Amazon War: Hachette Jumps on Macmillan's Pricing Bandwagon

Anyone hoping for a quick resolution to the shot heard 'round the publishing world will have to wait a little longer. Macmillan, one of publishing's Big Six, last week announced it would set prices for its own digital editions under the "agency model," and give retailers a 30% cut instead of the traditional 50%, provoking Amazon (AMZN) to remove all Macmillan titles. A follow-up paid ad in Publishers Lunch by Macmillan CEO John Sargent now says: "I cannot tell you when we will resume business as usual with Amazon, and needless to say I can promise nothing on the buy buttons. You can tell by the tone of this letter though that I feel the time is getting near to hand."HarperCollins, Hachette Side with Macmillan

This week, Macmillan added two allies in its move to switch to an agency model. During News Corp's (NWS) earnings call on Tuesday, CEO Rupert Murdoch commented on HarperCollins's e-book strategy: "We're not against electronic books -- on the contrary, we like them very much...but we want...some room to maneuver in it, and Apple (AAPL), in its agreement with us, which [has] not been disclosed in detail, does allow for a variety of slight of higher prices. There'll be prices very much less than the printed copy of books, but still, it will not be fixed in the way that Amazon has been doing it. And it appears that Amazon is now ready to sit down with us again and renegotiate pricing."

Late Wednesday, Hachette Book Group (LGDDY) released a statement that that it, too, would adopt the agency model and release e-books simultaneously with the first print edition, the publishing site GalleyCat reported. An agency model, CEO David Young said, would let Hachette "make pricing decisions that are rational and reflect the value of our authors' works," and invest more wisely in authors' careers. Without this investment in our authors, the diversity of books available to consumers will contract, as will the diversity of retailers, and our literary culture will suffer."

The Amazon-Macmillan War

Why is it taking so long to hammer out a deal where Amazon sells all Macmillan print and digital titles, and Macmillan can sell e-books at any price it wants? Amazon remains mum on the proceedings, but it probably boils down to the fact that it takes longer for Amazon to remove a blanket function (i.e., deleting the "buy" button on Macmillan books) than to restore it. And so the Macmillan-vs.-Amazon saga drags on.

But another bone of contention for authors and agents did find resolution in Sargent's new letter. Last October, the publisher announced new terms for e-book royalties, downgrading to a net rate of 20% -- 5% lower than the standard established by the other major houses. Naturally, there were objections, and while Sargent promised at the time that "we would be flexible and that we were prepared to move to a higher rate for digital books," the Authors Guild confirmed that Macmillan's royalty rate would rise to the current net standard. No date's been set for the boilerplate contract switch, but it's a good bet that this change will coincide both with the expiration of Macmillan's annual agreement with Amazon and the launch of Apple's iPad.

'Available Everywhere Except Amazon'

Some agents are still unhappy that the Big Six are sticking with this royalty. But the Authors' Guild hopes that "25% of receipts is a transitional royalty rate for e-books" -- and no doubt the agency model will spark new discussions on what authors should make from digital copies of their work. The Authors Guild, incidentally, has launched "Who Moved My Buy Button?" ("Keeping an eye on our friends at Amazon since 9 a.m.").

But for the past week, that answer for Macmillan authors has been a big fat zero, with respect to Kindle editions. And that has the publisher cheekily touting Atul Gawande's The Checklist Manifesto as being "available from booksellers everywhere except Amazon."
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