A Message from John Sargent

Dear authors, illustrators and agents:

Today the Department of Justice filed a lawsuit against Macmillan’s US trade publishing operation, charging us with collusion in the implementation of the agency model for e-book pricing. The charge is civil, not criminal. Let me start by saying that Macmillan did not act illegally. Macmillan did not collude.

We have been in discussions with the Department of Justice for months. It is always better if possible to settle these matters before a case is brought. The costs of continuing–in time, distraction, and expense– are truly daunting.

But the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the 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.

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.

It is also hard to settle a lawsuit when you know you have done no wrong. 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. 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.

Other publishers have chosen to settle. That is their decision to make. We have decided to fight this in court. Because others have settled, there may well be a preponderance of references to Macmillan, and to me personally, in the Justice Department’s papers – often without regard to context. So be it.

I hope you will agree with our stance, and with Scott Turow, the president of the Author’s Guild, who stated, “The irony of this bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition. This would be tragic for all of us who value books and the culture they support”.

Since we are now in litigation, I may not be able to comment much going forward. We remain dedicated to finding the best long term outcome for the book business, for Macmillan and for the work you have entrusted to our care.

Thanks.

John

80 Responses to “A Message from John Sargent”

  • Sam says:

    You’re not alone. I don’t know how to stand with you other than this meaningless comment, but I do stand with you in favor of a diverse, open future for books.

  • KD Ryder says:

    I think that we are breaking totally new ground here when it comes to the way prices are normally set. Anyone who has taken Economics 101 understands that market prices are set based upon supply and demand, at the point where the supply curve intersects the demand curve.

    But that model only works for goods that are limited in supply.

    We are in totally new territory when it comes to the selling of an item that costs essentially nothing to reproduce. Note I said “reproduce” not “produce.” Certainly the author has an investment in labor and research expenses, etc. Certainly the publisher may have invested in editing, cover design, and promotion. Once those costs are recouped, however, all sales past that point are pure profit in the case of the ebook, because there are no print costs, warehousing costs, shipping costs, return costs — all those things that continue with a print book do not exist with an ebook. It costs the publisher as much to produce one ebook download as a million (minor bandwidth costs aside).

    Under the traditional market pricing model, the price of the ebook should approach zero.

    The traditional publishers don’t want to let that happen. But the result of the agency model is that they are reaping what amounts to obscene profits.

    Alternatively, Amazon selling below cost is wrong. It amounts to predatory pricing and will lessen competition as it slowly kills off all the B&M bookstores. Eventually it will force publishers to lower prices and Amazon will no longer be losing money on the books and all the B&M’s will be shuttered.

    As both a reader and a writer, both of these issues are wrong and should be addressed by the DOJ. Amazon should not be allowed to sell below cost. There are laws against that.

    The publishers, on the other hand, CANNOT engage in price-fixing. They DO have the right to set a price for their ebooks, and if a publisher sets the wholesale price at $10, then Amazon should pay the $10 and should not be allowed to re-sell it for less than that. PERIOD. But neither should anyone else.

    But having set the wholesale price at $10, it is incorrect for the publishers to demand that Amazon re-sell at $15, especially in collusion with each other, and I have a hard time believing they all spontaneously arrived at the same conclusion independently of each other.

    I can see that Amazon’s predatory pricing forced the publishers into this position, but the position taken by the publishers, in my opinion, is just as wrong as Amazon’s. I won’t say that the publishers were driven solely by greed for wanting higher prices nor say that Amazon was NOT greedy for wanting lower prices. I see no virtue in Amazon’s efforts to make ebooks more affordable because I see it as an attempt to gain monopoly power which will only hurt the industry.

    But an item that costs nothing to produce will never be able to have its price set by normal market forces. What IS the “right” price for an ebook? It’s the lower of whatever readers are willing to pay or whatever the author is willing to accept. And that just so much depends on the author and the reader. When corporations are artificially tampering with that process it hurts everyone.

    I sell my book at $2.99 and get about $2 royalty per book. I’m a nobody. I’ve sold about 100 copies so far without advertising or promoting it. I’m willing to pay $15 to own a Janet Evanovich book. I wonder if she gets any more than $2 per copy for her sales. But she will sell hundreds of thousands of her books. But I am NOT willing to pay $15 for an e-copy of her book. That should cost about half that, because I am giving up the tangible item that will decorate my bookcase, that I can have her autograph if I ever meet her, that I can loan to friends, give to a senior center, or sell on eBay. By going e-book I give up a lot of rights I had by buying the hardcopy. It’s not about what did it cost the publisher, it’s about what is the value to the consumer. There is more value to a hardcopy than an ebook.

    I would read more authors if books were cheaper. If a new Janet Evanovich ebook came out for $5, would she then sell millions? This is what we don’t know yet. What is the elasticity of demand for ebooks? It will take time to determine that, but price-fixing and predatory pricing is not going to allow the market to “settle” and the graphs to be drawn so that that “right” price can be determined.

    I think the DOJ is correct in taking this action, but it also needs to move against Amazon to block the growth of this potential monopoly.

    • Fredrik Coulter says:

      There’s nothing new about the way prices are being set. Go back to your Economics 101 supply and demand curve, and realize that the situation is one with a (close to) horizontal supply curve.

      For the sake of argument (and to make the argument simpler mathematically), let’s assume the cost of an e-book is $0. If that’s the case, then the retailer will want to set the price to the point where the TOTAL REVENUE is maximized. And that’s dependent upon the slope of the curve. Some books are relatively price insensitive. You’ll sell 100,000 copies at any reasonable price. (Let’s work with the $1 to $25 range for eBooks.) In that case, the price would go real high. On the other hand, if the books is by an unknown author, then you may find the book to have far more price sensitivity. There are a lot of $1 books on Amazon for just this reason, despite the lower royalty rate that books under $2.99 get.

      Yes, the real world is slightly more complicated, but not by much. If an ebook is sold, Amazon may have the costs of sending it out through the cellular network. Amazon has royalties to pay for their books. There’s a minor cost of server space for all these books, which is a fixed cost spread out among all the books being sold in a given period of time.

      By the way, last I checked, Amazon’s 70% royalty rate is for non-agency model books with a suggested retail price (set by the author or publisher) between $2.99 and $9.99. The actual royalty is based upon sales times the suggested retail price. If Amazon decides to cut the price, the royalty doesn’t change. If the price drops by more than 30%, then Amazon looses money ON THAT PARTICULAR SALE, not the author or publisher. But they may gain money on other sales that they might not have made if the price wasn’t dropped.

      It’s still basic Economics 101. (Actually, at my school it was Economics 102. We learned Macro first, and Micro second.)

  • David Simmons says:

    Hoping for the best for Macmillan and John Sargent in the outcome of this case.

  • Indiana Jim says:

    Glad to know John Sargent stands with the inaccurate, biased and status-quo maintaining comments of Scott Turow. Tells us which side he’s on: His own. Not consumers, not writers, but himself and his company.

