April 1, 2010, 12:00 AM

Amazon gives ground on e-book pricing to publisher Hachette

Amazon.com says it has signed a new e-book pricing agreement with Hachette Book Group, effective April 3—the date Apple’s iPad and iBookstore are set to launch. The agreement follows Apple`s model by allowing publishers to set prices.

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Amazon.com Inc. says it has signed a new electronic book pricing agreement with Hachette Book Group, effective April 3-the date Apple Inc.’s iPad and iBookstore are set to launch. The agreement follows that Apple has made with major publishers, allowing the publisher to set the price instead of Amazon, which has been pricing e-books low as a way to promote sales of its Kindle reader.

In the new agreement, which echoes the agreements that Apple Inc. has made with publishers, publishers can set the prices of their own books. The merchant-acting as an agent for the publisher rather than setting its own prices-then pockets 30% of that amount. This so-called agency model allows publishers to lower prices when demand slackens, as is the case for digital downloads of music, TV shows and music. At the same time, it can allow publishers to set the price of electronic books at above the $9.99 level Amazon has set for many bestsellers, a price point that publishers feel devalues their books.

E-books from Hachette, one of the half-dozen largest book publishers in the West, will become available under the new terms Saturday. “Hachette has disallowed the sale of e-books except on agency terms effective as of 12:01 a.m. this morning,” says Amazon in a message posted today on the Kindle Community section on its web site. “We came to terms late last night but we cannot be operationally ready to sell their e-books on agency terms until two days from now-April 3-when we will also cut over for the other publishers that are switching to agency.”

Amazon, No. 1 in the Internet Retailer Top 500 Guide, has also reached new pricing agreements with Simon & Schuster and HarperCollins Publishers to shift to an agency model.

Like Apple’s iBookstore the arrangement means that while many best sellers will sell for $9.99, most books will be priced between $12.99 and $14.99.

Amazon’s agreement with Hachette, a French company that acquired the Time Warner Book Group in 2006, represents another step away from its strategy of selling low-priced e-books to encourage sales of its Kindle e-book reader. Amazon has been forced to retreat by major publishers that threatened not to sell books on Amazon if the e-retailer insisted on pricing books under $10. The e-retailer previously agreed to raise the prices of books from Macmillan Publishers Ltd. after the publisher demanded Amazon charge more than the $9.99 price tag the retailer puts on the majority of its e-books.

Amazon, Hachette, Simon & Schuster and HarperCollins Publishers could not be reached for comment.

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