Amazon Reaches Deal With Simon and Schuster

Posted on October 22, 2014

The publishing industry was surprised this week to learn that Amazon.com and Simon and Schuster have inked a multi-year retail agreement that includes the sale of ebooks. Amazon and Hachette have been locked in negotiations for months and have been unable to reach a deal regarding how ebooks are priced.

The Amazon-Hachette negotiations has resulted in an avalanche of bad press for the online retailer, which culminated in an emotional column by Paul Krugman in The New York Times which accused Amazon of having "too much power" and of suing that power "in ways that hurt America." Krugman, who uses Amazon Prime himself, admits that "o far Amazon has not tried to exploit consumers," and that Amazon is not a monopoly. He then compares Amazon to the great robber barons and accuses the company of using its power to force publishers to lower prices for consumers. Amazon has readily admitted it wants to lower prices on ebooks for consumers, so this is not much of a revelation.

In the midst of this unfolding drama, The Wall Street Journal reports that Amazon and Simon and Schuster have signed a retail and digital contract which will run for several years. Amazon never does multi-year contracts, so this is a first. No one will say exactly what the deal entails, but a few details have emerged.

Amazon issued a statement in which it said that "The agreement specifically creates a financial incentive for Simon & Schuster to deliver lower prices for readers." Amazon also confirmed that the the parties agreed to a modified version of an agency agreement. Simon and Schuster will be able to set the price of its ebooks, but Amazon will be able to discount the ebooks in certain (unspecified) situations. Reportedly, Simon and Schuster is paying a lot more in coop fees to get its titles featured on Amazon.com.

According to Business Insider Simon & Schuster CEO Carolyn Reidy wrote a letter to authors announcing the deal. In the letter she says she is, "very happy with this agreement as it is economically advantageous for both Simon & Schuster and its authors and maintains the author's share of income generated from eBook sales."

Reportedly, Simon and Schuster made the offer which was accepted by Amazon after it made a few changes to the proposed deal. CBS' Les Moonves mentioned in July that negotiations were ongoing and did not seem overly concerned about them. This deal really puts the pressure on Hachette. If Simon and Schuster could read a deal with Amazon, why can't Hachette?