In one of the more detailed accounts of a publisher’s e-book pricing strategy and relationship with the Department of Justice, Macmillan CEO John Sargent told authors, illustrators and agents in a letter sent today that the company has reached a new multiyear sales agreement with Amazon for both its e-books and print books. The deal will go into effect January 5.
Sargent also provided some context on how the deal, finalized last week, was reached. He noted that the house's consent decree with the Department of Justice expired today (December 18), which meant that that Macmillan is no longer required to allow retailers to discount its e-books. However, Sargent added, because of a separate ruling in the Apple price fixing case, Apple can still discount Macmillan's e-books until October 5, 2017. This, Sargent said, is something that will “ensure a muddled and inefficient market” until the October 5 date is reached.
The “odd aberration” created by the Apple ruling will, Sargent explained, "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.” Sargent continued: “Under our deal with Amazon your net percentage of the proceeds will not change. You will be affected, as you always have been, by our changes in price. Your books will continue to be featured in Amazon promotions and deals.”
Sargent then noted that since Amazon still holds a 64% share of Macmillan’s e-book business, the publisher will soon enter the subscription model in an attempt to broaden its distribution channels.
Acknowledging that Macmillan has concerns that subscription services run the risk of eroding the perceived value of books, the company will nevertheless test subscription services in the coming weeks with several companies that offer “pay per read” plans that offer favorable terms. “We plan to try subscription with backlist books, and mostly with titles that are not well represented at bricks and mortar retail stores. Our job has always been to provide you with the broadest possible distribution, and given the current financial and strategic incentives being offered, we believe the time is right to try this test” Sargent concluded.
