A Message From John Sargent

Dear Authors, Illustrators, and Agents,

There has been a lot of change in the e-book publishing world of late, so I thought it a good idea to update you on what is going on at Macmillan. The largest single change happens today, December 18th. Today a portion of our agreement with the Department of Justice (called a consent decree) expires, and we will no longer be required to allow retailers to discount e-books.

Unfortunately, the court in the Apple case made matters more complex. In a judgment against Apple, the court determined that publishers would be required to allow Apple unlimited discounting, and for a period that extends beyond the court approved consent decrees. Different time periods were assigned to different publishers. This will ensure a muddled and inefficient market until October 5, 2017 when Macmillan’s term (the last publisher) expires. Simon & Schuster and Macmillan have appealed the court’s decision to extend these dates. This appeal still awaits resolution.

Late last week Macmillan reached an agreement with Amazon on a multiyear deal for print books as well as a multiyear deal on the agency model for e-books, starting on January 5, 2015. All our other retailers will also be on the agency model, leaving Apple as the only retailer who is allowed unlimited discounting. Irony prospers in the digital age.

This odd aberration in the market will cause us to occasionally change the digital list price of your books in what may seem to be random fashion. I ask for your forbearance. We will be attempting to create even pricing as best we can.

Under our deal with Amazon your net percentage of the proceeds will not change. You will be affected, as you always have been, by our changes in price. Your books will continue to be featured in Amazon promotions and deals.

In reaching agreement with Amazon, we have not addressed one of the big problems in the digital marketplace. Through great innovation and prodigious amounts of risk and hard work, Amazon holds a 64% market share of Macmillan’s e-book business. As publishers, authors, illustrators, and agents, we need broader channels to reach our readers.

In our search for new routes to market, we have been considering alternative business models including the subscription model. Many of you know that we have long been opposed to subscription. We have always worried that it will erode the perceived value of your books. Though this significant long-term risk remains, we have decided to test subscription in the coming weeks. Several companies offer “pay per read” plans that offer favorable economic terms. We plan to try subscription with backlist books, and mostly with titles that are not well represented at bricks and mortar retail stores. Our job has always been to provide you with the broadest possible distribution, and given the current financial and strategic incentives being offered, we believe the time is right to try this test.

I remain entirely optimistic about our prospects together as we go forward. There is plenty of complexity to tackle, but with it will come great opportunity. As always, please be in touch with any questions or concerns.

Meanwhile, I hope you have a joyous holiday season! All best,
John

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