be intimidating, my way of saying this is something i would like to see as more in the industry, we need to talk. .. >> tell me about the whole damn story. >> yeah. >> you talked about the epiphany on a treadmill and how it started. tell us the story, how it all began, and up to the macmillan settlement and feelings on the aftermath. >> okay. first off i say, if you see me struggling with my language a bit and see me being ten thattive, i'm going to be called to testify next week in court, so i have to be a little bit careful so i may struggle to answer all your questions exactly as i should, but -- >> we totally understand, okay. >> the story is really quite simple. it starts with a world where as

e-books launched, one retailer had 90-some percent market share pricing books below cost, and that was an issue for all of us in the industry; right? if you look at what that does in its logical extreme; right? as they keep -- if they keep that market share for, you know, a long time and the books do actually all go quickly over to e-books, the discourse in book form in america, at the end of the day, is going to the distribution of books. it's going to be controlled by one man running a publicly traded company; right? the relatively unacceptable for us as publishers; right? there was a moment where i think it was common to everybody in the business that, you know, here's an interesting moment in

time. apple commences to launch the ipad, comes to publishers and says, you know, we'd like to launch the ipad. we have discussions with apple and macmillan went on for a period of time, a couple weeks, and at the end of the day, we made a decision to go agency. we went -- we -- i watched on tv on a screen as mr. jobs announced, you know, five publishers were in off in seattle, and, you know, i think the rest of that is reasonably well-documented, off to seattle, came back, the buy buttons were off, and there was paramount of trying to work through getting to the end, which is, you know, amazon is our largest customer and important distribution channel. we wanted to have a competitive marketplace with an even playing

field, and there was a lot of work to get there, and since, it's been a lot worse, on a steady basis. [laughter] >> this whole decision -- >> yeah. >> -- what lasting effect will the doj case and apple have on our business? i mean, what do you think -- you know, because this could put your out of business, you know? >> yeah. >> you know? >> there's no way to tell; right? that's in the future, and i have a lot of hope for where we stand today in business going forward. there's an awful lot of good signs as far as the movement to digital, the fact that people are not moving. if you think -- when you got an ipod, and you listen to music on it, you thought, oh, wow, that's great, nobody i know went back and said, oh, let me add cassette tape because that was cool; right? i think in the publishing world, what you see is people are

moving back and forth between formats. there is not this sort of in the end the consumer was always going to vote; right? the consumer decides how we want to read and what is dangerous is if you allow sort of artificial acceleration based on the desires of someone to further their own corporate goals, artificial acceleration is dangerous. at this moment in time, it seems to be a relatively stable market. the independent book sellers are having a good go of it. the -- i think the country was over stored. barnes & noble and independents doing it in big boxes, there was a moment where we were over stored, and now it looks like it's probably sustainable. i think at the end of the day, i am very hopeful that, you know,

in the future there's an even playing field, and the agreement we signedded with doj ends in december of, you know, 20 # 14, and at that point, it's, you know, we'll work to have an even playing field all the time. >> can you say what happens in 2014? will you move back to agency? >> i can't comment on any business models going forward. [laughter] >> okay. we've been frustrated, independent book sellers, have been frustrated with the doj, gone there, spoken a few times and all the letters and people within the industry sent to the doj, and yet their attitude, it didn't matter. it didn't matter that somehow consumer was king and nothing to do with the fair and equal marketplace. >> yeah. >> that's what was really frustrating for us, and i'm sure

for you. >> i disagree with a statement, consumer is king; right? i think that doj was extraordinary myopic, and i struggle and have been struggling for three years now with how you could make that bet and decision, and, look, at the end of the day, they were doing their best to be a traded corporation, publishers doing the best in the best interest of themselves, but of the industry and of the ecosystem and to protect what reading is in america; right? to actually protect that core thing. the publishers are working hard on that. they are -- economic interests for the long run, clearly, not for the short run, but interested in the long run. you look at it in the doj has essentially come in and made the

decision that they will carry amazon's water in this case; right? saying, look, this -- these guys have 90% market share. we are going to -- there's a new entrance coming into the market. we're beginning to discourage new entrance from coming in. cases set precedents; right? we'll discourage new interests from coming into the market; right? saying -- by trying to protect people at 9 it -- 92% market share. this is, on its face, ludacris. the guys at the doj, they a fine guys. i don't blame them. they are assigned, you go out win this thing, go, go, go, that's fine, but the senior guys who made the decision to bring this case, eric holder, all that, just incompetent.

