As if the threat of new competition is not enough, it looks as though there could be more trouble looming ahead for Amazon and its top consumer gadget — the Kindle.
David Young, CEO for Hachette Book Group USA announced recently that they will be shifting to an agency model for e-book pricing. This decision follows closely the Macmillan price dispute with Amazon which in turn, has definitely given Macmillan a powerful ally.
Young’s announcement included this quote, “it allows Hachette to make pricing decisions that are rational and reflect the value of our author’s work. In the long run this will enable Hachette to continue to invest in and nurture author’s careers—from major blockbusters to new voices”.
In addition to following the agency model, Hachette intends to release e-books simultaneously with the hardcover or the first format print edition. This is the letter that was sent to agents on February 4th:
February 4, 2010
Dear Agent,
At Hachette Book Group, we have been considering a new pricing model for some time, and have decided to transition to selling our e-books through an agency model.
There are many advantages to the agency model, for our authors, retailers, consumers, and publishers. It allows Hachette to make pricing decisions that are rational and reflect the value of our authors’ works. In the long run this will enable Hachette to continue to invest in and nurture authors’ careers–from major blockbusters to new voices. 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 agency relationship will allow us to make more titles available to more consumers on more platforms. This expands the author’s reach and readership, which is at the heart of what we do as a publisher. Ultimately, these new terms open doors to all online e-book service providers and create more avenues for delivering e-books to readers.
Another great benefit to our consumers is that we intend to release HBG e-books simultaneously with the hardcover (or first format print edition).
It’s important to note that we are not looking to the agency model as a way to make more money on e-books. In fact, we make less on each e-book sale under the new model; the author will continue to be fairly compensated and our e-book agents will make money on every digital sale. We’re willing to accept lower return for e-book sales as we control the value of our product–books, and content in general. We’re taking the long view on e-book pricing, and this new model helps protect the long term viability of the book marketplace.
We believe that this new model is preferable to withholding books, and is in our authors’ and HBG’s best interest. I’m happy to answer individual questions about the agency model, so please don’t hesitate to contact me.
Best,
David Young
Chairman and Chief Executive Officer
Hachette Book Group
The agency model will entail retailers acting as the publisher’s agent, and the retailer will get 30% commission. This is the standard split for many digital media businesses. The price for digital books will range from $5.99 to $14.99.
In dispute to Macmillan’s decision to follow the agency model, Amazon released a statement on the Kindle Community board that outlined why they temporarily ceased sale of Macmillan e-books. In addition, the statement included that they “don’t believe that all of the major publishers will take the same route as Macmillan.”
Unfortunately, it looks as though the big publishers are going to follow suit, and with such differences between Amazon and some of the top publishers in the country, could the popularity of the Amazon Kindle also suffer from the fallout?