Wednesday, February 29, 2012

Two Distributors Do Sign with Kindle--And Pay eBook Coop

While IPG remains in what could be a long-standing contractual disagreement with Amazon over wholesale terms for their clients--and their approximately 4,500 ebooks remain unavailable for sale on Kindle--two other independent distributors of scale did both come to terms with Amazon in the past week or so. Both the Perseus Books Group and National Book Network (NBN) reported to their respective clients on the new terms arrived for ebooks.
Those new contracts were some time in the making; one of the two told clients they "entered into negotiations with Amazon in October of last year and have only just concluded our agreement." The other underscored that the new terms were retroactive back to January 1, 2012.
As has been reported before, though not with any specificity, Amazon has been adding provisions for coop payments for ebooks this year. (Previously, coop was applied only to Amazon's print sales.) One of these distributors explicitly states a new provision of the revised contract is that clients will now allocate 3 percent coop on sales of ebooks. One of the two also makes explicit an increase in the portion of all coop, for both print and ebook editions, that goes towards "automation and personalization" (Amazon's term for the display of merchandising information on Amazon's site). For that distributor's clients, only half of all charged coop funds (instead of three-quarters, as in the past) can be spent on specific merchandising programs under the new contract.
Both distributors indicate that their discount schedules outside of coop remain unchanged. One writes, "The negotiations were difficult and at times contentious. Considering the point where we started last year, the final agreement we reached with Amazon was both the minimum they would accept to continue selling our Kindle titles, but it also preserved our core principles in these negotiations."
Also indicated in one client notification is that Amazon has also increased the ebook conversion fee they charge publishers who provide only a print book or PDF and want Amazon to produce the book file. That charge is now 8 percent of digital list price, up from 5 percent previously. (A note: we have deliberately obscured references to the which distributor wrote what; it's not our intention to unnecessarily reveal the specific business terms of any one company, but we recognize the abundant community utility in understanding some of the shifts in terms underway.)
Terms can certainly vary from house to house. Some independent publishers we spoke to did recently stretch to 4 percent coop on print books. At least some publishers told us they have not been approached for Kindle coop yet. It is expected that, as Kindle wins coop allocations, Barnes & Noble will impose a similar policy. In the course of conversations with a variety of publishers, we heard multiple reports from professional and/or academic publishers who sell to Amazon on traditional "short discounts" that they have been asked to radically restructure their terms of sale.
IPG president Mark Suchomel still declines to discuss their terms with Amazon, but did say of the recent and now very public standoff, "There has to be a point at which we really have to value our content." He said, "I don't necessarily want to be Mr. Crusader here. I want to do what's right and I want to do what's fair." In the end, he noted, "The big question is going to be, 'are we the only, or are we the first?'"
To that point, Educational Development Corporation announced Monday that, effective immediately, it "will no longer sell any of its books on Amazon or to any entities that resell to Amazon." In 2009 they stopped selling their Kane Miller list on Amazon and now they say they are withdrawing the Usborne line, which comprises roughly 1,500 titles. EDC President Randall White says in the announcement, "I see this as critical to the long-term growth of EDC, and a way to demonstrate our support of the local booksellers, museum shops, gift stores, and others who sell our books to consumers." White also reports in the release that "net sales of the Kane Miller books have increased more than thirty-three percent since 2009 when the list was pulled from Amazon." Of course there's a difference between having a direct sales relationship with Amazon and having your books available for sale there. As Laura Owen at paidContent noticed, Amazon still displays hundreds of Kane Miller titles for sale, apparently stocked through wholesalers.
Finally, IPG ceo Curtis Matthews posted on the company's blog on Friday on the topic of "what should an ebook cost?" In the closing he expresses what many people both outside and inside the trade still don't understand: "Only the six biggest publishing companies have had the market power to compel Amazon to accept the Agency Model, which allows the publisher to keep 70 percent of the e-book list price. Independent publishers have had to accept the Wholesale Model, which has let us keep only about 50 percent of the suggested price." That said, the pressure for increased discount, on the heels of other recent moves like the inclusion of books in the Kindle Owner's Lending Library without publishers' consent, once again has some publishers considering a move to the agency model (and/or to an agency model distributor) despite Amazon's resistance.

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