[laughter] [applause] >> it is confounding when you think so much about it, but, you know, talking about the emerging view of e-books and what share of the market it has, and people say 20-25%, leveling of technology, where are we going? where do you see that? are you in agreement with the emerging view that's where we're going to be? >> no. i think we're on a plateau certainly. if you think about the number of new screens that are in the market place on an ongoing basis month by month, explosion of screens, and yet the growth of e-books is pretty much pegged, you know? pretty flat for us. i don't know across the board, but for us, that's dplat. that suggests new people reading on the screens, there's as many people who used to read on screens not reading on screens

anymore. it suggests there's a plateau. i have no idea what the next innovation is, and one of the frustrating things about, at least my job, is the pace of innovation is exhausting; right? there's something new every week. there's something new to consider. i think they'll be more innovations, but it's hard to imagine 25-30 years from now that we're still sitting here with 33% of the business being e-books and 66 being paper books, but we have been making our decisions for a long time now based on a -- look, what is dangerous for us is this sort of cataclysmic change; right? retail book sellers, you guys are superb in adapting. you proved that over and over again; right? here comes the big box, a chain next door first, then a big box next door, then the online seller. you guys adjust do that.

what you need is time to adjust and figure out the right square footage, the right product mix, time to adjust. what we need is a curve that looks like this opposed to a curve that is doing this with a sharp drop off. what we have so far, we got a pretty good curve; right? it is going okay. if it stays flat, i think we're in good shape, and if it declines slowly, i think we're in good shape. the problem is, you know, big sudden change, which right now, we have not had for quite a while. >> you know, there's been a lot of conversations about reinventing the way that publishers and book sellers do business. you know, reinventing the model of how we do things. what can you tells about macmillan's plans. a couple weeks ago, this was something in the air. can you say anything about what may be coming? >> uh, no. [laughter] sorry. >> okay, okay, i tried. [laughter] >> look, there's -- one of the

really interesting things that has been -- i keep seeing over and over now is i look at all the stuff, and at the end of the day, what people want in every format is, apparently, primarily, book length works generally that tell a good story with a great narrative. you know, that's not changed. the channels of distribution are changing like mad, half the people are reading is changing whether it's socially or not socially is changing, but the plain fact of the matter is most people still want a great book, and that is our area of expertise. i don't actually feel a need to put in film studios into, you know, the officers to make short films. i don't feel a need to invest tremendously in the enhanced e-book. i mean, we sold an enhanced

e-book thought, okay, let's test it out, spent a bunch of money, do an enhanced e-book, put all kinds of really cool stuff in it, and then we kept the price exactly the same as the unenhanced e book so you can have the enhanced one or the unenhanced one, and 7-to-1 people chose the unenhanced e-book; right? where's the logic of dumping an incredible sum of money into developing enhanced e-books. what we have to do is understand the consumer and what they want. you guys see it all the time in your stores; right? you understand what people want when they come in the stores. we have to have a way of understanding that and giving folks what they want. also, coming up with new and interesting things, and we have an author -- you know, our authors are incredibly creative people coming up with new and interesting stuff, which we're working with them with all the time, but as for, you know, are

we going to, you know drk i don't know, are we going to start a data based company to try and develop new software delivering on a word-by-word basis on the back of the glasses to read a book faster, no, no. [laughter] >> thank you. >> okay. [laughter] >> so -- expwr my -- >> [inaudible] >> just don't touch that. >> okay. okay. >> all right. >> okay. >> going to what publishers do well, the proliferation of people -- we are all barraged in the stores with people who are self-published or want to be doing it digitally and in print, but they think they can bypass traditional publishing, and you spoke to that a little bit, can you talk more because i think there's a lot of crap out there, you know? [laughter] >> yeah. >> the thing is --

[laughter] they -- ..

ins, tens of millions of books being published and one thing is for sure, not everybody can write a great book and very few people can. in a world with unfettered ability to publish a role of the publisher becomes more and more important than the role of the book seller becomes more and more important. publisher has got to -- what we do for a living is low canada huge amount of manuscripts that come in, decide which one the good books. you have an instinct will still built in 2 years and years experience and people who are good at it are hard to find and it is tough to do. you could crowds force it all right out, theoretically that is a possibility