    • Anthony Pero says:

      While I understand your sentiment, it begs the question… exactly whose side should a CEO be on? Isn’t he being paid to be on the side of his own business? Lip service is always paid to the consumer, but in the end, a business is about profits. Some people believe that what’s in the best interest of big publishing is letting the market dictate the price… but that’s just categorically false. If the market for hardcovers collapse, it would be devastating on these six companies and their employees. Do I think that would be bad for readers and consumers? Not necessarily. Something would rise out of the ashes, and great literary works would go on, and authors and editors would still get paid. The indie authors you feature on your podcast are proof enough of that. None of that would be good for Macmillan though. John Sargent’s job is to make Macmillan the best, most profitable company it can be. He’s doing exactly what he should do–protect his company.

      • Fredrik Coulter says:

        I can’t fault a CEO for doing what’s in the best interest of his stockholders. In fact, if he DIDN’T do what was in the best interest of his stockholders, he probably should be fired.

        The agency model was in the best (short term) interests of his stockholders. Whether it was in the best long term interests of his stockholders or in the best interests of consumers is a very different question. And stockholders have generally demanded short term results, so Mr. Sargent was doing his job.

  • Kenneth Cavness says:

    As a fan of many of Tor’s authors, I hope this disappointing decision by Macmillan eventually is reversed, or that their attempts to defend the agency model in court fail.

  • Brian says:

    Well, the publishers have no one to blame but themselves for Amazons monopoly on ebooks. Once you buy enough DRM’d books for the Kindle you really have no choice but to keep using Amazon. Free the books and you’ll break the monopoly.

    • Anthony Pero says:

      ^LIKE BUTTON^

      This is EXACTLY right. DRM has become a drug to traditional publishing, and it is inherently a false promise and a poisoned apple. You can remove DRM from Kindle books in about 5 minutes of searching on Google and downloading a plugin. So it does NOTHING to prevent piracy. On the flip side, it LOCKS YOU IN TO A RETAILER’S ECOSYSTEM!!! It gives the retailer ALL the power.

      • Fredrik Coulter says:

        Amazon’s “monopoly” is based on their web store far more than the quality of their devices. If I decide to move to a device other than a Kindle, I’ll probably have a very bad weekend breaking the DRM of all of their books, and then moving them to the other device. But my device is “good enough”, and the store is the best in the business.

        Until then, the DRM is not causing me any issues. I keep buying books from Amazon and from other, independent eBook stores, and reading them on my Amazon device.

  • Sam says:

    KD Ryder: “Under the traditional market pricing model, the price of the ebook should approach zero.”

    Only if units shipped approach infinity, which they do not. Books are not fungible. The average book sells between 1,000 and 2,000 copies, so even a $20,000 outlay in the first copy of the book (not a terrific reward for an author’s years of work, the artists, the editors, etc.) would require a net price of $10-$20 per copy, just to break even.

    Even a bestseller which sells 50,000 copies, and which has a $200,000 outlay in the first copy, can’t approach zero in price. That would require a net price of $4 on each copy, just to break even. When many, many of these books sell 10,000 copies or less, the majority selling 1,000 to 2,000 copies or less, pricing at “break even if every book is a bestseller” is not a particularly good idea.

    • KD Ryder says:

      I was speaking theoretically, based on the assumption that the lower the cost, the higher the demand, and the price will “approach” zero, never, of course, reaching zero for a new release because there will always be costs (Gutenberg has thousands of titles out there at zero cost but those of course are not new releases). But if a book went from 50,000 sales to a million sales, that price could drop significantly. What needs to be factored in is the degree of cannibalization; people who buy an ebook instead of a print book are one thing. People who buy an ebook at $5 who would never have paid $15 for a pbook are additional sales. People who buy the print book to own it, but are willing to pay another couple bucks to ALSO have it on their ereader represent free money to the publisher.

      The point I’m trying to make is that there is a place where the prices will settle, and the balance between supply and demand will be maintained, but with the artificial influences on price that come with monopoly power, we don’t know where that point is. Readers are being hurt and disillusioned in the process. I can’t speak for everyone but what I’ve read on various comment boards is that I am not alone in feeling ripped off for being asked to pay essentially the same price for an ebook as a pbook, and giving up the other advantages I mentioned that come with the pbook.

      I’m willing to pay a certain amount to READ a book and a certain amount to OWN a book but I’m not willing to pay the same amount just to read it as to own it.

      I hope that clarifies my point. (And I wrote the original post without really knowing how many books a title might sell. I assume a household name like Evanovich or Grisham or Crichton (RIP) sells many many thousands of each title, but I really don’t have the sales statistics at hand.)

  • Jayne says:

    How does price fixing and collusion ensure an open and competitive market? Competition DECREASED under the agency model. The MFN clause took care of that.

    Barnes and Noble was the only winner here as it bought them time. Readers were a loser due to increased prices. Authors lost even more with reduction in royalties paid per unit. Independent sellers lost business due to the inability to compete on price, loyalty programs and the like.

    With price taken out of the equation and your insistence on DRM, you essentially sent everyone to Amazon or B&N and locked them in further to the two largest retailers. All while reducing your own income per unit. How does that make sense?

    So, no I do not agree with your stance. You totally disregarded what was best for your readers, authors, independents and shareholders when you made your decision to try and rein in Amazon by way of colluding with Apple and the other publishers.

    • Anthony Pero says:

      I understand what you are saying, but publishers will point to a simple statistical fact: When Agency/MFN was instituted, Amazon controlled 92% of the eBook market. Now they control 61%. I.E, there is now more competition for eBooks than there was before they instituted the Agency model.

      Unfortunately, it is making an assumption that these two things have a correlation, and they don’t. Amazon holds a smaller margin primarily because of the Nook, which was going to happen whether Agency happened or not. What Agency DID do was help B&N get started without getting into a price war with Amazon, which B&N could not have won. Without Agency, B&N may have gone the way of Borders in that war. That being said, it doesn’t make a MFN clause legal which is the primary assertion of the DoJ. The courts will have to decide now of MFN clauses are legal in this area or not.

  • Joshua Kehe says:

    @Sam, where did you get your numbers for book sales? Because I have a hard time believing that bestsellers only sell 50,000 copies across the life of the book.

    Because that’s the other thing that needs to be considered with ebooks: They never come off the shelves. This means that it’s always possible for a book to be selling — as KD pointed out above, the cost of reproduction is inconsequential with ebooks — so all books (even the non-bestselling ones) have an opportunity to continue selling for years instead of months. So while a book may only sell 50,000 copies in the first year (and I still think that’s a modest number), and allow the company to break even, every copy sold after that will be pure profit. And, because ebooks never come off the “shelves,” readers can continue buying them long past the point where they’re available in stores.

    I don’t think it’s unreasonable to expect a greater number of books to reach “profitable” status than in the past, provided a fair price is honored by distributers and publishers have the patience to give ebooks the time they need to sell.

    However, I am not an expert on publishing. What research I have done has not been backed up by personal experience, which is why I like to see facts and figures quoted.

    So, forgive me for doubting your numbers, but I’d like to see some attribution on those statistics.

