NEW YORK (TheStreet) -- Now that Amazon (AMZN) has swept away its competition in the $3 billion U.S. e-book business through years of aggressive discounting, it's starting to make peace with publishers, which should mean more profits at the world's largest bookseller.
In recent months, Amazon has signed new contracts with three of the world's five largest publishers: Legardere's Hachette, CBS's (CBS) Simon & Schuster and most recently, Macmillan. Those contracts return much of the pricing control of e-books back to the publishers. Not long ago, Amazon fought hard for that control.
So what's changed?
Amazon has solidified its already strong strong market share position since the 2012 federal court ruling that mandated major publishers allow discounting on e-books by Kindle, Barnes & Noble's (BKS) Nook, Apple's (AAPL) iBooks and other e-book retailers.
"This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books," said an Amazon spokesperson at the time of the settlement. And discount Amazon did, causing prices for best-selling e-books to fall by more than 50% in under two years.
Nook had been Amazon's most serious competitor during the years when the e-book price-fixing trial was playing out in court. Back then, Nook often matched Amazon's discounts, resulting in big losses. These days, Nook is much diminished.
Under the previous pricing agreements, publishers and booksellers shared the proceeds of e-book sales, with 70% going to the publisher and 30% going to the retailer -- so-called agency pricing. Under the court-mandated pricing agreements, publishers sold e-books to retailers, which in turn set their own prices; heavily discounted e-books were often sold at a loss.
"Amazon holds a 64% market share of Macmillan's e-book business," said Macmillan CEO John Sargent in a letter to authors and readers discussing the company's new deal with Amazon. That number is likely higher for other major publishers, as Macmillan sells e-books directly to readers, unlike some of the others.