Macmillan, Inc.

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Macmillan, Inc.

55 Railroad Avenue
Greenwich, Connecticut 06830-6302
U.S.A.
(203) 862-7500
Fax: (203) 862-7712

Private company
Incorporated: 1896 as The Macmillan Company
Employees: 9,400
Sales: $1,070 million
SICs: 2731 Book Publishing

Macmillan has been a distinguished name in publishing for more than 150 years. Macmillan, Inc. is the American offspring of the British publishing house founded in 1843 and now known as Macmillan & Co., Ltd.; the two firms have been entirely separate since 1951, sharing only the names of their Scottish founders and a hundred years of book publishing history.

Macmillan, Inc. has prospered mightily in the years since its independence, building especially strong positions in the textbook and children’s book markets in the United States. After assembling a diverse portfolio of subsidiaries in the 1960s Macmillan fell victim to the machinations of rogue publishing baron Robert Maxwell shortly before the latter’s death and the resulting collapse of his empire in 1991. A profitable and well-managed company, Macmillan is likely to be sold intact by Maxwell’s bankruptcy administrators and resume its place among the leading American publishers.

Macmillan, Inc. had its origins in the English publishing firm established in 1843 as D. & A. Macmillan. Daniel and Alexander Macmillan were brothers born to the family of a Scottish farmer in 1813 and 1818, respectively. After completing their primary school education the two boys were set to work, Daniel for a bookseller and binder in Irvine, Scotland, while Alexander taught school for several years before joining a firm of Glasgow booksellers. In 1833 Daniel Macmillan went to work at a bookstore located near Cambridge University that specialized in classical authors. He soon gained a reputation among university students as a well-read, reliable guide to recent publications. After a brief stint with a London bookseller, during which time Daniel was joined by his younger brother, the Macmillans opened their own shop in London and in 1843 published their first book, The Philosophy of Training, a tract that called for the establishment of additional teachers’ colleges in Britain.

As the title of their initial volume might suggest, the Macmillan brothers were young men of sober and religious tastes. Daniel in particular considered publishing to be much more than a business venture. “You surely never thought you were merely working for bread!” he once wrote to a fellow book dealer. “We booksellers, if we are faithful to our task, are trying to destroy … all kinds of confusion, and are aiding our great Taskmaster to reduce the world into order, and beauty, and harmony.” On the other hand, the Macmillans were also practical men who earned a living from the sale of books, and they operated their publishing firm with a judicious mixture of idealism and market savvy. As Charles Morgan noted in The House of Macmillan, Alexander once commented of one of the firm’s more high-minded authors, “had we had only such books as his we could not have lasted three years.”

Before that lesson could be learned, however, D. & A. Macmillan found itself near bankruptcy. The brothers closed their London business after only a year and with borrowed money managed to buy a retail shop back in Cambridge. The source of this borrowed capital was Archdeacon Hare, a Cambridge churchman with whom Daniel Macmillan had become friends during his first tenure in Cambridge. Through Hare and the latter’s brother-in-law, the theologian F. D. Maurice, the Macmillans became supporters of a reform movement known as Christian Socialism. Most of their early publications reflected the liberal sentiments of that group with respect to education and church reform. In particular, the Macmillans shared the Christian Socialist commitment to universal education in Great Britain. The firm, as a consequence, soon became (and remains to this day) a leading publisher of textbooks and other educational material. This pedagogic emphasis was also encouraged by Macmillan’s location near Cambridge University, many of whose students and famed scholars frequented the Macmillan shop on Trinity Street and were later published by the firm.

