In a letter sent to authors, illustrators and agents Wednesday afternoon, Macmillan CEO John Sargent said the despite Penguin’s decision to settle with the Department of Justice in its e-book pricing-fixing lawsuit, Macmillan’s position “has not changed.” Sargent’s letter didn’t limit itself to the DoJ though, and included his thoughts on “flightless birds and consolidation” and the digital transformation.
Sargent said despite speculation of more consolidation following the RH-Penguin merger, Macmillan “is not in discussions with anyone.” While granting that there is some value to “scale,” Sargent observed that “you need a certain level of capital and infrastructure, but that does not require being a behemoth…the relationship between editor and author does not scale. Nor do the relationships between sales rep and bookseller or between publicist and producer.”
On the impact of digital, Sargent said that 26% of Macmillan’s revenue is now coming from digital content, but said the rapid growth of earlier years has slowed, noting that, “the percentage of e-book sales has remained consistent week by week through the year for the most part.” Tor’s DRM-free move has not led to an increase in piracy, though Sargent stopped short of saying Macmillan will move to all DRM-free. He also said that the publisher will begin a new library e-book lending program “for a limited part of our list” in the new year.
Moving to the decision to not settle with the DoJ, Sargent said it was more than that Macmillan “did nothing wrong,” but involved trying to keep a healthy bookselling environment. The DoJ, Sargent explained, continues to insist on a two year “discounting regime” that he believes Amazon would fully take advantage, but that would leave competitors with no e-book revenue for that period, something that some retailers would be unable to weather. “As we heard of each successive publisher settling,” Sargent wrote, “the need to support retailers, both digital and bricks and mortar, became more important.”
Macmillan has made some changes since the suit, cancelling all of its retailer e-book contracts and negotiating new ones with all but one customer whose term was not up yet. According to Sargent, all the new contracts are compliant with the government's requests in their complaint and contain no most-favored nations clauses and no price limits. And as reported in PW Daily on Monday, they also allow 10% discounting on individual books priced at $13.99 and above. “Needless to say," Sargent noted, “we continue to see the lawsuit as pointless and destructive.”
Sargent ended on an upbeat note, stressing the positive developments in the last year: “The best news as we enter this holiday season is that independent booksellers have had a good year, booksellers in general have had the time to adjust their product mix and store counts, and consumers continue to value and buy real books. Piracy continues to be an issue, but it has not exploded. More people are reading more books. The playing field in e-book retailing, while not even, has not yet tilted too far. There is a bright future out there.”