The Wall Street Journal reported that e-commerce giant Amazon.com Inc. AMZN has signed a multi-year agreement with book publisher HarperCollins, expected to be effective from this week. Financials of the deal were kept under wraps and neither party was available for comment.
Per the agreement, Amazon will continue to sell and promote HarperCollins titles in both the print and digital medium. HarperCollins will follow the agency pricing model for its e-books. Per the model, it will have the right to set the prices of its titles and the retailers will get a portion that is around 30% of the revenues. The company will also get better terms from Amazon if it keeps prices low.
So the deal is expected to benefit both parties. On the one hand, HarperCollins and its authors can continue endorsing their titles on a huge platform like Amazon. As for Amazon, it will earn profits on the sale of HarperCollins digital titles.
Last year, relationships between the e-tailer and publishers worsened when Amazon pulled out consumers’ pre-orders for books and postponed shipments of titles in a bid to extract better pricing terms from publishers.
It faced criticism from authors and other publishing industry insiders, who alleged that the e-commerce giant was exploiting its position as a major retailer to extract unfair pricing terms from suppliers. Its pricing strategy harmed not only authors but consumers as well.
The e-tailer was also under certain amount of pressure from investors who were increasingly unimpressed with its huge investments that continues to yield low returns because of its aggressive pricing strategies.
Therefore, it called a truce and reached similar deals with other book publishers last year, including CBS Corp's CBS publishing arm, Simon & Schuster, in October, Hachette Book Group in November and Macmillan in December.
Amazon currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the technology space include Groupon, Inc. GRPN and PetMed Express, Inc. PETS. Both the stocks carry a Zacks Rank #2 (Buy).
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