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Breaking: Hachette Book Group to Transition to Agency Model

hachette.jpgIn an email to agents this evening, Hachette Book Group USA CEO David Young announced a shift to an agency model for eBook pricing.

Here’s an excerpt: “There are many advantages to the agency model, for our authors, retailers, consumers, and publishers. It allows Hachette to make pricing decisions that are rational and reflect the value of our authors’ works. In the long run this will enable Hachette to continue to invest in and nurture authors’ careers–from major blockbusters to new voices. Without this investment in our authors, the diversity of books available to consumers will contract, as will the diversity of retailers, and our literary culture will suffer.”

And he added this point about eBook releases: “Another great benefit to our consumers is that we intend to release HBG e-books simultaneously with the hardcover (or first format print edition).”

This makes Hachette a valuable ally for Macmillan in their price feud with Amazon (AMZN). In a paid advertisement about the Amazon debate, Macmillan CEO John Sargent defended the agency model: “Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.”

In its letter about why they temporarily stopped the direct sale of books, Amazon tied the agency model to its list of complaints: “Macmillan, one of the ‘big six’ publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.”

Read the entire letter after the jump.


February 4, 2010
Dear Agent,

At Hachette Book Group, we have been considering a new pricing model for some time, and have decided to transition to selling our e-books through an agency model.

There are many advantages to the agency model, for our authors, retailers, consumers, and publishers. It allows Hachette to make pricing decisions that are rational and reflect the value of our authors’ works. In the long run this will enable Hachette to continue to invest in and nurture authors’ careers–from major blockbusters to new voices. Without this investment in our authors, the diversity of books available to consumers will contract, as will the diversity of retailers, and our literary culture will suffer.

The agency relationship will allow us to make more titles available to more consumers on more platforms. This expands the author’s reach and readership, which is at the heart of what we do as a publisher. Ultimately, these new terms open doors to all online e-book service providers and create more avenues for delivering e-books to readers.

Another great benefit to our consumers is that we intend to release HBG e-books simultaneously with the hardcover (or first format print edition).

It’s important to note that we are not looking to the agency model as a way to make more money on e-books. In fact, we make less on each e-book sale under the new model; the author will continue to be fairly compensated and our e-book agents will make money on every digital sale. We’re willing to accept lower return for e-book sales as we control the value of our product–books, and content in general. We’re taking the long view on e-book pricing, and this new model helps protect the long term viability of the book marketplace.

We believe that this new model is preferable to withholding books, and is in our authors’ and HBG’s best interest. I’m happy to answer individual questions about the agency model, so please don’t hesitate to contact me.

Best,
David Young

Chairman and Chief Executive Officer
Hachette Book Group |

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