April 8, 2013
Amazon begins discounting Macmillan ebooks; Penguin ebook prices still listed as “set by the publisher”
by Claire Kelley
In February, Macmillan was the last publisher named in the U.S. Department of Justice lawsuit to settle. And yet their ebooks have begun being discounted on retailer sites like Amazon before Penguin‘s, who settled in December. The end of agency pricing is a result of the proposed DOJ agreement terms, and the publishers who settled—Simon & Schuster, HarperCollins, and Hachette—have already seen their ebook prices decline.
This new DOJ-approved pricing model has been called “Agency Lite,” a term coined by Michael Cader at Publisher’s Lunch:
Under this model the publisher is still the seller of record, and the reseller (for example, the bookstore) is still acting as its agent. The publisher is still responsible for collecting and remitting the sales tax, while the retailer is allowed to discount titles, though not below their cost for the publisher’s entire catalog over a one-year period.
Random House and Penguin, who have now been approved to merge, are still using agency pricing. While Penguin settled with the DOJ, they have still not released their price controls. And Random House has agreed to comply with Penguin’s settlement terms as part of the merger agreement, so presumably both publishers will join the other four in abandoning agency pricing. John Sargent cited this as one reason for Macmillian’s unwillingness to continue to fight the lawsuit in a letter to authors, agents and illustrators on February 8th 2013:
There are two reasons we did not settle earlier. First, the settlement called for a level of e-book discounting we believed would be harmful to the industry. We felt that if only three of the big six publishers were required to discount and we stood firm, those problems might be avoided. But when Random House agreed to be bound by the Penguin settlement, it became clear that all five of the other big six publishers would be allowing the whole agent’s commission to be used as discount, and Macmillan’s stand-alone selling at full agency price would have no impact on the overall marketplace.
As the New York Times noted last December, these reductions in ebook prices have not led to a price war, which some excepted. In fact, ebook prices have hovered around the ten dollar mark, a low-end price point that publisher fought hard to preserve. So, it seems that ebooks have not eclipsed the physical book, in terms of market share, and that Amazon may be reluctant to discount them too much, as there’s not as much to gain, in terms of market share, as many expected. Ebook sales are no longer growing at the exponential rate that they were just a short while ago; in fact, they may have finally leveled out.
Claire Kelley is a the former Director of Library and Academic Marketing.