Macmillan Agrees Multiyear Deal with Amazon and the Introduction of Subscription Services

MacmillanMacmillan is now the third of the big five publishers to agree a multiyear deal with online retail giant Amazon. Macmillan CEO John Sargent revealed the news in a letter sent today to authors, agents and illustrators. The deal will cover the sales of both print and e-books and will commence from the first week of January 2015. In the letter, Sargent says that terms were agreed with Amazon last week and e-books will be sold by the retailer under an agency model (70/30%).

Late last week Macmillan reached an agreement with Amazon 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.

Sargent is referring to a ruling in the Apple price fixing case which allows Apple to still discount Macmillan’s e-books until October 5, 2017. Looking forward, he described this “odd aberration” as something that will “ensure a muddled and inefficient market” until the 2017. The letter also reveals that Amazon holds a 64% share of Macmillan’s e-book business, and in light of this and the importance of looking to alternative business models, the publisher has decided to explore the subscription model for e-books despite its previous reluctance to enter this area.

Many of you know that we have long been opposed to subscription. We have always worried that it will erode the perceived value of your books. Though this significant long-term risk remains, we have decided to test subscription in the coming weeks. Several companies offer “pay per read” plans that offer favorable economic terms. We plan to try subscription with backlist books, and mostly with titles that are not well represented at bricks and mortar retail stores.

Sargent concluded the letter by acknowledging that the future is filled with ‘plenty of complexity to tackle’, but he remained optimistic.

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