May 15, 2012

Newly released court docs reveal Penguin CEO wanted to “make Random House hurt” for not joining fight against Amazon


Penguin CEO David Shanks

Seventeen more states have joined the class-action lawsuit against the publishing industry over ebook pricing, and the release of the amended complaint has included some fascinating evidence previously redacted, including a detailed email from Steve Jobs about ebook pricing.

In a report from PaidContent, which broke the story, Laura Hazard Owen says the Jobs email was written “to an executive at the parent company” of one publisher who was hesitant about signing on with Apple under the agency model. Here’s Jobs’ email:

As I see it, [Conspiring Publisher] has the following choices:

1. Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.

2. Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.

3. Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them. This will be the start of piracy and once started, there will be no stopping it. Trust me, I’ve seen this happen with my own eyes.

Maybe I’m missing something, but I don’t see any other alternatives. Do you?

Owen also cites material showing at least one of the publishers being sued, Penguin CEO David Shanks, was furious that Random House had decided not to join the other publishers by going to agency. Owen says the newly released evidence reveals that Shanks …

… sent Barnes & Noble‘s then-CEO Steve Riggio an e-mail reading in part, “Random House has chosen to stay on their current model and will allow retailers to sell at whatever price they wish…I would hope that [Barnes & Noble] would be equally brutal to Publishers who have thrown in with your competition with obvious disdain for your welfare…I hope you make Random House hurt like Amazon is doing to people who are looking out for the overall welfare of the publishing industry.” The state complaint additionally says that Shanks was trying to get Barnes & Noble to “stop any promotion or advertising of Random House titles,” and when Barnes & Noble continued to do so, “Shanks went back to Barnes & Noble again. Following this contact, Barnes & Noble’s management decided not to feature Random House in any future advertising.”

While fascinating and seemingly damning, Owen smartly points out the new material “does not prove the states’ claim that all five publishers acted against Random House, since only one publisher is mentioned.”

So far, neither Owen nor any of the other news outlets picking up the story — such as CNET News, which ran this story — has been able to get any of the parties mentioned above has responded to requests for comment.

Meanwhile, the class action lawsuit against publishers now totals 31 states.


Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives