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John Sargent’s Nose Must be at Least a Yard Long

Le_avventure_di_Pinocchio-pag107[1]John Sargent, CEO of the Macmillan publishing empire, posted his end-of-the-year missive over on  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.

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Mike Cane December 19, 2012 um 7:03 pm

>>>The legal bills look like the unit sales numbers for 50 Shades of Grey.

Yeah, and for what? He gets thrown out of there next year, I say.

Peter December 20, 2012 um 1:52 am

"One major problem with this is that the other ebookstores don’t have to match Amazon to survive."

Well, yes and no. I realize you were talking about pricing here, but where the other ebookstores actually *do* have to match Amazon to survive is in customer service, and none of the major players are even coming close. I know that if I buy a book from Amazon and there’s a problem they’ll either fix it or refund the purchase within a couple of days. I also know, from bitter experience, that if I buy something from Kobo or Sony the only service I’ll receive will be in the veterinary sense of the term.

Mike Cane December 20, 2012 um 7:22 am

Service has nothing to do with pricing. You can be treated like a king at McDonald’s and treated like shit at a five-star restaurant.

fjtorres December 20, 2012 um 7:32 am

On an anecdotal basis, sure. Customer service is most often about dealing with people and whether somebody is having a good or bad day matters.

But as a rule consistently good customer service costs money. It takes training time, script-writing time and effort, time and effort to create and track logs, time and effort to evaluate resuts and iterate.
Consistently good customer service isn’t accidental or random. It is by intent and design.

Nate Hoffelder December 20, 2012 um 7:27 am

I’ve had decent service at some of the smaller ebookstores. It’s not impossible; all it takes is for the retailer to feel CS is a priority.

Paul December 20, 2012 um 10:02 am

Amazon however is undercutting all the other ebook prices by $2-3 at the moment. You would have to have a really compelling case not to save money by buying elsewhere. In my case I am deliberately trying not to use Amazon solely because I think their current pricing is unsustainable and I still want some competition around.

Brian December 20, 2012 um 11:23 am

They are? I’ve been buying titles from the settling publishers from Books on Board lately because they’re almost always cheaper than Amazon.

Nate Hoffelder December 20, 2012 um 11:24 am

Except Amazon is not undercutting all of the other ebookstores on all of the prices. I just checked a number of titles for the post on B&N and Amazon didn’t always have the best price.

fjtorres December 20, 2012 um 2:08 pm

When it comes to the settling BPHs, ebook prices are back where things were in 2009: some books are cheaper at Amazon, some books are cheaper elsewhere.

Amazon is cheaper in the *aggregate*; if you buy *all* your books there instead of buying all your books at another (single) ebookstore. But if you’re a cherry-picker sales-hound you’ll save some money if you jump from site to site. That was true pre-agency and it’s almost as true now. (The exception being Pinochio’s Publishing House.)

Nate Hoffelder December 20, 2012 um 2:18 pm

I’m not so sure Amazon is cheaper in the aggregate; it depends on what you’re buying.

And I agree that the ebook market is much like the paper book market; it pays to shop around.

John Sargent’s Nose Must be at Least a Yard Long | The Passive Voice December 20, 2012 um 2:03 pm

[…] Link to the rest at The Digital Reader […]

Bob Kohn Appeals Macmillan, Penguin eBook Settlements – Could he be a Cats-Paw for the Publishers? – The Digital Reader December 24, 2013 um 8:20 am

[…] this argument themselves. That includes Macmillan, which settled while still claiming that they had done nothing wrong.  If Macmillan had the evidence to support Kohn’s argument don’t you think they would […]

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