    • Dawn says:

      numbers definetly skewed
      an established author made #19 on nyt mm bestseller list in 2008 with sales of 64000+ books between july and november of that year

  • KenP says:

    Calling Amazon a monopoly seem only beneficial in connoting the negatives associated with monopolistic practices. The more accurate term might be “disruptive force” and history is full of those and usually are to man’s benefit.

    Empires have risen and fallen throughout history. The various media empires are the one trying to legislate or collude away change. Very unbecoming and destine, I feel, to fail.

    Typically, those in these situations seek to maintaining the failing model instead of designing a new one that addresses the new reality. However your 4 A.M. flawed decisions on a exercise bike had a homey note we can all relate to.

  • Rancho Unicorno says:

    @KD Ryder – Why shouldn’t Amazon (or any other retailer) be permitted to sell a product below cost? The use of loss leaders is a long established methodology that has been used to drive traffic to a given store. The merchant’s hope is that this will lead to other, profit generating, purchases. If Amazon wants to sell the latest Harry Potter hardcover book for less than cost, they are the ones who take the risk of losing money rather than making any. Same for eBooks. All the marketshare in the world will do you little good if you are only bleeding cash.

    As far as hurting B/M retailers, the biggest obstacle is going to be DRM. Of course, I suspect that it isn’t Amazon that is demanding DRM. Without DRM, any eReader would be capable of supporting material from any source. And, just as Barnes & Noble has adapted and survived (while Borders didn’t and failed), smaller B/M retailers would be able to purchase licenses from publishers and act as retailers of eBooks. This would allow them to adapt and survive without having to produce their own eReaders. While the DRM model could survive with smaller B/M retailers who might band together and generate their own network, it still would be an obstacle to consumers.

    So, kill off DRM, return to the market model, and allow B/M retailers who are willing to adapt to act as eBook retailers (allowing those shops to increase inventory and sales without increasing their footprint), and consumers will be strengthened as establishments compete for success. Stay with the agency model or establish price floors, and people will continue to seek out alternative solutions.

    • KD Ryder says:

      Predatory pricing is not the same as a loss leader. Amazon’s pricing has had a chilling effect on the industry as B&M’s have been hit already due to being unable to compete with an online business that doesn’t charge sales tax and doesn’t have many of the expenses of a B&M. Add below-cost pricing and B&M’s don’t have a chance.

      Predatory pricing is illegal. It’s unfair. Amazon, being bigger than your typical B&M, can hold its breath longer. Once the B&M’s are out of business then Amazon can set prices wherever it wants. Even if it prices “fairly” (whatever that is) the damage has been done. We have lost our ability to touch and feel and smell the book before buying. Not everyone is on the internet — horror of horrors — and they are being hurt by an inability to wander into a local bookstore and just enjoy BOOKS.

      I was walking through an airport a few months ago as the Borders store was packing up and I felt this pang of loss, even though I haven’t bought a book in a bookstore in years, I feel people SHOULD be able to.

      • Fredrik Coulter says:

        When Amazon raises their prices, what is there to stop a new competitor from entering the business? Being a first mover in the technology business is not a good predictor of ultimate success.

        Anyone remember Visicalc? or Lotus 1-2-3? or WordPerfect? or Netscape? or dBase?

        • Anthony Pero says:

          In the case of eBooks, there is no impediment, because there is very little upfront cost to selling an eBook. For bricks and mortar bookstores, that is a whole different equation. And it’s the one that really matters to the Publishers, because the whole thing is kept afloat by hardcover sales.

        • Anthony Pero says:

          Also, in the mean time, Amazon will be able to negotiate whatever deal they want with Publishers because of their monospoly. They will be the only buyer. This is what publishers are really afraid of. Not that Amazon will raise prices on consumers but that they will demand that the publishers get less when the publishers have no one else to sell to.

      • DG says:

        Amazon’s pricing may have had a chilling effect on the appearance of new B&Ms, sure. The rise of Amazon has almost certainly encouraged people not to invest in outmoded, high-cost businesses like B&Ms that provide inferior value to consumers. The industry as a whole will continue to transform based on the disruptive innovations that Amazon introduced. If anything, a full industry shift to an e-tailing model will result in more entrepreneurship by lowering fixed costs and, consequently, barriers to entry.

        You and I might personally put value on the ability to touch, smell, and just be near the books you’re browsing for. Why should our preferences count for more than the preferences of the millions of readers who, by voting with their wallets, have demonstrated that they would prefer to pay less than touch and smell the merchandise.

        Yes, predatory pricing is illegal, but driving your competitors out of business by pricing below cost does NOT equal predatory pricing. The Supreme Court, in its most recent predatory pricing case (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (1993), found that “evidence of below cost pricing is not alone sufficient to permit an inference of probable recoupment and injury to competition.” That’s one reason why basically no predatory pricing argument has ever succeeded before the high court and why proponents of the argument have a hard time pointing to a single instance where consumers were harmed by predatory pricing.

  • Sam says:

    re: “How does price fixing and collusion ensure an open and competitive market?”

    1. this doesn’t have anything to do with Macmillan, as they did not collude, but for the sake of argument:
    2. when these are the only tactics available to stop a runaway monopoly

    re: “Competition DECREASED under the agency model.”

    That’s strange, as the four immediate follow-ons of Macmillan’s move to the agency model were:

    1. Introduction of new competitor iBooks
    2. Amazon competitor B&N remained in business and grew its e-reader technology
    3. Amazon doubled its royalty payment scale to self-publishing authors
    4. Introduction of new competitor Kobo

    The opposite of these 4 things:

    1. no iBooks
    2. no B&N and Nook
    3. Amazon still paying 35% instead of 70%
    4. no Kobo

    Would not be an increase in competition.

    re: “Readers were a loser due to increased prices.”

    In the short term, perhaps. Short term thinking is the road to a decimated book culture, however.

    re: “All while reducing your own income per unit. How does that make sense?”

    Sargent answers this in the letter above, emphasis mine: “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.”

  • Jayne says:

    Sam-

    I don’t think 1 & 4 have risen to a level that materially affects this argument. I could be wrong but nothing I have seen in real life or written supports this. I admit that may not be looking in the right places.

    #2 did happen and I think it was as a direct result of the agency model but Amazon’s customers were probably the beneficiary more than B&N’s. I believe B&N is very competitive on the hardware side but the retail side has a long way to go to match Amazon. They seem to make no effort on the customer service side of things and have lost a number of customers that I know personally due to this lack of effort.

    #3 may or may not have happened without the agency model. Regardless, the increased royalties did not benefit the colluding publishers or their authors as they are not eligible for this royalty program. If you want to make the argument that the agency model did indeed force the increased royalties to the non-agency authors, I think it could be argued that it reduced competition even further. Many of these authors ended up going exclusive for a specific amount of time on Amazon through the KOLL or KDP select programs. More readers further entrenched in the clutches of Amazon.

    I think we’re back to that Barnes & Noble was the winner. Readers, authors under contract to the big 6 and shareholders of the big 6 were losers.

