Macmillan will sell only one digital copy per library in first eight weeks of release
The Wall Street Journal
One of the country’s largest book publishers is changing the way it sells e-books to libraries, whose increasingly popular digital-book borrowing apps are taking a toll on its sales.
Macmillan, whose recent hits include Michael Wolff’s “Fire and Fury” and James Comey’s “A Higher Loyalty,” plans to limit each library system’s access to only one digital copy of each new book it publishes in the first eight weeks of the book’s release.
The move comes as borrowing e-books from local libraries has become easier than ever and as other leading publishers have adjusted their terms.
“Library reads are currently 45% of our total digital book reads in the U.S. and growing,” Macmillan Chief Executive John Sargent said in an interview. “They are cannibalizing our digital sales.”
Macmillan’s new policy will take effect on Nov. 1, said Mr. Sargent. After a book has been out for eight weeks, libraries will be able to buy as many additional digital copies as they want. Macmillan said the delay, known in publishing circles as “windowing,” is intended to boost the sale of new books, both digital and hardcover.
Demand for new titles is typically the greatest upon publication, when books and their authors get the most media attention. Macmillan is betting that many consumers will be frustrated at the long waiting periods that are likely to develop if libraries have only one digital copy and will instead buy the books they want to read at retailers like Amazon.com Inc., Barnes & Noble Inc. or independent bookstores.
In recent years, digital-lending platforms at American libraries have gone from clunky to virtually seamless. Many launched their own smartphone apps, making it easier for readers to find and download e-books free.
“It seems that given a choice between a purchase of an e-book for $12.99 or a frictionless lend free, the American e-book reader is starting to lean heavily toward free,” Mr. Sargent wrote in a letter sent Thursday to Macmillan’s authors, illustrators and to literary agents.
The CEO of a leading distributor of digital books to libraries criticized Macmillan’s move.
“It will create a backlash against Macmillan books and their authors,” said Steve Potash, chief executive of Rakuten OverDrive, a unit of Japanese Internet services company Rakuten Inc. “Libraries encourage and showcase authors to readers. Now libraries will have a hard time doing that for Macmillan.”
Mr. Sargent declined to respond to the comments.
Other major publishers are changing the terms of their deals with libraries.
Earlier this month, Lagardère SCA’s Hachette Book Group stopped selling its e-books to libraries on a “perpetual” basis, meaning an e-book copy only had to be bought once but could be lent indefinitely.
Hachette now charges a fixed fee for every e-book copy, an agreement that is renewable every two years. The switch follows a similar move made last October by Penguin Random House, which is 75% owned by Germany’s Bertelsmann SE. Hachette and Penguin Random House each said they lowered the price of their e-books as part of the switch to the metered model.
Penguin Random House declined to disclose how much it charges. A spokeswoman for Hachette said most of its adult e-books have a digital list price of $65 but that some genre romance titles sell for less.
Starting on Aug. 1, CBS Corp. ’s Simon & Schuster publishing arm will raise the price of most e-books sold to libraries as part of a switch to a two-year metered model from a one-year term. Most of the publisher’s new e-books will be priced in the range of $38.99 to $52.99.
Macmillan publishes an estimated 1,200 new books a year. Mr. Sargent said publishers have long delayed the paperback editions of new titles in favor of generating more sales of higher-priced hardcovers.
Movies follow a similar distribution pattern, from the initial opening in theaters to DVD and video-on-demand, to pay-TV services like AT&T Inc. ’s HBO or subscription services such as Netflix Inc.
There are more than 9,000 public library systems in the U.S., according to a 2017 report compiled by the Institute of Museum and Library Services, a federal agency. Of these, more than 8,000 offer e-books.
Macmillan will continue to sell its e-books to libraries for a two-year period, or 52 lends for $60 per book copy. One copy of each title will be sold on a perpetual-use basis for $30.
Macmillan, a unit of closely held German company Verlagsgruppe Georg von Holtzbrinck GmbH, doesn’t report financial results.
Mr. Sargent said the publisher’s e-book revenue has been relatively flat in recent years, although e-book revenue as a percentage of total revenue has fallen.
Libraries generate only 15% of Macmillan’s total annual e-book revenue.
Macmillan is paid between $9 and $10.50 for most of its new e-books sold on retail websites, significantly more than it generates from libraries each time one of its digital books is checked out-or as little as $1.15 per read for a title checked out 52 times.
Macmillan experimented with windowing last year when Tor Books, its science fiction and fantasy division, began making some of its newly published digital titles available to libraries 16 weeks after they went on sale. Mr. Sargent said that Tor’s e-book revenue increased after the windowing went into effect, although he declined to be more specific.
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