The first noteworthy success of Macmillan & Co. (the name adopted in 1850) was the 1855 publication of a novel by Charles Kingsley, Westward Ho!. Equally important was Tom Brown’s School Days by Thomas Hughes, published in 1857; both authors were reform-minded writers introduced to the Macmillans by Archdeacon Hare. After Daniel Macmillan’s early death in 1857 his brother Alexander assumed the direction of Macmillan & Co., a position he would retain for the next 32 years. Encouraged by the firm’s success in the fiction market, Alexander opened a second branch in 1858 at 23 Henrietta Street, London. Alexander Macmillan was a considerably more sociable individual than his brother had been, and the shop in Henrietta Street became the setting for “feasts of Talk, Tobacco and Tipple” held every Thursday night and attended by a number of England’s most brilliant writers. Tennyson, T. H. Huxley, and Herbert Spencer were among the regular guests at these intellectual “feasts,” and many of them would later contribute to the success of Macmillan’s Magazine, a monthly journal begun by Alexander Macmillan in 1859 that remained a pillar of mid-Victorian culture until its demise in 1909.

Macmillan & Co. prospered under Alexander’s astute guidance. Its stable of authors comprised an exceptional gallery of late nineteenth-century English novelists, including Lewis Carroll, Matthew Arnold, William Gladstone, George Meredith, Walter Pater, Christina Rossetti, Lord Tennyson, Thomas Hardy, W. B. Yeats, and Rudyard Kipling. Macmillan & Co. continued its tradition of providing inexpensive educational texts with a number of long-running series, including the Science Primers, edited by Huxley, English Men of Letters, and Literature Primers. In addition to Macmillan’s Magazine, the company also published The Practitioner for the medical profession and Nature, the prestigious science journal still read around the world. To edit and publish these many projects, Alexander Mac-millan called on the help of his son, George A. Macmillan, and the two sons of his brother Daniel, Frederick and Maurice. Upon Alexander’s retirement in 1889 it was Frederick Macmillan who succeeded him as chairman of the limited partnership.

In the meantime, the seeds of the American branch of Macmillan had been sown. Alexander Macmillan recognized the potential importance of the American market as early as 1859, when he retained Scribner & Welford as agents for Macmillan books in the United States. In 1867 he spent eight weeks in the United States, where he met President Grant as well as distinguished men of letters. During his visit he wrote back to a colleague that “a great international publishing house is possible, and would be a good plan to be realized.” He therefore set up a New York branch office as headquarters in the United States, hiring as its director George Edward Brett, a young Englishman then working for a London distributor. Brett opened the Macmillan office at 63 Bleecker Street in August of 1869, acting primarily as a marketing and sales director for Macmillan titles throughout the United States. (The New York office did no publishing of its own until the late 1890s.) In 1874 Brett’s son, George Platt Brett, joined the firm as a traveling salesman, where he acquired the experience that enabled him to effectively lead the firm after the death of his father in 1890. Remarkably enough, the Bretts remained in control of the American offices of Macmillan from its creation in 1869 to the early 1960s, a span matched by few other families in the history of United States business.

George P. Brett was an ambitious as well as capable man. After his father’s death he was asked by the Macmillans to assume direction of the New York office, but he refused to do so, proposing instead that he be made partner in a new American corporation. Brett’s position as the key man in their American markets left the Macmillan family with little room to maneuver, and in 1896 the Macmillan house was divided into two newly established entities, The Macmillan Company in New York and Macmillan & Co., Ltd., of London. The two companies were both controlled by the Macmillan family (which retained about 61 percent of the American company’s stock until the 1951 split); they freely shared titles and authors and made use of the company’s worldwide network of sales branches established in the early twentieth century in such ports of call as Bombay (established 1901); Toronto (1904); Calcutta (1907); Melbourne (1912); and Madras (1913). Nevertheless, the creation of a separate company in New York was destined to have profound implications for the house of Macmillan, as the American organization outstripped its parent and eventually required complete independence at mid-century.

Fueled by George Brett’s inexhaustible energy and detailed knowledge of every aspect of the book business, The Macmillan Co. grew steadily to a position of prominence in American publishing by the 1930s. The publication of Winston Churchill’s novel Richard Carvel in 1899 was the first of many successes in the general (or trade) market for Macmillan, followed soon after by Jack London’s The Call of the Wild and F. Marion Crawford’s Sacracinesca. More typical of the Macmillan tradition was its continuing commitment to the educational field, where it published both textbooks for general school use and reprints of classic works for the growing college market. The standardized nature of educational texts made it possible for Macmillan to become the first American publisher to open branch offices across the country, each of which was provided with its own warehouse inventory of titles. (Previously, publishers had shipped directly to bookstores from a single national warehouse.) Between 1895 and 1909 such semi-independent branches were established in Chicago, Boston, Atlanta, Dallas, and San Francisco.

In addition to its trade agreements with Macmillan of London, the Macmillan offices in the U.S. built a vigorous business in the Far East prior to the second World War, where it sold upwards of $750,000 of books annually before the commencement of hostilities in the Pacific.

A third George Brett assumed the leadership of Macmillan in 1936. George Platt Brett, Jr., who started work at Macmillan in 1913, became president in 1931 and, upon the death of his father (then chairman) in 1936, became the company’s chief executive officer. Brett found it difficult to duplicate his father’s success; Macmillan was vying for the lead in United States publishing in terms of both titles and sales (approximately $5 million) in the mid-1930s, and the loss of its business in Asia was a significant blow.

The publishing industry as a whole was undergoing rapid change. The introduction of cheap paperbound books vastly increased the potential market for books and placed an emphasis on high-volume, low-cost publishing methods. To this new environment, both larger and more specialized than in years past, Macmillan brought a number of assets and certain decided liabilities. Its strength in the educational and college markets would provide the company with a solid revenue base for years to come, as America’s growing population increasingly considered higher education to be a necessity rather than a luxury. Further, the company’s 1919 creation of a children’s books department gave Macmillan a head start in this important market as well. On the other hand, Macmillan was slow to appreciate the impact of paperbacks on the publishing landscape and in general did not adapt well to the mass merchandising techniques required by the newly enlarged market for “trade” books (those sold in retail bookstores).

As a result, after a brief period of preeminence in the trade market (highlighted by the publication of the 1936 blockbuster Gone with the Wind) Macmillan soon returned to its traditional position in the middle of the field of United States trade publishers. Of its $13.2 million in sales in 1950, approximately two-thirds were generated by the educational and college departments, with trade and medical books making up the remainder. In the following year Macmillan of London agreed to sell its 61 percent share of The Macmillan Co.’s stock on the open market, thus completing the American company’s separation from its English parent. The two companies continued for some years to use a common international sales force but at present have no formal ties.

The booming 1950s should have been a decade of tremendous growth for Macmillan. The American population grew wealthier and younger, and great numbers of its young people not only finished high school but went to some institution of higher learning as well. While the company’s primary strengths lay in educational texts, however, Macmillan’s sales increased from 1950’s $13.1 million to $19.1 million in fiscal 1960, a relatively modest increase given the circumstances. Feeling the pressure of intense competition on all fronts, Macmillan did not object when Crowell-Collier Publishing Company began buying up its shares in late 1959, and in December 1960 the two companies were merged under the Crowell-Collier name. Cro-well-Collier, incorporated in 1911 but active since 1883 as the publisher of Collier’s magazine, was then about twice Macmillan’s size in terms of revenue, the bulk of it from radio stations and Collier’s Encyclopedia. The merger provided Macmillan (the name was reassumed within a few years) a much needed infusion of cash and, more importantly, the leadership of Raymond C. Hagel, who became CEO in 1963. Hagel replaced Bruce Y. Brett, the last of that family to serve as president of Macmillan.