    When retailers are required to sell at the same price and with DRM, there is nothing to differentiate the sellers except hardware and ease of purchasing. Amazon is still the leader when it comes to ease of purchasing/customer service so the agency model locked more people into Amazon than before. Fictionwise? AllRomance? Smashwords? Why go to these retailers or any other independent? When you play retail price maintenance on digital items you reduce what retailers can compete on.

    Hopefully this warning shot means that publishers will finally consider innovating instead of trying to sustain the old print model on the back of the new digital model. They are no closer to breaking Amazon than prior to agency pricing and are now looking at a long legal fight and/or fines.

  • Adam says:

    I don’t really care how the deals are made. I just know that I will never pay more for an e-book than a paperback copy of the same title. E-books are worth less because consumers never really own them — merely a license to read them on a particular compatible device. I cannot resell or give away an e-book that I have purchased, and “lending” so far is reduced to absurd limits like one-time-only for 2 weeks. Oh, and they become completely useless and unreadable if the particular DRM platform dies. Why should I pay $12.99 or $14.99 for that?

    You know what I would pay for in a heartbeat? A Netflix-like service for e-books. Charge me a reasonable monthly fee and let me download up to, say, 3 books at a time. I mean, if I’m never going to truly own an e-book in perpetuity anyway, why not just pay for a subscription service instead? Basically take the concept of a free public library and turn it into a profit-making business. I like the library, but I’d happily pay something like $10/month for the convenience of anytime access to a vast collection of e-books from all publishers, no due dates, a high-quality recommendation engine and a queue for titles I’d like to read next. Overdrive’s current collaboration with public libraries fills part of this gap, but their collection of titles is limited, there is no recommendation engine to speak of, most popular titles have a waiting list, and most have a 2 or 3 week lending period with no renewals allowed. Seems like that is a market ripe for disruption.

    • Nathan says:

      It’s only the DRM model of E-books in which this is the case. Some of the small web publisheing stores, competitors to this site even, give you the ability to buy an e-book in all formats. The ebooks I bought through that publisher some 5-6 years ago have been even updated for the E-readers that came out. And they don’t have DRM either.

      And the price is less than the price points the big six set.

      The Amazon model and the MacMillian models aren’t the only ones out there. And personally, I hope they both fail.

  • Daniel R Mitchell says:

    I am all for authors getting nice royalty checks (if they can’t afford to write, then I loose the pleasure of reading) and publishers deserve to make a profit. There are cost associated with the business that must be recouped. I understand all of these things, what I don’t understand is how you can justify pricing ebooks at $4, $5 or more than a paperback. I loose all the tangible benefits of having a physical copy and aside from convenience and the very rare exception, publishers have not added any enhancements to take advantage of the technology of ereaders and tablets.

  • Nonny Maus says:

    I believe, Mr. Sargent, that you should be using the term Monopsony to describe Amazon, rather than Monopoly. Words are hard.

  • Finno Furre says:

    “I am Macmillan’s CEO and I made the decision to move Macmillan to the agency model. 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.”

    You, sir, have a backbone to be proud of!

  • Joanne says:

    @Adam “You know what I would pay for in a heartbeat? A Netflix-like service for e-books.”

    Um… have you been to your local library lately? While some publishing companies refuse to allow libraries to get copies of their ebooks to loan there are a LOT of libraries and a LOT of books available FOR FREE. Frankly, I don’t see the point of buying ebooks at all if they can be loaned. Here’s the ebook selection from the New York Public Library http://ebooks.nypl.org/E6E16DAE-7479-42CE-BF53-438361884352/10/257/en/Default.htm

  • Sam Hankins says:

    I think it’s worth noting that John Sargent’s message is addressed to “Dear authors, illustrators and agents”. The reader/consumer is not someone he’s interested in. His responsibility is to himself, the writers, illustrators and agents, the people who profit from Macmillan publishing. The readers are irrelevant and, I suspect, an annoyance to him.

    This forum provides an opportunity for the readers and buyers of his products to vent, but we should have no illusions that the outrage the majority of readers feel about the existing pricing model is of any interest at all to John Sargent or the any of the other publishers who’ve colluded in this monopsony. Macmillan et al will lose this case, as they should.

  • Peter Leeflang says:

    Mr Sargent, you speak for all you readers, when you oppose this witch hunt of publishers.

    I want to add t o you case that it should be exposed that the federal, state and local governments in the US currently are increasing the suing and finin g of businesses with a barely disguised agenda to fill their tax coffers.

    Since any fine will have to be passed on to consumers (translated in higher prices,) those governments are using businesses like your company as a back door to grab into our pockets, in other words as tax collectors.

    • Fredrik Coulter says:

      While I mostly find Holder’s decisions to be unsupportable, I agree with this one.

      Fines, if they go to the government, will lower (slightly) the deficits that the government is currently building up. This means (slighlty) lower interest payments and (slightly) smaller tax increases in the future to pay off the debt. (Or slightly smaller future cuts in expenditures.)

      OR, they will be forced to pay the fines to the consumers who bought the over prices books via Amazon. Can you imagine how much Amazon is going to enjoy the marketing benefits of crediting their customers with the amounts they are owed?

      A lot of previous DOJ actions have ended up with some sort of gimme to the customers, and not to the government. I don’t think this would be different. (Amazon definitly keeps track of everything your buy, so it shouldn’t be that difficult to arrange.)

  • Chris says:

    Umm….I have to ask how you did not act illegally, along with Apple?

    You agreed to terms that Apple set that said no one can sell an e-book for a lower price than Apple sells it for.

    This is two companies (in all reality there are more) colluding to make prices set at a certain price or higher, this is exactly what our Antitrust laws are in place to prevent.

    Now, what should be done is you should be able to set a price that you want to get paid for the book and leave it up to the resellers to set their prices accordingly. This is essentially the same thing that happens with physical media, you sell the book to Barnes and Noble for $1.50 and they sell it for $5.00 for example.

    This results in demand setting the prices.

    • Knowledge and Reason says:

      Why can’t Macmillan price their products the same across all retailers? Every store in America has products on it’s shelves that do this. You might have been unaware or under some different preconception, but here’s nothing new, illegal or special about it. I also think that you’ve mistaken commonly misunderstood ideas about monopoly laws are and what they actually are. It’s a very popular error, that can be corrected with some reading and education. It’s easy to confuse an ‘ideal’ with a law, and it’s so easy to curry opinion by appealing to the former, while misrepresnting the latter. A far too frequent way for governments to reek havoc. You should try considering that perhaps the government does not have your interests in mind, if only to exercise your intellect with a thought experiment. How does your opinion hold, say if the government weren’t being honest in it’s statements? Get Vulcan, and try to separate your emotion from your logic. Then again, some prefer the blue pill to reality.

      • Anthony Pero says:

        Actually, the MFN clause is the centerpiece of the DoJs antitrust suit. And the DoJ doesn’t lose very often, so… apparently the poster was correct, at least the DoJ thinks so. We’ll see when the trial ends.

