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The big news of the week is that Amazon and Hachette have finally reached agreement on the pricing of Hachette e-books, when sold from Amazon. Amazon has been trying to drive the price of e-books down, presumably on the assumption that cheaper sells more and increases the company’s profits; Hachette has been resisting, ostensibly because it claims that authors will suffer as a result of lower prices, since royalty payments are based on the price of the item sold. In fact, it too, is probably more concerned about profit – it is, after all, a commercial company with shareholders who want to see higher dividents.

The details of the agreement have not been revealed, but the Library Journal speculates that it will be similar to the agreement reached earlier with Simon and Schuster, “essentially a return to the agency model of 2010 wherein publishers control retail pricing and retailers—in this case Amazon—serve as agents through which customers make their purchases”. Ironically, this is the model that got Apple and the publishers into trouble with the US legal system. Curious that when a group of publishers and a retailer (in this case Apple iBooks) get together to sort out pricing arrangement, it is called collusion, but when Amazon does it one at a time with the same publishers, it’s OK.

Digital Reader blog draws attention to another factor that may have influenced Hachette’s decision to resolve the dispute, quoting Publishers’ Weekly:

Third quarter sales at Hachette Book Group USA fell 18.5% in the period ended September 30, 2014 compared to the third quarter of 2013, parent company Lagardere reported. The decline was attributed to difficult comparisons with last year when the company had an “unusually high” number of bestsellers led by The Longest Ride, Lagardere said. The “difficult situation” with Amazon also impacted sales and HBG also postponed some titles, Lagardere said.
For all of Lagardere Publishing, revenue in the quarter fell 2.9%, to 564 million euros. In addition to softness in the U.S., sales were down in France and the U.K., but rose in Spain/Latin America.