In a letter sent to “Macmillan Authors, Macmillan Illustrators, and Agents“ on Thursday, July 25th, Macmillan CEO John Sargent announced new lending terms and pricing for library ebooks, claiming library lending was “cannibalizing sales“ and impacting royalties as revenue from library sales are “a small fraction of the revenue we share with you on a retail read.“
It seems that given a choice between a purchase of an ebook for $12.99 or a frictionless lend for free, the American ebook reader is starting to lean heavily toward free.
After our conversations with many libraries across the country and with many of you, we decided to change our library terms of sale. Our new terms are designed to protect the value of your books during their first format publication. But they also ensure that the mission of libraries is supported. They honor the libraries’ archival mandate and they reduce the cost and administrative burden associated with ebook lending. We are trying to address the concerns of all parties.”
—Letter to Macmillan Authors, Macmillan Illustrators, and Agents from John Sargent, CEO (via infoDOCKET)
The new terms were announced after Macmillan had “windowed a portion of the Tor ebook frontlist for 16 weeks as a test” in 2018, and their findings led them to conclude that library ebooks were having a negative impact on retail sales.
[Fritz Foy, president and publisher of Tom Doherty Associates] said they initiated their test with the understanding that library sales are a major source of growth for the publisher. Macmillan’s library ebook revenue increased 800% over the last five years, with libraries now making up 45% of the publisher’s total digital reads.
However the problem, according to Foy, is that while libraries make up 45% of Macmillan’s ebook reads, those digital-lending reads account for only 15% of their revenue. That readership/revenue gap was starting to have a significant negative impact on Tor’s authors and the company.
“What we were seeing was really reaching a tipping point,” Foy said, “where we’d have to explain to our authors that while your readership is growing, your royalty statement will be getting smaller and smaller.”
The new terms go into effect on November 1, 2019 and will limit libraries to a single, discounted copy of all new Macmillan ebook titles for the first eight weeks after their publication, a copy they will have perpetual access to. After the embargo has passed, libraries will be able to purchase additional copies at a higher price, under metered terms.
Under the publisher’s new digital terms of sale for libraries, "library systems" will now be allowed to purchase a single—that is, one—perpetual access e-book during the first eight weeks of publication for each new Macmillan release, at half price ($30). Additional copies will then be available at full price (generally $60 for new releases) after the eight-week window has passed. All other terms remain the same: e-book licenses will continue to be metered for two years or 52 lends, whichever comes first, on a one copy/one user model. A Macmillan spokesperson confirmed to PW that the single perpetual access copy will be available only for new release titles in the first eight weeks after publication—the option to buy a single perpetual access copy expires after that eight week window, and the offer is not available for backlist titles.
ALA President Wanda Brown denounced the embargo:
“This new embargo is the latest evidence of a troubling trend in the publishing industry,” said Brown. “ALA is developing a strategy to address this trend in the long term. Following the model of ALA’s former Digital Content Working Group, this advocacy effort will extend several years, not several months, and will not be limited to one company in the publishing ecosystem. ALA will push harder and explore all possible avenues to ensure that libraries can do our jobs of providing access to information for all, without arbitrary limitations that undermine libraries’ abilities to serve their communities.
“In the short term, ALA calls on library customers of Macmillan Publishers to tell CEO John Sargent they object to the publishing company’s new policy.”
Beyond the debatable analysis of their windowing experiment, one of the more puzzling aspects of the announcement was Sargent’s claims of “active marketing by various parties to turn purchasers into borrowers, and apps that support lending across libraries regardless of residence (including borrowing from libraries in different states and countries).”
While many would agree that library e-lending apps have become easier to use in recent years, many librarians would almost certainly dispute the statement that there is “no friction in e-lending.” Notably, patrons of most library systems will face a holds list when they want to check out a frontlist ebook.
Also, while OverDrive began offering libraries the option to enable remote library card signup two years ago, the service uses a third-party identity verification service that matches a new cardholder’s phone number to an address to ensure that the potential user resides within the library’s service area. It is unclear which apps Sargent is referring to that would enable users to check out ebooks from libraries in states and countries where they do not have proof of residence.
Over the past 10 years research has shown that library patrons are also book buyers, using libraries as a point of discovery, especially in the many communities where there is no local bookseller.
"50% of all library users report purchasing books by an author they were introduced to in the library." Patron Profiles, 2011
"A majority of print readers (54%) and readers of e-books (61%) prefer to purchase their own copies of these books." Pew Research, 2012
"About half (48%) of readers under age 30 said they had purchased their most recently read book. Another 24% said they had borrowed it from a friend or family member, and 14% said they borrowed it from a library." Pew Research, 2013
"31% of people who have used library websites or mobile apps read book reviews or got book recommendations." Pew Research, 2016
"69 percent of millennial readers have library cards, and the data highlight millennials’ view of the public library as offering not just value, but also the opportunity to explore new titles without financial investment: 44 percent said that the main factor in the decision of whether to borrow a book is cost: i.e., a desired book is too expensive to purchase. Another 42 percent reported that they turn to the library in order to “take a chance on a new author or book I never heard of for free,” while 39 percent said they borrow titles when they are “not sure about reading the book.” Notably, once a book has been borrowed, a majority—60 percent—of millennials reported that they go on to purchase that same title. And more than three quarters—77 percent—later purchase books by the same author."
And recent research from the Panorama Project has shown the direct, positive impact libraries have on book sales—from direct partnerships with local booksellers to targeted campaigns for specific titles.
While Macmillan’s embargo is disappointing news for libraries, authors, and, most importantly, readers—it reinforces the need for a cross-industry initiative to identify ways publishers and libraries can continue to support their intrinsically related missions while delivering mutually beneficial outcomes. We encourage more publishers, independent booksellers, authors, agents, and allied associations and vendors to collaborate with us and help measure the real impact libraries have on developing readers, driving book discovery, and generating book sales in their local communities, and beyond.