      • Fredrik Coulter says:

        You said that every store in America has products on its shelves who’s price was set by the manufacturer. Really?

        Manufacturer’s set suggested retail prices, and the stores are perfectly within their rights to set the actual prices higher or lower than those prices. A great example is the car industry, where Ford puts a sticker on the car, and the local dealer then makes whatever deals they can. When you go to Books a Million, you can easily pay 10% to 40% LESS than the price the publisher has set. There are a lot of other examples out there.

        So, since you claim that prices are routinely set by the manufacturer, I’d love to see some examples. If you’re right, it shouldn’t be that hard. And remember, any of your examples are killed by a single counter example. Even if 90% of the stores follow the suggested retail price, all you need is one store saying “take 10% off”.

  • Venu N. says:

    Dear John Sargeant,

    I applaud your courage and moral conviction on this issue and I cannot agree with you more. I wish there are more business leaders like you with as clear conviction.

    It is the artists, writers and the publishers who bet and invest on their work who create the products for others to enjoy. The bureaucrats, who don’t produce anything except the cynical spins they weave and always claim to act on behalf of the “consumers” to justify their actions and grab power.

    The “producers” of a good should reserve the right to what ever they think that the product (that is perhaps their life work) is worth. Consumer’s are always smart enough to choose a product for what its worth. If they think it isn’t they won’t. It is as simple as that and it is should be that way.

    I understand that we will all hear these politicians and bureaucrats will spin, as they always have, that they are acting on behalf of all of us. But I want you to know that, at the least, it won’t be on my name.

    Lastly, I want to take this opportunity to thank you and other extraordinary leaders like Tim Cook, Wendell Weeks (and late Steve Jobs) for inspiring all of us.

    God Speed to all of you.

  • Michael Herrmann says:

    Good for you. Don’t back down!

    Seems to me that if Amazon wants to play rough, and enlist the biggest dummy on the playground, the DOJ, to help bully you, maybe they should get the same 46%-48% discount your real bookstore accounts get, instead of the 55% or 60% you’re now giving them. Why do publishers reward them for ruining publishing? Why help them devalue your product? They don’t need the help!

  • Sarah Evans says:

    So basically the strategy here is to lie about collusion and the blatant attempt to stifle the ebook industry and limit book culture to the old world of print publishing. Imagine if the creators of records, cassette players, or cds tried to do what the big publishers and Apple did? Mp3s would be sold as albums only and priced at anywhere from 5-15 dollars more than the actual item. Ridiculous. I’ve taught students, ages 12 to 18, and they are obsessed with technology. They are always on their cell phones, computers, and gaming devices. Ebooks have actually increased their reading from almost zero (reading the SparkNotes version for example) to actually reading and seeking books out. My entire class became part of the Hunger Games craze and read all three books on phones, computers, and through loaned hard copies. Then several students started reading sample chapters (downloaded from Kindle) or reviews on GoodReads (where my entire class is signed up and part of a group) to find more books to read. I am amazed by the changes that Amazon’s Kindle and Kindle Fire, ebook technology has brought. With all the games and texting, kids find time to read and kids these days prefer to read electronically. By setting high price points the bix six publishers are actually encouraging kids to read less and hurting the overall future of books.

    I don’t support an Amazon monoply or monopsony but I do think that more than five bucks for an ebook (think about an mp3 costing between 99 cents to 4.99) will harm book sales and the culture of reading.

    A cogent response to Turow’s other statement can be found here: http://jakonrath.blogspot.com/2012/03/barry-joe-scott-turow.html

    • Venu N. says:

      Sarah,
      I think you are a missing the larger point here. The “rights” of a producer of a good.

      I will give you an example:
      When Ayn Rand’s Atlas Shrugged ebook price moved up to $28.00, I deferred my purchase. But lately I purchased the ebook when the price was reduced to $12.99, I didn’t need the govt. overreaching power in that. The market forces compelled the publisher to balance the price/demand according to their goals.

      So your goal of “improving reading habits” does not give you or the govt. right to sue anybody and force a price down the producers throats. But if you have noticed, the market forces did that automatically and made me buy a book I wanted.

      In any case, I just don’t subscribe to the notion that mere distributing books (even for free) will actually improve reading habits by that much. But even if they do, it does not give us the right to dictate to the producers what they should be selling for. I much rather have the market forces level that automatically. Fascist and communist countries have always tried to force a lot of things in the name of “common good” and time has proven they have failed. And somehow this great country is moving towards that direction dangerously inch by inch and issue by issue.

      Let free will prevail. That is what this great country is all about.

      If you still think you have a “right” to something just because you feel like improving the “reading habits” of the “people”, Perhaps you should start writing books and selling it for $5.00 or maybe even $1.00 if you wish. As an avid reader I would appreciate (that is if I find the book worth even that to begin with).

    • Venu N. says:

      Dear Sarah Evans,
      I just realized that I have completely misinterpreted your comments. Actually I am in agreement with your comments. I must have risen on the wrong side of the bed or something. I sincerely apologize for it and please disregard my references in my comments about you missing the larger point and particularly the last para in my comments. You haven’t missed any point in my reply. I wish I could retract those comments and post an edited version of it.

      Sorry again for mis-interpretting your comments.

  • Brigite says:

    you inspire me, thanks.

  • Knowledge and Reason says:

    It’s amazing when people throw around terms like monopoly, but there’s no monopoly in sight.

    Obviously many of you have been boycotting buying economics books. Price fixing is not the same as agreeing to not undercut a new distributor by allowing Amazon to sell for $5 and While hanging out another to sell for $10. This is a standard clause in all manner of businesses. It’s on the same token, when shopping for electronics or matresses and the retailer says they can’t advertise the amazing low price of their weekend special – because it wouod allow one retailer to under cut every other retailer of said product, and therefor make it impossible for a business to market their product across several outlets.

    I can’t believe how ignorant, silly and petty some of the reactionary comments about this are, and it’s especially disheartening when the DOJ and Eric Holder are so incredibly clueless about basic legal economic practices that they waste more tax dollars pursuing garbage like this. Some people want to complain about DRM (a completely different, irrelevant issue) and they don’t seem to think that a business can raise its prices ever. There’s nothing that Apple or publishers did to ‘fix prices’. This country would be in a lot better shape if the lot of you used your brains before your emotions, and thought these things through before crying all over about how mean you ‘feel’ something is. All it takes is one press release of the word ‘monopoly’ and all you clowns pile into the same clown car. Pathetic really and absolutely medieval behaviIng like ignorant serfs beholden to a church promising heaven thru government litigious activity. Folly according to all known history.

    So what if ebooks are more expensive than printed versions? Guess what Sherlocks, Microsoft Word is more expensive than pen and paper. Its also on demand, instaneous and formatted for your fancy little digital device. New products/mediums often carry a premium, it’s only the market that will suss that out. The best scenario is don’t buy ebooks if you don’t like the price. If Macmillian loses enough business they’ll lower their prices across all retailers. At the end of the day, so what? If a book publisher wants to charge $5 or $5000 for a product, you shouldn’t have any say in the matter, it’s their choice how they price their products, just as it’s your choice to price your labors and products accordingly.

