Opinion

Jack Shafer

Mergers alone won’t save book industry

By Jack Shafer
October 26, 2012

News of merger talks between book publishers Random House and Penguin has shaken loose alarmist responses from the book industry: howls from agents and authors that they’ll have fewer publishers to pitch to, and hence their incomes will fall; warnings that editors and marketers face huge layoffs; fears that reducing the number of big publishers from six to five will bestow upon the survivors unprecedented cultural hegemony.

Somewhere somebody must be describing the impending merger and the increased concentration of book power in fewer New York hands as an assault on democracy.

If the admonitions seem familiar, it’s because they’ve been sounded for a half century. The book industry has been consolidating steadily since the early 1960s, when independent publishers–many of them run by families–swarmed. A July 31, 1960, New York Times article (subscription required) chronicled that era’s merger-mania, as independent publishers Holt, Rinehart, and Winston had hooked up to create a new company—Holt, Rinehart, and Winston—that sounded like a law firm. In other transactions, Random House had acquired Knopf and Crowell-Collier had taken Macmillan, presaging the coming days when conglomerates would eventually swallow the industry’s major players.

“The mergers have, in some cases, meant consolidation of clerical and shipping staffs,” the Times article reported.

Yet the number of big publishers has remained fixed at six since the mid-1980s suggesting that for all the shouting, the consolidation of the industry has been exaggerated.

Some publishing executives are on record advocating greater consolidation. In 2009, for example, Arnaud Nourry, head of Hachette (then the world’s No. 2 publisher by sales) called consolidation the best way to compete with Barnes & Noble, Amazon.com, Apple, and Google, all of which have been vying to become the digital tails that wag the publishing dog. (See this recent Bloomberg Businessweek story about Amazon’s hardball tactics against publishers.) Nourry and other publishers regard bulking up with mergers and acquisitions as a business offensive. But from my vantage point, it looks like a defensive crouch that says We’ve got the books, Amazon, you got bupkis, and we’re going to set the terms for the digitization of the book industry, not you!

Like other industries, the big publishers feel the pull of the “consolidation curve,” the term of art devised in this 2002 Harvard Business Review article to describe the trend toward greater and greater consolidation of mature companies. If individual industries don’t consolidate, it’s because they’ve evolved into something new (from buggy-maker to automaker) or they’ve just disappeared.

Nobody thinks book publishing will disappear, especially given the ubiquity and ease of e-books. After all, even in a world of cheap self-publishing, somebody has to find and market books to the masses. Recognizing this business reality (and good for them) is Penguin, which recently purchased the self-publishing company Author Solutions for $116 million. But the long-term prognosis for books is still not super. A New Yorker writer was probably right to fret in 2007 that pleasure reading may “one day be the province of a special ‘reading class,’ much as it was before the arrival of mass literacy, in the second half of the nineteenth century.” Indeed, the industry has fallen into a stagnant funk. A year ago, the Association of American Publishers claimed as positive news that 4.1 percent more books were sold in 2010 over 2008. 4.1 percent! That kind of growth kills.

According to the Harvard Business Review wizards, a company that possesses a terrific first-mover advantage, a technological edge, or a patent portfolio strong enough to protect it from the competition can build scale and dominate its sector. Penguin was that sort of revolutionary company when publisher Allen Lane founded it in the mid-1930s. Lane intuited correctly that there was a market for quality literature printed inexpensively in paperback form. But his success inspired so much instant competition that his first-mover advantage was fleeting, and he couldn’t patent the paperback.

The Penguin-Random House merger would theoretically give the new company more leverage in the pricing fights with Amazon et. al. But as important as that struggle for control might be, it still leaves Penguin-Random House operating in a moribund and hidebound enterprise that looks and acts like something out of the 18th century. Book publishers are playing against a stacked deck. They don’t own the distribution channels, they don’t own the stores, they don’t control any proprietary technologies or patents, they’re terrible at inventing new products, and the market value of their brands is dwindling. Plus, their most valuable properties, their writers, are free agents who don’t really belong to them.

This merger—and other book industry consolidation to come—is less about winning than it is losing more slowly.

******

“Random House & Penguin Publishers are negotiating a merger … please let the new company be called Random Penguin,” tweeted Shara Morris today. I can’t beat that! Send email to Shafer.Reuters@gmail.com. See also, the right hemisphere of my personality on Twitter. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns.

PHOTO: Leona, 7, poses inside a labyrinth installation made up of 250,000 books titled “aMAZEme” by Marcos Saboya and Gualter Pupo at the Royal Festival Hall in central London July 31, 2012. REUTERS/Olivia Harris

Comments
3 comments so far | RSS Comments RSS

Would I trade my books – the ones with pages that you can turn – for one of the electronic gadgets? No. I volunteer at a non-profit thrift store and am in full charge of the book section – the “book lady” – and it is wonderful to see the way nooks are flying off the shelves. Not only the romance novels and westerns, but the children’s books and those for teens and pre-teens.

The most decorative items in my home are books – bookcases full of them with all different kinds of subjects. Worlds that I can touch in my mind – facts that enable me to make good judgments on many things – some for just escape reading – a world of words and thoughts. I can underline phrases that have meaning to me – paragraphs that are important to me – go back to one that touches on a subject or program of interest.

The most horrifying thing that is happening with books is the sanitizing, the homogenizing of them – Mark Twain’s “Huckleberry Finn” for example. And now they want to change “The Night Before Christmas” by Moore and take away Santa’s pipe! Will Santa next have no belly that shakes like jelly?

Posted by AZreb | Report as abusive
 

Of all the publishing and book distribution mergers, this one has to be the most indicative of our times:

Waterstones and Amazon’s Kindle turn a new chapter
http://www.bbc.co.uk/news/technology-200 46568

Posted by matthewslyman | Report as abusive
 

The ONE THING I think publishers could do to really save themselves is to take control of distribution (especially ebooks). They MUST start selling directly. The reason Amazon is beating the hell out of them is that they have access to the millions of readers emails and use it to promote other books to them. Publishers have exclusive right to the content…the thing that readers will buy…why don’t they sell direct? They have turned over the keys to their buyers to others…and have no direct connection to them…is it any wonder they are in such dire straits?

Posted by Anonymous | Report as abusive
 

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