Blog Post

Macmillan CEO Sargent: Why we won’t settle against DOJ

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Macmillan is ready to fight the Department of Justice lawsuit against Apple and five big publishers, CEO John Sargent writes in an open letter to the publishing community today.

“Let me start by saying that Macmillan did not act illegally. Macmillan did not collude,” Sargent writes. He acknowledges that the costs of fighting the DOJ’s suit — “in time, distraction, and expense” — are “truly daunting,” but “we have decided to fight this in court.”

Meanwhile, HarperCollins, Hachette and Simon & Schuster are settling with the DOJ. Penguin, the fifth publisher named in the suit, has not yet announced its plans but is presumed to be fighting the case in court.

“The government’s charge is that Macmillan’s CEO colluded with other CEO’s in changing to the agency model. I am Macmillan’s CEO and I made the decision to move Macmillan to the agency model,” Sargent writes. “After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement. It remains the loneliest decision I have ever made, and I see no reason to go back on it now.”

And, Sargent says, “When Macmillan changed to the agency model we did so knowing we would make less money on our e-book business. We made the change to support an open and competitive market for the future, and it worked. We still believe in that future and we still believe the agency model is the only way to get there.”

Macmillan, under Sargent’s leadership, has been at the front lines of fighting against Amazon (s AMZN) — starting back in 2010, when Macmillan switched to the agency model and Amazon temporarily turned off the “buy” button on its books before capitulating. In today’s letter, Sargent notes that the DOJ’s proposed settlement terms “could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.”

5 Responses to “Macmillan CEO Sargent: Why we won’t settle against DOJ”

  1. Marcus Stuart

    Ric Sansand’s reasoning is THE classic case of a dumb argument which, superficially, seems to hold water. But it is wrong and full of holes. And to suggest that Amazon is some sort of benign body fighting for the rights of consumers (and even authors!) is stupidity personified.

    Unfortunately the perception of Publishers playing the role of the greedy, colluding, out-of-touch, elitest, bad guys plays well to the popular press and to those who consume news and sprout opinions without engaging brains. This is a much bigger and more important fight than that.

  2. egoncasteel

    The Agency model is just a consumer milking machine to make publishing companies, which are becoming increasingly irrelevant, money. People are not so dumb as to not understand that it is drastically cheaper and linguistically easier to distribute an ebook compared to a physical book. It would be one thing if the author set the price, but this is just profiteering by the publisher. Unless book publishers want to be as hated as the MPAA and Ticketmaster they need to change.

    No one feels guilty about stealing from a thief. Publisher have no moral high ground to stand on when trying to stop piracy when they use business plans like this.

    The electronic distribution is about making it cheap and easy for people to buy. Your inventory if 100% on demand and your manufacturing has a small one time setup cost and is free there after. If Henry Ford saw these publisher’s you business model he would go up side their heads.

  3. dutchesspdx

    John, your stance would be believable if the price of e-books and dead tree versions where the same. The fact that their consistently higher than the price of physical copies leads me to believe that there is something keeping their price higher.

  4. Ric Sansand

    Hey John, your stance is out of touch with your consumer and reality of the e-book ecosystem. The perception across the board is why should you be charging physical book prices on virtual books that share none of those costs?

    Greed is the only perception and say what you will about Amazon, they were trying to do you a favor by setting the ‘New’ price perception that would allow for ebook growth to coexist alongside the physical medium.

    But, like the music industry you blew it. Now … you look like the profit driven trolls you are, AND uplifted Amazon as the consumer friendly platform it is, and now with shiny new martyrdom to go with it.

    Truth is Amazon and Kindle have been quietly giving up an coming authors a whole new self publishing platform to get thier work out into readers hands in a way that if you are not careful threatens to steamroll you into the dust.

    Embrace the new paradigm John, for if you dont, your market will go away from you. Your arrogance has already guaranteed that I will actively spend my book money on authors not affiliated with you or I will get the content elsewhere.

    I suggest you rethink your position.

    • David Thomas

      1. New, hardcover books typically price at 24.99 or higher, on average. New e-books under agency plan prices are 12.99 to 14.99.
      2. Greed? Compensating the author/creator is greed? Funding the budgets for marketing, advertising, publicity and promotional tours is greedy?
      3. Video games are sold under terms similar to an agency plan. They’re doing okay. The vast majority of ebooks were selling well below 12.99…the *better*, more *desired*, and *edited* ebooks were selling under agency plan.
      4. Amazon was loosing money on the 9.99 e-book price, selling below cost. Why? Loss leader to sell more Kindles, where they targeted lots of profit in the long run. Consumer friendly? Please, their own board is frustrated with the lack of profits. Amazon’s plan was moving to be the monopoly of e-books, and the monopolist always makes the price in the end.
      5. The e-book is not the same media item as a song. Authors deserve to be compensated for their effort. To ignore those facts is genuine arrogance.