    If the DOJ wins, there is nothing to gain for any of us, any money will just go down into the government sinkhole. First we’ll pay for the government’s legal fees, then we’ll pay for the publisher’s thru higher prices, then we’ll pay more in taxes for inevitable government oversight branch that will be created to monitor book publishers for our ‘best interests’. If you keep letting the government force your will on others, soon they will return the favor and you’ll be forced in turn. You should all consider buying a dictionary and a mirror, then read the definitions out loud to yourselfes of shortsighted, cowed, shallow and slave… keep it up and soon you’ll be all four.

    • Anthony Pero says:

      In your mattress example, however, the retailer CAN STILL SELL IT for whatever they want, they have just agreed not to advertise it. That is not remotely the same as Agency.

      Besides, its a waste of time to apply any model of selling physical goods to an infinitely and effortlessly copyable digital product. Bottom line: Author advances are going away, just like musicians advances have gone away, except at the top of the game. You want to get paid? Write a good book, give away a bunch of rights to have it professionally edited (you need it), and split the profits with the publisher/editor. Oh yeah, and don’t forget to actually market it yourself.

      • Nathan says:

        Here’s the ultimate question, though. Why do I have to sign away rights to have it edited and in a digital age, why do I need a publisher in the first place?

        The nature of the market is changing. If I can go straight to the customer through Ebooks and the product is no longer physical, what value do publishing companies add? Editors? I’ve heard enough horror stories from midlisters to know that service has been trimmed repeatedly over the last few years.

        Is it neceassry to have so many middlemen between the writer, that is, the actual producer of the good, and the customer any more?

        That’s the question that publishers need to answer.

        • Anthony Pero says:

          You need a publisher because your work is not as good as you think it is. No one’s work is as good as they think it is. All commercial creative endeavors benefit enormously from outside contributions. Someone else needs to be able to say to you, no, sorry, that is not ready to hit the market. When you hire an editor, he may tell you this, but likely she will not, because she wants you to hire her again. A partnership where both parties split profits is the best scenario.

          • Nathan says:

            No, I need an editor, for reasons you’ve said, although I think you’re overstating the case for contributions from outside the editor/writer relationship. You’ve not said why I need a publisher, especially in the age of Ebooks.

  • Jason Frost says:

    Stand STONG and FIGHT!

  • D. Hanson says:

    The time for physical bookstores like Barnes and Noble has passed so trying to save them is just putting off the inevitable.

    You can say “no collusion” all you want. But when several book companies all change their pricing at the same time under the leadership of Apple, then it IS collusion.

    Learn to live with smaller profits in an e-book world!

  • Subwoofer says:

    I find the term “Department of Justice” to be an oxymoron. Those words look kind of sketchy linked together. Stay true to what you believe.

    Woof™.

  • Joe Ranft says:

    The larger issue here is why do publishers need to exist at all? And why should they take a single dime from authors? It’s very simple for an author to self publish to both Amazon, B&N, and Apple. There is no need for publishers to provide the paper, ink, and trucks.

    Yet you want to maintain the profits from the print era. That era is gone.

    How much does an author earn from one of your ebooks? I’ll pay that, and then I’ll pay the site I buy it from, and that’s it.

    • KD Ryder says:

      And THAT is the elephant in the room that nobody wants to acknowledge. An author with a great story but poor grammar skills can hire someone to clean up the manuscript for a lot less than the cut taken by a traditional publishing house. Self-publishing is not hard at all and with computer software even cover design is not difficult, and there are people who will do this for pay.

      I think we will soon see the advent of publishing assistants taking the place of big publishing houses, with the price of books coming down and more money going to the author. Self-publishing takes the “gamble” out of it. No minimum press run, no risk of unsold books to dispose of. People either buy it or they don’t.

      I really think that day is coming. Wouldn’t it be ironic if 10 years from now all the “big” publishing houses only had “small” authors to work with any more because the ones who made them rich decided to do it themselves?

      • Anthony Pero says:

        Most books require more than a copyedit. The reason John Locke’s books continue to sell so well is that he can afford to hire a top notch editor to help him with the crafting of his story. He was rich to begin with, and amazingly humble (he knows he needs more than a copyedit).

        Large books are the work of many hands. The ones that aren’t are noticeably deficient.

        The problem with hiring an actual editor to tell you when something doesn’t work and help you fix it is obvious when you think about it: They are your employees. How often do you pull punches with your boss? Even worse, they are contract employees. In order to get your business again, they need to please you. You can say until you are blue in the face that what pleases you is that they tell you when something sucks, but… that doesn’t mean they will believe you. Hiring an editor to do substantial content-oriented edits on your book is problematic at best. You may get lucky and it may work, but it is far more likely to work is someone else is signing their checks.

        The new model that will likely emerge are small, agile, publishing houses run by editors instead of businessmen (much like 35 years ago). They will not have the overhead of warehousing and distributing large print runs, and will therefore be able to pay a much higher percentage on sales. They will probably not give advances. They will provide quality editorial services, artwork, marketing, accounting, etc… In other words, they will still be true publishers, but without the ridiculous unnecessary overhead in a digital world.

        Rockstar, money editors will become household names much the way certain film producers are household names, like Tarantino and Spielberg. Maybe even their names will appear on the cover. This will have the same effect that buying a Tor book or DAW book has now–you trust the brand. I also expect that lifetime contracts will go bye bye as well, in this scenario.

    • Fredrik Coulter says:

      Publishers provide, in one place, a bunch of services, ranging from ediiting, to production, to delivery of product, and all the way through marketing and advertising.

      The interesting question for the book industry is whether all these services are best provided by one source, the publisher, or by a variety of sources all working on one aspect of the process. It may be that publishers are the most efficient and effective way of doing all of this. It may not be.

      But the answer to that question is going to take a while. Independent editors are a new phenomena, and one that (based on my reading of independent author’s books) not all authors think they need. But as more people see the need and fill it, the quality of independent books will rise. Whether this will cost as much as what publishers take is a different issue.

      The other issue is the question of the advance. Independent authors must be willing to forgo advances for a higher royalty rate and additional costs. It’s hard to tell what the correct decision is for authors between those two choices.

      But, going back to your original post, publishers, while not “neccessary”, may very well be more efficient and effective than the alternative.

      • Anthony Pero says:

        Publishers source out a lot of those things in your list already. They try to find the best people for the job. They do a really good job at many of these items. The issue isn’t whether you can source these out yourself or not and improve your product (you can). The issue is, can you pay for it all up front? Kickstarter is not really an option for unknown writers. It’s a fantastic option for midlist writers without a House, however.

        I think the future of publishing will be discovery and development of new talent at a 50/50 royalty split with no advance. Then the publishers will give advances to successful authors in order to keep them in House. Many authors who just want to write will do this.

  • Ashley Winn says:

    Fear itself.

