Agency and distribution contracts for ebook sales
I recently attended a training session on international contracts run by Micheline Dessureault, a lawyer at Jolicœur Lacasse. With a few general law courses in university under my belt, I found that this intensive, highly instructive two-day event refreshed my memory on various details that should be kept in mind when signing any type of international contract. Since De Marque has to negotiate a number of contracts for its publishing partners, the training turned out to be well worth the time investment.
Marketing our publishing partners’ ebooks through certain sales channels connected to Cantook or the Digital Warehouse requires the execution of specific contracts. We therefore negotiate agreements with players such as Apple, Kobo, etc., which offer our publishers maximum benefit. My intent here is to briefly describe the two main types of contracts currently used in ebook marketing.
– Distribution contracts (also known as “retail” or “wholesale”): Ebooks are posted for sale on the distributor’s website – a go-between who buys them from the publisher when making the sale to the final consumer and then, almost instantaneously, resells them to the customer. This pre-sale transfer of ownership (where the distributor only owns the book for a fraction of a second) means that the intermediary is free to set the resale price to the final consumer. The distributor’s compensation is the difference between your price upon assignment (e.g., 50% of the suggested retail price) and the sales price charged to the consumer, over which you have no control.
– Agency contract (“agency” or “commissionnaire”): As the publisher’s proxy, the agent (or commissionnaire) acts on their behalf. While it sells ebooks to final consumers in its own name, the publisher is the beneficiary of the transaction and sets the conditions of sale. Under this arrangement, publishers can, for one thing, set their own sales prices. They retain ownership of the book until it’s paid for by the consumer; at no time during this process does the agent acquire any ownership rights. The agent’s compensation takes the form of a commission on the sales price (e.g., 25% of the customer’s sales price net of taxes), paid by the publisher.
Many countries that regulate book prices—including France, Germany and Spain—have enacted legislation mandating flat pricing for books. This has forced the use of agency-type contracts within their borders, enabling the publisher to set the consumer sales price. In most countries, however, choosing between a distribution and an agency contract is a function of the business decision made by the two parties.
One thing to keep in mind: Signing both types of contracts for the same territory can lead to complications. Agency contracts usually contain a clause allowing the agency to match the lowest price in effect within the territory. Every time your distributor lowers the price of a book, the agent can do the same and you risk losing control quickly.
Some of our publishing partners have advised us that they wish to sell titles as agencies in some territories, but as distributors in others. This is why we recently incorporated “type of price” into the metadata managed by Cantook. In the near future, once we negotiate “distribution”-type agreements with ebooksellers, every publisher will able to record one of three price types for each territory: agency, distribution or fixed pricing (for territories subject to pricing legislation). It’s one more way in which we have adapted our ebook distribution technology to comply with publishers’ wishes and keep pace with the changing nature of contracts within the industry.