John Sargent, CEO of the Macmillan publishing empire, posted his end-of-the-year missive over on Tor.com. Nestled among the half-truths, misleading statements, and outright fictions were a number of interesting details, including stuff about ebooks, library ebooks, and Macmillan's decision to stand firm on the anti-trust prosecution.
eBooks now make up 26% of Macmillan's revenue, a rate which has remained the same since just after Christmas last year. And they are coming to libraries in early 2013, though only a limited number will be available. Quote: "We have found a model we believe works for a limited part of our list, so we will now move forward."
And in other news, Mr. Sargent repeated Macmillan's intention to stand firm on the defense in the price-fixing lawsuit brought by the DOJ, even though MacMillan settled in Europe and is rapidly running out of co-defendants in the US.
It's in this section of the letter that the prevarications begin, some of which are quite inventive misstatements of current and past events. I'm going to call out the choicer statements, and point out how they are wrong.
It was our belief that Amazon would use that entire discount (selling ebooks at cost) 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.
One major problem with this is that the other ebookstores don't have to match Amazon to survive. That belief is based on the mistaken assumption that they can only compete on price. Of course, Mr. Sargent doesn't actually say that; he merely implies that Macmillan has to protect the poor defenseless ebook retailer from the big mean Amazon.
Also, Amazon ran rampant for a couple years (2008, 2009) before Agency pricing was enforced and yet they didn't manage to kill off all that many competitors. That is a decent argument that the discounted ebook boogie man does not exist, or at least is not nearly as powerful as some in publishing would claim.
Simultaneous discounting across the major publishers (you could think of it as government-mandated collusive pricing) would lead to an unhealthy marketplace.
That would only be true if you misdefine the word "collusive", which means "acting in secret to achieve a fraudulent, illegal, or deceitful goal." (Free Dictionary) Given that the anti-trust settlement includes a watchdog provision, I don't see where publishers would get the chance to act in secret. Oh, and something which is mandated by the government cannot, by definition, be illegal.
We decided shortly after the suit was filed that we would cancel all our retailer e-book contracts and negotiate new ones. We did this with all our customers except one whose term was not up yet. All the new contracts are compliant with the government’s requests in their complaint. They contain no most-favored nations clauses and no price limits. They also allow 10 percent discounting on individual books priced at $13.99 and above. In short, we complied with the demands of the complaint the DOJ filed. Needless to say, we continue to see the lawsuit as pointless and destructive.
This one took me a few minutes to understand, and once I did I stood up and applauded Mr. Sargent. I have deep respect for anyone who has the chutzpah to put two contradictory sentences next too each and hope no one notices.
He only mentions allowing discounts on ebooks $14 and up, and that can be taken to mean that Macmillan does not allow discounts on cheaper books (that's what I have seen on Amazon). So Macmillan still controls the price of the cheaper books and that means they clearly have not complied with the demands of the DOJ complaint.
And hell, allowing only a 10% discount on the expensive titles does not even come close to the spirit of the anti-trust complaint, much less the letter. A longer leash is still a leash. A loosened restriction is still a restriction.
In any case, if Macmillan did nothing wrong then why claim that the publisher has complied with the demands of the complaint?
Meanwhile, the settling publishers have apparently reached terms with retailers. There is some discounting, but because it is not across the board the impact appears to be limited.
If the impact of the discounting is limited then the fears about Amazon driving the competition into the grave are unfounded.
All in all, I can understand why he went for such a wide shovel. Under his stewardship Macmillan was caught colluding with their competition. What else could he do but prevaricate?
Well, he could settle, but I suppose that would require good judgement. And if he had good judgement then he would not have colluded in the first place.