    Fear of piracy among content producers is without doubt justified. However publishers, movie studios, those who sell content are being irrational in their response to that fear. The cure they are clinging to is worse than the disease. By insisting that the content they sell be locked down to a particular device, they have put all the power in the hands of the device makers. Locking down your content annoys legitimate customers. It creates only small road blocks for those intent on stealing. And it gives a near-monopoly position to who ever sells the most devices. If the publishers would sell unlocked digital copies of their books, perhaps on usb sticks, they could sell through the thousands of independent bookstores and amazon would lose all of their power.

  • Sarah says:

    I see that you do not listen to your PR people any better than your attorneys.

    I’m not against you or your employees or authors making a living, I’m opposed to you trying to make that living in what appears to be an illegal way. Most certainly a tone deaf way.

  • John says:

    I am a small publisher and I support MacMillan and Apple 100%. In the electronic book market, publishers should be able to set the price they think is fair, not Amazon. Apple gives me 70% of the price of my books. Amazon, Sony, and B&N give me half that. If Amazon wants to sell ebooks at a loss, fine. But they need to absorb the loss, not me. There is no “wholesale model” in this market. Amazon, Sony, and B&N do NOT pay anything for any wholesale product. They merely undercut the competition and pass the loss back to the wholesaler. Years ago, the government would break up monopolies. Today, it servers as the enforcers of the monopoly.

    • Fredrik Coulter says:

      When Amazon sells the book for less than the amount they owe the publisher, they are absorbing the loss. I’m not sure where your statement is coming from.

      The government went after monopolies WHEN THE MONOPOLY HURT THE CONSUMER. Even assuming that Amazon was a monopoly — hardly a proven statement — the issue was that Amazon was selling books for LESS than the publisher wanted. This hardly hurts the consumer.

    • Anthony Pero says:

      Your statement is an untrue characterization of how things were before Agency was instituted. Amazon paid a wholesale (negotiated) price to the big 6 for an eBook, then would sell them for less than wholesale. Publishers still got the wholesale price.

      Maybe that’s not how it worked for a small press, but that’s how it worked for the Big 6 pre-Agency.

  • Alan McKendree says:

    Mr. Sargent has the courage to stand up against this charge, levied under evil anti-trust laws. Too many are forced to give in, not due to wrongdoing but because they can’t afford to fight.
    Too many Americans and far too many legislators do not know what a free market really is (as is amply evidenced in the comments here). They advocate interference to micromanage *their* vision of what a free market should be — in other words, they try to force a free market, and are unable to see the inherent contradiction. Or even worse, they take the attitude that the books are theirs by right, and anything over what THEY, the customer, choose to pay must be prohibited by the government — the guys with the guns. This disgusting thug mentality should be rejected outright.
    There is no remedy until anti-trust laws are realized for the evil they are, and repealed.
    Inadequate though my encouragement may be, Mr. Sargent, you have it. Best wishes and thanks for all you do to bring the light of literacy and education to the world.

    • Niall Hosking says:

      Well, if you want such a libertarian ‘free’ market, why not remove all ‘evil government monopolies’ and abrogate copyright altogether, and let everyone compete on the service they provide?

      Oh wait, monopolies like copyright are only good when they suit the corporate masters.

      The only people that would call anti-trust laws ‘evil’ are those who think that corporations have all the right to stamp over your rights the exact same way that you complain about the government doing – except that at least the government is somewhat accountable.

  • A Wallace says:

    I have a word for you people and I shall capitalize it so you know I’m serious. BAEN! This is how you do ebooks. No excuses, no DRM, any device and… no amazon (B&N, Apple, etc.). They are seriously doing it right and will be standing in the ashes selling books. Treat your customers right and not like thieves and you’ll do fine.

    • MikeP says:

      Second that. Baen is a great publisher who is successfully selling ebooks competitively against Amazon. First thing I did when I got my Kindle is go to Baen’s website to make sure I could properly buy, download, and read on my new device. A good 25% of my books on Kindle are from Baen and it would be more if they represented a wider range of authors. So, instead of copying a successful model, Macmillan has chosen to fight for an antiquated one where ebooks are the redheaded stepchild of ‘proper’ paper publishing and all efforts must be made to prevent adoption of the new format. Bravo, enjoy the boneyard while your readers simply follow the path the least resistance for their reading pleasure.

  • W Niddery says:

    First, kudos to John Sargent for standing up to the government and its arbitrary, non-objective antitrust laws, the law that makes *any* price illegal – if he undercut others he’d be accused of trying to monopolize (eliminate competitors) and if he charges higher he is said to be “gouging”, but charging the same is an automatic assumption of “collusion”.

    As to the debate on supply and demand, where some claim the near zero reproduction costs of an ebook (or any software) means the price should approach zero, all are all missing an important (Economics 101) point – prices are not dictated or determined solely on *cost* – cost has nothing to do with supply and demand, it merely determines whether the supplier can make a profit at any given price.

    If you can make something for 10 cents yet find someone willing to pay $10,000 for it, that is perfectly just and moral (assuming you are not misrepresenting the product or otherwise being dishonest). The notion that you should only charge some “reasonable” profit margin, say 10% (thus only sell said item for 11 cents, making a 1 cent profit) is completely arbitrary and unjust. As with price itself, there is no correct or moral/immoral profit margin.

    Thus the only “correct” *and moral* price is the intersection of what some are willing to pay vs what the seller is willing to take. Having any other price forced on the market by the government or anyone else is just that – *force* – and is immoral. Consequently, antitrust laws are immoral and should all be repealed.

    • Anthony Pero says:

      I agree with most everything you are saying here, except for certain parts of your last paragraph. The problem is that, for what we are talking about–the price CONSUMERS pay for eBooks–the Publisher is not the SELLER. The retail outlet is. You said:

      Having any other price forced on the market by the government or anyone else is just that – *force* – and is immoral.

      What the anti-trust laws are designed for (in this instance) is to prevent the CREATOR (Publisher) from, in your words, immorally, forcing the SELLER (Amazon, B&N, etc..) to set the price where they, the CREATOR, wish. The only context in which the Publishers are the sellers is as the wholesale seller to the retail outlets. Publishers, other than Baen, do not and do not want to sell directly to consumers. Antitrust laws, at least the ones under discussion here, are aimed at consumer protection, and nothing else. In this context the Publisher is not the SELLER. I don’t understand why people don’t get that. You aren’t giving your money to Macmillan, you’re giving it to Amazon. That distinction is what makes Amazon the SELLER. If you, the consumer gave your money to Macmillan directly, then they would be the seller. But ya don’t, so they’re not. Therefore, if (and it’s a big if) it is immoral to force prices on SELLERS, it’s the publishers that are the ones doing the forcing. I don’t happen to find anything immoral in this. Of course publishers want to control prices. There’s nothing EVIL about that. It’s called business. The question isn’t whether its immoral, but whether its illegal. The courts will determine whether MFN clauses in these situations are legal or not.

