue streams.

Macmillan’s settlement with the Department of Justice in the [company]Apple[/company] ebook pricing case required it (and the four other settling publishers) to allow retailers to offer unlimited discounts on its ebooks for two years. Now the two years are up and publishers are returning to agency pricing agreements with Amazon. Under agency pricing, the publisher sets an ebook’s price and the retailer takes a commission. The negotiations between Amazon and publisher Hachette were highly fraught and public, but Macmillan’s were much quieter.

Sargent wrote:

“Late last week Macmillan reached an agreement with [company]Amazon[/company] on a multiyear deal for print books as well as a multiyear deal on the agency model for e-books, starting on January 5, 2015. All our other retailers will also be on the agency model, leaving Apple as the only retailer who is allowed unlimited discounting. Irony prospers in the digital age.

This odd aberration in the market will cause us to occasionally change the digital list price of your books in what may seem to be random fashion. I ask for your forbearance. We will be attempting to create even pricing as best we can.”

Apple can offer unlimited discounts on ebooks because, as a result of the settlements, publishers weren’t allowed to negotiate new contracts with it for five years. Macmillan and Simon & Schuster are appealing that decision and were in appeals court to argue their position last week.

In his characteristically forthright letter, Sargent also noted that

“In reaching agreement with Amazon, we have not addressed one of the big problems in the digital marketplace. Through great innovation and prodigious amounts of risk and hard work, Amazon holds a 64% market share of Macmillan’s e-book business. As publishers, authors, illustrators, and agents, we need broader channels to reach our readers.”

As a result, Sargent wrote, Macmillan will be testing ebook subscriptions: “We plan to try subscription with backlist books, and mostly with titles that are not well represented at bricks and mortar retail stores.” While Sargent didn’t say which companies Macmillan will be working with, Oyster and Scribd are likely candidates.