In his 17-year tenure as Macmillan’s chief, Raymond Hagel engineered the company’s transformation from a sleepy publisher of textbooks to an enormous conglomerate with additional interests in retail sales, language schools, musical instruments, printing, and information services. Macmillan’s growth was startling when compared with that of previous decades: from the merged companies’ 1960 sales of $54 million, Macmillan went over the $400 million mark a mere twelve years later and boasted sales of about $600 million annually by 1980. Among its numerous acquisitions were the Brentano’s chain of retail bookstores; the myriad language schools of Berlitz Inc.; Standard Rate & Data Service; C. G. Conn, maker of musical instruments; and Gump’s, the San Francisco-based specialty store. The diverse portfolio was typical of conglomerates built in the 1960s and 1970s and, also typically, did not enjoy a long life span. Macmillan’s patchwork creation was dismantled by the next generation of executives, T. Mellon Evans and his son E. P. Evans.

When Evans gained control of Macmillan in 1980 (via the purchase of stock) he was dissatisfied with the rate of return earned by the company’s far-flung assets. He fired Hagel and sold off most of Macmillan’s businesses outside the areas of publishing, instruction schools, and the fast-growing information services division. After the painful recession of 1981-82, which brought company revenues down as far as $430 million, the company responded to Evans’ strategy. Both sales and net income rose briskly throughout the 1980s, with publishing entrenched as the backbone of corporate revenue (about 46 percent) and most of the publishing dollars garnered in the educational markets. The instructional schools were also solid, averaging around 20 percent of revenue. The star of Macmillan’s line-up, however, was unquestionably its cluster of information service companies, which by 1987 were contributing profits equal to the publishing division ($62 million) on half the revenue dollars. The information services segment included firms engaged in direct marketing, trade journal publishing, industry directories, and Standard Rate and Data Service.

In mid-1988 Macmillan became entangled in one of the stranger episodes of twentieth-century business history. As happened so often in the 1980s, Macmillan and its attractive assets became the object of a bidding war between three heavyweight corporate raiders—the Barr brothers, Kohlberg Kravits Roberts & Co., and the Czech-born British media mogul Robert Maxwell. After three months of struggle Maxwell succeeded in gaining control of Macmillan for $2.6 billion—about $1 billion more than the company was generally thought to be worth. Macmillan executives threatened to quit en masse rather than work for Maxwell, the mysterious proprietor of scores of companies in Europe and North America, including the Mirror Group newspapers in England, several huge printing firms, and the Official Airline Guide, bought for $750 million at about the same time as the Macmillan deal.

Maxwell then died under mysterious circumstances, further muddying the future course of Macmillan. Shortly after Maxwell’s body was found floating in the ocean near his yacht in late 1991, a long line of creditors discovered that his mighty empire was a kind of financial optical illusion, a labyrinth of publicly traded companies owned or controlled by Maxwell’s private family concerns, which in turn had used loans and pension funds from the public corporations (such as Maxwell Communications Corporation-MCC, the parent company of Macmillan) to secure loans of their own. In the end, it appears that among other bizarre maneuvers Maxwell was siphoning money from MCC to help his private companies buy MCC shares in the hope that such purchases would bolster the public company’s weak stock price and thereby calm his bankers, to whom he had pledged MCC stock as collateral.

As the authorities continue to try to untangle the financial and legal mess uncovered by Maxwell’s death, Macmillan’s future status remains unclear. MCC was placed under the joint administration of United States and English bankruptcy courts acting with the help of Price Waterhouse, the accounting firm, and was to be sold off piecemeal to repay some of its $2.5 billion in debt and the hundreds of millions of dollars fraudulently transferred by Maxwell. From this debacle Macmillan, Inc. should emerge in good order and nearly whole. Although reliable figures are not available, there is no reason to think that Macmillan’s core of educational publishing and information service companies is not as strong as it was in the late 1980s. One possible buyer is K-III Holdings, a Kohlberg Kravits Roberts investment company headed by William F. Reilly, the last pre-Maxwell president of Macmillan. Whoever ends up with control of Macmillan, however, will probably have to do without its profitable Berlitz subsidiary—57 percent of that company’s stock was pledged as collateral for Maxwell family loans and is now part of the international squabble over who gets what of the Maxwell empire.