      • Anthony Pero says:

        Please note that I recognize that Agency makes the Publisher the SELLER. That’s the whole point of Agency, it’s what allows the Publisher to set prices. If the DoJ suit fails, and Agency and MFN clauses hold up, then yes, as long as they don’t collude with each other, the Publishers can set the price of eBooks wherever they want. They are then the SELLER.

  • Liz says:

    Thanks for supporting authors!

  • Edward Savio says:

    Dear Anti-trust Division,

    As an author and also a consumer of books, I find your suing of Apple to be short sighted.

    Although it may appear at first glance to have artificially kept prices low, the agreement which you find so damaging has actually INCREASED competition. Amazon has had a tight grip on the publishing industry. Before 2010, it could set prices and terms. The reason it could do that was because it was the place everyone had to go to if you wanted to sell an ebook because of its huge market share. Typically, there has been a 40-45% publisher stake with a distributor taking 55-60%. That made sense when the distributor had to then turn around and resell the books to a brick and mortar bookstore. They needed to have enough room to stay in business while giving the stores a profit margin as well.

    This all changed once Amazon effectively became the distributor and seller. Instead of the book store getting 30-40% of the retail price (which they would usually mark down bestsellers 10-30%) Amazon had 55% and could undersell everyone. This drove booksellers like Borders OUT OF BUSINESS. Not only that, but Amazon led the charge to RAISE it’s rates. Smaller publishers (anyone but the biggest) had to give up 65% to Amazon.

    This 55-65% used to be split. Now it’s being taken by one company.

    Instead of lowering prices, it actually raised them. If a publisher, let alone an author, is going to make any money at all, it had to raise the retail price. This hurts brick and mortar stores even further. But let’s stick to the ebook realm.

    After Apple’s entry into the market with the iPad and its “agency” pricing, small publishers were able to lower prices. Hugely successful authors could choose to publish themselves, get a bigger cut and offer books at a lower price. Even the traditional publishers thrived. Books that weren’t available via ebook became available because the publishers didn’t hold back books that would have lost money if priced too low.

    In fact, there’s been an increase in the number of books with prices that are more reasonable than before. The industry shook itself out. At first prices may have been higher for some books, but after awhile a more market driven price structure came into play. There was an explosion of product. The market jumped. And everyone got a better deal. The consumer got more choices, many of them for less than the $9.99 that Amazon had made as its price point.

    When you take Apple out of the equation, Amazon is once again going to be able to squeeze the life out of this industry.

    Trust me when I say, the unintended consequences of your actions today—if they are fully successful—are going make it harder for authors to make a living. And its going to decrease both the available of quality product in the market place and eventually (as we’ve seen in other areas) it’s going to increase the cost in the long run for all books.

    Market pricing works when there is a WORKING market. If there’s only one market (Amazon) then even if the prices are lower in the short term, that doesn’t mean it’s better for the health of an industry. What it meant was that one company made a lion share of the profits. Far from being anti-trust, Apple’s entry into the market did the opposite. It has allowed a greater number of people and companies to share the fruits of their labors. Just because something is cheaper doesn’t mean it’s “fair.”

    Goods would be cheaper if we didn’t have to pay workers. Amazon is the only winner in this lawsuit. Conversely, if this lawsuit fails and I hope you see the wrong-headedness of this case—everyone else wins. Apple won’t lose either way. But the reading public will lose and so will the authors and publishers.

    Sincerely,

    Edward Savio

  • Pamela says:

    What concerns me about Amazon is not how much they price a legitimate copy of a book or ebook for, but all those “used” book dealers they house that sell the book for nearly nothing, even when the book or ebook is brand-spanking new. How exactly is this done by Amazon’s underlings? If I put a book out today for $10, and tomorrow on Amazon, it is being sold by one of their troll underlings for $2.30 for “slighly used but good condition”, how is that possible? And this is happening, I promise. How is a brand new book “slightly used but in good condition” within days of coming out? Who in the world would buy my book at Amazon for $10 when they can scroll down and get it for $2.30? See, I don’t know that Amazon should be investigated for selling under the market through their legitimate company as much as selling WAY WAY under the market by their “used book” underlings. Is it piracy or magic that Amazon uses to take a just-released book and turn it into a worn-out has-been within a week of coming out? Amazon is an odd, red-headed step-child on the block and I don’t blame publishers or authors for scratching their head and say, “What the hey!?” Good for you MacMillan. It used to be that the big publishers were a threat, but today, it may be that the big publishers are the little guys’ first line – and only line – of defense. Without you, it would only be an Amazon world, so the big guys should get involved. You’re the only ones who have the strength.

  • Diane Boyle says:

    It’s really all about my favorite authors and who will sell them to me for the best price. For the most part, I don’t know who publishes the books I buy. I do know that one of the reasons I got interested in the whole ereading thing was the pricing and portability of ereaders. Sony had a good reader, but Amazon put it all together.

    Before the whole Agency thing, I never paid much attention to who published my books and $10.00 seemed reasonable for a newly published ebook. I always bought a lot of books, but rarely hardback, I always waited for the paperback to come out. Hardbacks are bulky and cost too much. I thought the high price of the hardback, was well, the binding. Turns out I was wrong. Also turns out that when I’m buying a print book, I’m also paying for all the books that don’t sell and end up in a landfill somewhere.

    I could go on and on, but the bottom line is that now I have a very negative view point of the Big 6, especially MacMillan and Penquin because they refuse to sell ebooks to libraries. But the good news for the big 6 is, I still don’t pay attention to who publishes the books I buy. And while I used to be happy to pay $10, I’m finding myself reluctant to pay even that because while waiting for the price of that new best seller to go down, I don’t have any trouble finding books to buy within my price range. I’ve even found that sometimes, the price comes down and I’m no longer interested.

    This year due to Agency pricing, my book spending went down 70% of what I spent the first two years I had my Kindle. The year Agency pricing took effect, it only went down 30%, but I stocked up on a lot of books in anticipation of prices going up.

    As a consumer, I don’t like Agency pricing. John Sargent and Scott Turow can moan and groan all they want. I think that Barry Eisler, J. A. Konrath, and other successful independent authors make a better argument. Amazon has always given me great customer service and prices. I don’t need MacMillan or anyone else to “curate” for me. I can decide on my own which books are worth reading and what I want to pay for them.

    And seriously, if you really want to level the playing field–get rid of DRM. But you really don’t want competition. You want to protect the status quo. I’m hoping you lose big time.

    • Pamela says:

      Most authors don’t want to self publish. They don’t want to create cover art, or copy edit their writing, or format, or acquire ISBN’s or library control numbers, and they don’t want to deal with the printers or the distributors, and they don’t want to market their book, and a whole host of other details that go into building and releasing a book. So, to bash publishers, all the while enjoying the product they produce, seems supremely selfish to me. To claim you hope we all fail – wow. You’ve already said you never pay attention to who publishes a book. But I assure you, people worked hard to get that book out there for you to enjoy – whether you pay attention to them or not. You seem to be an avid reader, even keeping track of the percentage of money per year you spend on material, and yet you can’t be at all grateful to publishers to the point that you want them to fail? Geez.