Macmillan CEO John Sargent has just revealed in a public letter posted on Tor.com that Macmillan has signed a deal with its biggest ebook customer and will soon be dabbling in the subscription ebook market.
To start, the ebook deal was signed last week, and while we have less than complete info Sargent did say that:
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 less than specific on the terms of the contract, but I would be willing to bet that the deal is probably much closer to the deal Amazon signed with S&S, which might best be described as modified agency (or so it appears from what few details have been leaked).
Update: The WSJ confirmed that this is a modified version of agency similar to the S&S deal:
“We are happy with this agreement, as it allows us to grow our business together with Macmillan and their authors,” said a spokeswoman for Amazon in a statement. “Importantly, the agreement specifically creates a financial incentive for Macmillan to deliver lower prices for readers.”
Macmillan confirmed that it will receive better terms from Amazon when it offers lower prices on its titles.
Macmillan is the third major US publisher to sign a new contract with Amazon in the past two months. S&S went first, inking a deal not quite two months ago, and Hachette settled its dispute with Amazon a few weeks later. (There's no news yet on whether PRH or HarperCollins are talking terms with Amazon.)
These 5 publishers have had to renegotiate their deal with Amazon and other ebook retailers following their decisions to settle the ebook price fixing antitrust lawsuit brought by the DOJ and states' attorneys generals in 2012.
Llike Hachette, which relies on Amazon for the majority of its ebook sales, Amazon has Macmillan over an ebook barrel. Sargent has revealed that Amazon is the single largest seller of Macmillan ebooks:
In reaching agreement with Amazon, we have not addressed one of the big problems in the digital marketplace. Through great innovation and prodigious amounts of risk and hard work, Amazon holds a 64% market share of Macmillan’s e-book business.
He goes on to explain how Macmillan will respond to Amazon's dominance of the ebook market, namely by looking for other markets:
In our search for new routes to market, we have been considering alternative business models including the subscription model. 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.
The details are less than complete, but he says that Macmillan will test the subscription market first with "backlist books, and mostly with titles that are not well represented at bricks and mortar retail stores". No partners are named, but I would expect that Macmillan will sign with Oyster and Scribd, but not Kindle Unlimited, which doesn't pay as well.
Oyster and Scribd have already signed deals with HarperCollins, S&S, HMH, and other publishers big and small, few of which have signed with Amazon.