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You have to admire a CEO who declaims any interest in scale for his company on grounds that it would harm the product. In his annual year-end letter to authors and agents released yesterday, Macmillan Publishing CEO John Sargent did just that:
Many of you have asked what the Penguin/Random merger means for us, and what the chances are of a Harper/Simon merger. I think the Random/Penguin merger is based on financial engineering, and as such is good for the financial statements of the two companies. I think others have the same sort of opportunity, but I have no idea if they are talking.
I do know that we are not in discussions, with anyone. This will leave us where we have always been, the smallest of the big publishers. It has never hurt us in the past, and I expect it will not hurt us in the future. Publishing trade books is, in the end, a human endeavor. The relationship between editor and author does not scale. Nor do the relationships between sales rep and bookseller or between publicist and producer. Certainly there are some advantages to being big, but the essence of the business is not a function of size.
Sargent also goes on to defend price-fixing on similar grounds, which takes some chutzpah:
Since the very beginning, the government’s demands have never wavered in all our discussions. They still insist on the two year discounting regime that forms the heart of the agreement signed by the three settling publishers. It was our belief that Amazon would use that entire discount for the two years. That would mean that retailers who felt they needed to match prices with Amazon would have no revenue from e-books from five of the big publishers (and possibly the sixth) for two years. Not no profit, no revenue. For two years. We felt that few retailers could survive this or would choose to survive this.
Whether fear of what one customer might do is a sufficient reason to risk breaking the law is a question I’ll leave to the courts. But there’s a deeper problem with the model of publishing Sargent is defending.
The relationship between author and editor may not scale, but in the age of e-books and low-cost digital publishing platforms it’s certainly going to change, as are those between authors and publishers, editors and publishers, publishers and retailers, retailers and customers. The shift from print to digital publishing involves more than formats and pricing. As with other content industries undergoing similar transitions, it represents a whole new way of doing business.
The real issue is not whether the current structure of your operation scales but whether its organizational and financial structures are aligned with the deeper and broader changes in the business.