Readersforum's Blog

December 4, 2012

How Mergermania Is Destroying Book Publishing

bookstore_ap_img  By André Schiffrin
The recently announced merger of Penguin and Random House, which is owned by Bertelsmann in Germany, sent shock waves throughout Western publishing circles. This new leviathan will publish a quarter of all books appearing in English, with annual sales of close to $4 billion, yet it is being treated by The New York Times and other media as a routine and perhaps even beneficial development.

Since the 1980s, when Random House was purchased by Si Newhouse’s Advance Publications, mergers have swallowed up most small and independent US and British firms. Publishing has been so dominated by the major conglomerates that another merger seems natural, the Times suggests. Indeed, others can be expected to follow. Rupert Murdoch has already expressed his disappointment at not having bought Penguin and his desire to buy another large firm to merge with HarperCollins, a subsidiary of News Corporation, which his family controls.

In a way, there’s a logic to this analysis. The mergers are occurring because book publishing has proved to be less profitable than the conglomerates had hoped. For most of the past two centuries, Western houses averaged a mere 3 percent annual profit. The new owners had hoped to raise the rate closer to 25 percent, to match those of their other holdings: newspapers, magazines and TV stations (even though these depend on advertising). But try as it might, publishing failed to churn out enough bestsellers.

Then came the competition from Amazon, which has entered the publishing market itself, hiring agents and editors to help it find bestselling authors. Amazon has also forced publishers to accept its pricing of e-books at $9.99—which has drastically reduced their profit margins and has the additional benefit for Amazon of weakening sales of the traditional trade paperback, the format publishers have counted on as a dependable earner.  It has even refused to list the books of houses that resisted its policies. Amazingly, the Justice Department has taken an extremely narrow view of the antitrust laws, prosecuting the publishers resisting Amazon’s pricing rather than the behemoth pressuring them.

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November 6, 2012

Book publishers have long been playing into Amazon’s hands

Penguin, soon to get into bed with Random House.

The proposed merger of Penguin and Random House might be too late for a publishing industry seemingly set on self-destruction.

By John Naughton

There’s something quaintly touching about the spectacle of two publishing conglomerates – Bertelsmann and Pearson – arranging for their book-publishing arms (Random House and Penguin respectively) to huddle together for warmth against the icy blasts coming from California (Google and Apple) and Seattle (Amazon). When the deal (which still has to be approved by regulators) was announced, there was the usual corporate guff about “synergies” – aka job losses – and about how the new partnership will be “the world’s leading publishing house”, which will give it “the upper hand” in its dealings with Apple and Amazon.

Ho, ho. In the long view of history, the Bertelsmann-Pearson deal will be seen as just the latest instalment of a long-running story: a tale of formerly dominant industries trying to prevent their venerable business models being dismantled by the internet. The early victims were travel agents, record labels, newspapers, magazines and broadcast networks.

In each case, the relevant executives could be heard loudly declaring that while it was indeed the case that the guys “over there” (gesturing in the direction of some other industry) were being disintermediated by the network, nevertheless the speaker’s own industry was special and therefore immune from technological contagion. Universities and book publishers have been arguing like this for quite a while. The Bertelsmann-Pearson deal suggests that the publishers have finally heard the tocsin. Universities haven’t got the message yet.

The funny thing about the publishing industry is that long before it was really threatened by the internet it was busily rearranging itself so as to make it more vulnerable to it. The process was vividly described by sociologist John Thompson in his book Merchants of Culture, the best account we have of what happened to publishing.

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November 2, 2012

Penguin merger minuses could be pluses for indies

Filed under: Publishers — Tags: , , , , , , — Bookblurb @ 6:01 am

Secondhand wisdom … a reprint of an early Penguin Classic

The book trade’s response to the creation of Penguin Random House has been largely despairing – but there is new hope for independents.

By Gavin James Bower

The reactions to news that the publishing arms of Bertelsmann and Pearson are merging, creating the biggest publisher in the world in Penguin Random House, can be summed up in one word: negative. There are, however, three strands to this glass-half-emptiness – and all of them, when you scratch beneath the surface, spectacularly miss the point.

First, there’s pessimism – evident in bleak industry forecasts right, left and centre based on the current state of the trade, in its worst shape in living memory. Print sales are falling – down 11% in 2011, the trend continuing in 2012 – while bookshops, both specialist and chain, are closing. Borders has gone, Waterstones is in turmoil, and independent booksellers the length and breadth of the country are vanishing. Publishers, meanwhile, are being squeezed by the last remnants of the High Street, struggling to make established margins pay. Last but not least, advances are falling, the midlist novelist looking like an endangered species and writing for a living no longer an option for the vast majority of published let alone aspiring authors.

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October 29, 2012

Penguin/Random House merger confirmed

Markus Dohle

29.10.12 | Benedicte Page

Pearson and Bertelsmann have confirmed that Penguin and Random House are to combine into a new consumer publishing organisation, Penguin Random House, with the merger expected to complete in the second half of 2013.

Bertelsmann will own 53% of the new venture and Pearson 47%; Bertelsmann gets five directors on the new board and Pearson four. Current Penguin chairman and chief executive John Makinson will be chairman of Penguin Random House with Random House chief executive Markus Dohle in the chief executive role for the new company.

However the joint venture will exclude Bertelsmann’s trade publishing business in Germany and Pearson will retain rights to use the Penguin brand in education markets worldwide.

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March 2, 2012

How to Counter Amazon: Create a One World E-Book Alliance

By Javier Celaya

During my presentation earlier this month at the If Book Then conference in Milan, I proposed that European publishers create a joint platform to compete against Amazon. Although I admire Amazon for its culture of innovation and superb customer service, I do not consider it beneficial either for society (readers) or any of the entities involved in the book industry (publishers, bookstores, libraries, etc.) to allow one company to take on such a leading position in the cultural world and be able to determine its future at its own whim. A diverse variety of online bookstores would guarantee more competition, resulting in better services and a broader range of content for all readers.

Although the creation of a joint venture is not an easy task, I am pleased to see that my suggestion was not taken as entirely ludicrous. Last week, the main Spanish financial daily – Expansión – published an article announcing that Grupo Planeta, Telefónica and Bertelsmann are planning to create a common platform to counteract Amazon’s growing leadership position. In the event of any potential criticism by those who tend to disapprove of risky ventures, I take this opportunity to express my support for this strategic decision since these three companies will undoubtedly be confronted with a remarkable challenge.

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