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Simon & Schuster’s Agreement with Amazon Points the Way Back to Agency Pricing

Simon & Schuster and Amazon have reached a multi-year contract covering both print and digital books, reports Jeffrey Trachtenberg of the Wall Street Journal (subscription required).

This is the first deal Amazon has struck with any of the five publishers who settled with the government after having been charged with e-book price-fixing in 2012. Notably, Simon & Schuster has negotiated an agreement that “preserves the basic construct and terms of agency [pricing],” according to a source who spoke to Publishers Lunch (subscription required). This will allow the publisher to set the prices of its e-books in most cases, as Amazon’s right to discount will be confined to specific situations, according to an Amazon source quoted in the same report.

Simon & Schuster CEO Carolyn Reidy said in a letter to authors that, although deals like this are not usually announced, “the high level of public speculation over the status of these talks made it important to let you know about this positive development.” She refers, of course, to the ongoing Amazon-Hachette dispute, in which Hachette authors have found themselves held hostage by the e-tailer.

Prior to this news, insiders had speculated whether Amazon’s approach in the Hachette dispute would be replicated in negotiations with the other major publishers. It seems not. Simon & Schuster authors’ royalty checks appear safe from the retailer’s freeze in advance of the upcoming holiday season.

We supported agency pricing when it was first conceived, and we’re glad to see S&S authors evade the fate of their Hachette counterparts. However, we’re not yet sure of the details of the agreement. The Amazon source told Publishers Lunch that it “specifically creates a financial incentive for Simon & Schuster to deliver lower prices for readers.” If that’s true, we could be looking at agency pricing in name only, with Amazon effectively subsidizing a deflated e-book pricing structure.

And S&S writers will still be subject to an inequitable split of e-book profits with the publisher, an issue that predates this deal. Authors’ royalties remain idle at 25% of the publisher’s net profits, the same place they’ve been since 2010. It’s a profit split we’ve always found inequitable. Now that Simon & Schuster has made a deal with Amazon, it’s time for them to make a better deal with authors.