Sargent set the session’s agenda: He would share how he made the decision for the embargo and then would take questions. (He ended up taking questions throughout.)

See ALA’s press release on the session here. See Publishers Weekly’s take on the session here.

Macmillan’s Point of View

Sargent said that when ebooks first came into the mainstream (thanks mostly to Amazon), Macmillan saw it as a problem—retail sales went down, and digital sales went up. Libraries began lending ebooks, and the growth was tremendous, especially at OverDrive. That means that consumers are paying nothing to get their ebooks, and word traveled that libraries are places to get ebooks for free. (A librarian near me whispered that libraries aren’t really “free” because of the taxes that go toward funding them.) Macmillan sees the rise of ebooks as an imbalance of the ecosystem, which consists of publishers, libraries, stores, and schools. Sargent shaped his arm into the sharp upward trajectory of ebooks, saying that the curve needs to flatten a little in order for the business to succeed.

Sargent noted that the publisher has two responsibilities: a) be profitable as a business and b) deliver for its authors. The value of each read has gone down if consumers are using libraries to get ebooks—publishers raised ebook prices for libraries so authors and publishers would get more money from each sale. A librarian asked him how that’s different from print books; libraries weren’t “punished” for lending print titles. Sargent said he objects to the concept that Macmillan’s policy is a punishment. Publishers and libraries reached an agreement for print books that has stayed the same for decades. He sees print as a different animal because there was friction: People had to go to the physical building to borrow books. Now they don’t.

Authors’ Point of View

Sargent said that publishers got authors to support sales to libraries, although that meant they would earn less in royalties. OverDrive is reporting hundreds of millions of ebook downloads from libraries, but the print book business for libraries is stable. Ebooks are down 10% in consumer sales, but up 20%–30% in library sales. A librarian asked Sargent to explain more about the ecosystem imbalance he referenced. He said that from authors’ point of view, their book has the highest value when it’s new—a book comes out and a patron goes to buy it, but sees that the library has it for free, so the publisher loses the sale and the author loses the royalty payment. (A librarian next to me muttered, “He’s trying to make us feel sorry for the authors.”)

Pricing Versus Availability

A librarian commented that library lending breeds loyal customers through word of mouth and the desire to buy an author’s other books. Sargent agreed; he said he fully recognizes and thanks libraries for developing readership, but the issue is the digital disruption. He cited the music industry: Musicians now make more money on merchandise than they do on selling their actual music, but authors don’t have a similar additional outlet.

Macmillan’s frontlist titles are most of its digital business, so it had to raise prices of new titles. Sargent saw the embargo policy as the right calculation. He said he admits he made a mistake in putting so much stock in the “availability solution.” Librarians don’t like the “price solution” either, so he said he isn’t sure what to do next. A librarian told him, “We are willing to pay you,” but titles need to be available when libraries need them.

Sargent reiterated that he feels digital is different from print: Ebooks don’t fall apart, they are always returned on time, etc. Macmillan sees in its data that the average time of having an ebook checked out of the library is less than 2 weeks, and then it can be checked out again immediately, so there are more reads per ebook than per print book. And he said again that “if I’m a consumer, I see [library ebooks] as free.”

The company is using the policy of libraries waiting 8 weeks for multiple ebook copies so they could pay a lower price. And that way, Sargent said, patrons would have that 8 weeks to decide to buy the title. A librarian told him that that is a false construction: pitting price against availability doesn’t take into account the people who will never be able to afford the book. Another librarian chimed in, “Rich people read Macmillan; poor people read everything else.” The general consensus in the room was that public libraries are the great equalizer, but Macmillan is limiting access.

Sargent defended himself, saying that he has spent his whole life making sure people value literature and can have access to books. A librarian spoke up, “I value equal access. If we can’t buy [the ebooks], we don’t have equal access.” Sargent didn’t have an immediate answer to that, but then said Macmillan knows that’s something the company needs to help with. Another librarian said that this whole issue is about having an educated populace—libraries’ mission is to keep the public educated no matter who they are. Sargent’s answer was that libraries can still “buy a physical book to keep in your building on publication day.”

Finding New Models

Another librarian noted that Amazon is the elephant in the room. Sargent agreed, saying that Amazon is part of library business because of the Kindle—OverDrive lends ebooks that can be read on Kindles, and the Kindle app is pervasive as a tool for retailers and libraries. A librarian told Sargent to use librarians to help come up with a lending model that works for everyone, and Sargent said he wants to know what the better models are. He went back to his point that the ecosystem is imbalanced: Authors can’t make a living; libraries need books to lend out; there is printer consolidation, making even the availability of print books an issue. He said it’s a complex ecosystem, and Macmillan tried something that libraries didn’t like—so an embargo is not necessarily the answer, but Macmillan is trying to find one.

A librarian said he doesn’t doubt that Sargent loves libraries, but he hopes the CEO understands the impact Macmillan’s embargo is having. The company made a decision without figuring out a model that works for both publishers and libraries—reverse the decision, the librarian said, and work with libraries. Sargent replied that he did talk to about 35 library systems and that is what led him to believe an embargo would work. He said he doesn’t see how raising prices is good for libraries. He said he “naively” thought that libraries designed collections to ignite the love of reading in a community—it’s not about new books, it’s about the best books. After all, he said, libraries don’t always purchase every print book at publication. A librarian piped up, “You’re controlling supply to increase demand.” Sargent said, “We’re controlling supply to increase price.” Macmillan will always want more demand, he said, but it also wants more value per read.

Another librarian commented, “Clearly, there’s frustration on both sides. Are you willing to commit to working with more libraries and look at different models going forward?” Sargent did agree to talk to more libraries after some discussion about what organizations would put him in a position to do that. He said he didn’t want to pull the plug on the embargo; one reason is that small and rural libraries that buy ebooks directly seemed to appreciate the embargo (so they could save on price). He said Macmillan will gather information over the next few months and then make a more informed decision: “I learn a lot every time we talk.”

There was more back-and-forth about what models could work and the role of Amazon in providing data. Another librarian said that there should be different models that could be tailored to different libraries’ needs. Sargent agreed, saying that he wants to get to a place where libraries aren’t feeling disrespected. If ebooks continue to grow in popularity, making no changes will be a problem down the line, Sargent said. No matter what, author earnings are a concern. According to Sargent, his intent is not to stop anyone from gaining access to ebooks. A librarian said, “Well, that’s what you’re doing.”

Libraries as Problems

Sargent said that he does want to make sure disadvantaged people have ebook access, and it’s distressing that people think he doesn’t believe that. A librarian said, “You’re acting like we’re a problem you have to solve,” and Macmillan is explaining librarians’ work in a way that doesn’t represent them. Sargent replied that he is trying not to use the “p” word: “I apologize if I’m giving you the impression that I’m disparaging libraries—that’s not my intention.”

A librarian brought up the point that ebooks are so expensive that customers choose to get them from the library. Sargent said that Macmillan can’t control print prices—retailers do—but it can control ebook prices, which is why they are higher than print prices in some cases. Sargent is worried about the acceleration of more lending and less sales (that curve he mentioned). Another librarian said that the jury is still out on whether the embargo model works, so the library community should take this opportunity to study this model and see what other options are out there.

As the session wound down, another librarian thanked Sargent and told him, “I’d love to see you get a partial win” by expanding his notion of one copy per library system—maybe he could agree to giving one copy per consortium or branch during the embargo, so more copies would be available? Sargent said he wouldn’t commit to anything at that time, but Macmillan would put some creative energy into deciding what it can agree to change. How libraries feel is pretty clear right now, he said, and Macmillan will see what it can do.