http://www.publishersweekly.com/pw/p...-agency-2.html
Quote:
According to the retailer, who has seen the new contracts for Hachette, HarperCollins, and Simon & Schuster e-books, the settling publishers will continue to use the agency pricing model in its new hybrid form. However, under this so-called Agency 2, “discounts may be applied by retailers to the PRP [publishers’ retail price] at any time,” and those discounts will be applied to the retailer’s share of the sales transaction. Under the agency model, publishers receive 70% of the PRP and retailers receive 30%, out of which a percentage also goes to e-book distributors such as Ingram or OverDrive. According to the retailer, the new contracts specify that “any discounting applied will reduce the amount of the [30% retailer’s] commission earned.”
While retailers can apply discounts at any time under so-called Agency 2, new agreements mandate the “aggregate amounts of the discounts during any twelve (12) month period must be less than or equal to the total commission earned on sales of the publisher’s e-books in such twelve month period.” A retailer called it a “cumulative maximum discount; you can’t go below cost. I can sell e-books for 99% off for a time as long as I stop before I go over 30% off over the course of a year’s sales.” The retailer said the settling publishers are also setting up shorter periods, from a month to 90 days, during which time they will monitor any retailer price discounts to prevent overdiscounting.
Things have been changing quietly at Macmillan, which is also still fighting the DoJ charges. In recent months, Macmillan began to allow their agents to discount e-books that are priced at $13.99 and above by up to 10% of the digital list price on a title by title basis.
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So it is not wholesale anymore but agency pricing without the "most favored clause" that kept retailers profit margin at 30%.
Example: Publishers set the price at $15. Retailers will get 30% of this in commission or $4.5 if they choose to offer the book at Publisher Agency Price. Retailers can discount it as much as they like as long as cumulative maximum discount won't go below cost (overall catalog).
Publisher set the ebook price at $15. Retailer
Sell it at $15 = 30% profit
Sell it at $13.5 = 20% profit
Sell it at $12 = 10% profit
Sell it at $10.5 = 0% profit (at cost)
Sell it at $9 = 10% loss
Look like this is a big win for publishers since they get to set the price and get 70% of whatever price they set. And with prices being lower, they will sell even more.
No wonder MacMillan is joining in with agency pricing 2.0