The If-Only Lawsuit

From Kristine Kathryn Rus ch:

The United States Justice Department is suing to stop the big merger of Penguin Random House and Simon & Schuster. That I can write about without a lot of research, because I’ve been following this merger for a long time.

. . . .

However, this suit is worth mentioning…

Because it’s fifteen to twenty years too late. The Authors Guild noted that in their response to the news of the DOJ suit:

Today’s decision by the DOJ was unexpected given that so many other major mergers and acquisitions in the publishing industry have gone through recently and over the last few decades with nary a raised eyebrow, leaving us with only a handful of companies dominating the industry.

Yeah. Exactly. Those of us who suffered through the previous mergers know what bullshit the PRH and S&S are feeding the press. No effect on competition? In the 1990s, my books routinely went to auction, and we always got a higher price for the books than the initial offer.

By the end of the decade and into the early part of this century, there was no one to have an auction with. The book had to be a potential (and obvious) blockbuster. One of my editors backed out of a possible deal when she heard that another editor at a different imprint in the same gigantic merged company wanted the book.

Oh, my editor said to me, she can pay you more, and their imprint will probably take over mine in a year or so.

Guess what? My editor was right. Eighteen months after the merger, the “overlapping” departments and imprints were cut as a cost-saving measure, putting my former editor out of a job, along with everyone else on her team. The cuts and trimming, for the sake of the stockholders, mostly hit the most experienced people in the purchased company (not the one that did the buying) because experienced folk are paid more.

. . . .

All the promises in the world mean nothing when large companies merge.

I read the complaint for the suit the day the suit was announced. The complaint is worth reading because, if nothing else, it’s a what-if. What if the DOJ had been on this as the mergers started twenty years ago? What would the traditional publishing landscape look like now?

I can tell you: It would look completely different. Instead of the traditional part of the industry being dominated by five large conglomerates, the traditional part of the industry would look the same or better than it did in the early 1990s. There would be a lot of publishing houses, a lot of working editors, a lot of imprints, and a lot of competition.

Indie wouldn’t be as attractive for many big name writers because those writers would still be working. Just this morning, I discovered that a writer whose work I loved decades ago has gone indie. Why? Because he hasn’t been able to get anyone to buy his books for…you guessed it…twenty years.

This happened to a worldwide bestseller who hit the top of the major lists for decades and whose work was made into three feature films. He couldn’t sell another book because his genre was “passé.” His genre? Horror. No one at the big houses would touch horror twenty years ago, and even the smaller ones looked askance at it.

If anyone had any brains, they would have seen that the genre would become as big as it is now. Right now, the people greenlighting movies and TV shows and buying books are the generation who grew up reading R.L. Stine. Of course, they want more horror. It was on the horizon.

The multitudinous publishing houses of the 1980s and 1990s could have afforded to play the waiting game—at least one or two of them, or maybe even three of them. Even better, the editors there who would have had long careers would have seen the writing on the wall and pushed out reissues of this writer’s books as the horror boom started.

The five large companies that exist now have no idea what they have in inventory. They have no institutional memory because they’re really not an institution. They’re parts, slammed together to make a great stock portfolio, so that they can be traded and bring in profits for the stockholders. Forget the books, forget the product, forget the employees, forget the readers. The books literally are widgets that are, in the minds of the people running the company, interchangeable.

If this weren’t true, then Simon & Schuster would not be up for sale. ViacomCBS would keep it and mine the inventory for projects for various TV, streaming, and movie projects, not to mention gaming rights and other things. A book publisher owned by a media company? Sounds like a surefire way to make even more money, right?


There’s no vision here.

And the suit by DOJ is as stuck in the past as that little dream of mine was. Yes, this merger by PRH and S&S is truly anti-competitive, just like all the other mergers were.  And the impact, should the merger go through, on the traditional publishing industry will be profound…although not as profound as all of the mergers that preceded it.

What has changed is the rise of indie publishing. Writers do have somewhere else to go. They can publish their own works. They can reach the same readers that these large companies can, because these companies are no longer interested in publishing books. They’re just manufacturing widgets.

One very ironic thing that has emerged during the entire discussion of the merger is this: For about a decade now, companies like PRH and S&S denied that indie writers in any way contributed to the publishing industry. “Flotsam and jetsam” were some of the words floated around about indie publishing; “garbage” was another.

Now, though? Now that they need us? We’re part of their defense.

Oh, no, the attorneys for PRH and S&S have been saying all year, we’re not in control of the market. See this large thriving market over here? Those indie writers? They’re part of the industry too.

. . . .

The traditional publishing industry, as I have written many, many, many times, is broken. New writers can no longer anticipate having a career in the traditional publishing industry, let alone making a living at writing. And even a lot of the big guns are watching their income fade because of the policies and behaviors of these megacorporations.

Sure, there are always a handful of books that make millions. But once upon a time (twenty-five years ago), there were hundreds of books that made their authors millions. Enough books that Publisher’s Weekly devoted an entire month of issues every spring to cover the sales figures, never going below 250,000 for hardcovers and 500,000 for mass market paperbacks.

Link to the rest at Kristine Kathryn Rusch

Here’s a link to Kris Rusch’s books. If you like the thoughts Kris shares, you can show your appreciation by checking out her books.

18 thoughts on “The If-Only Lawsuit”

  1. Her anecdote about the worldwide bestselling horror author who’s not been able to get published for the last twenty years made me think of your previous posting: “Winning Attention with That Book Proposal”. Maybe when not slapping people down with the message that a book would only sell two copies, the COO was deciding which genres were now passé?

  2. The books literally are widgets that are, in the minds of the people running the company, interchangeable.

    Exactly. They are also widgets in the minds of zillions of consumers. Consumers want widgets. Producers make widgets.

    The market is large enough to also accommodate those who think each and every book is special. There is no reason to think one size must fit all.

    • Exactly. Myself, I think that I am better off (as a reader) with a million or so publishers out there. Decent science fiction / fantasy became impossible to find fifty years ago, and Baen could not possibly fill the gap.

      These days, my TBR pile is growing faster than I can consume it. I like having a first world problem!

      • Exactly. Myself, I think that I am better off (as a reader) with a million or so publishers out there. Decent science fiction / fantasy became impossible to find fifty years ago, and Baen could not possibly fill the gap.

        But books are widgets! They’re all the same! It doesn’t matter who writes them, or who publishes them, or what they’re about. They have no more individuality than bricks, for Elliot123 says so.

    • Exactly. They are also widgets in the minds of zillions of consumers. Consumers want widgets. Producers make widgets.

      I’d like to meet any one of these zillions of consumers. It has yet to happen.

      Every reader I have ever met or heard of was not looking for just any old book, but at minimum, a book of a specific type on a specific topic (if nonfiction) or in a specific genre (if fiction). Usually they were much fussier than that (like, for instance, Writing Observer in this very thread).

      If books were as interchangeable as you keep insisting, there would be no point in either writing or publishing new ones. All those zillions of consumers could keep quite busy for the rest of their lives picking random titles out of the backlist.

      • Try taking a half step back and instead of looking at the market from the supplier point of view look at it from the usage point of view.

        First of all, there is no single “book” market.
        There is rather a collection of different markets that use the same technologies (pbooks, ebooks, websites, etc) to serve different customer bases. If you only look at the distribution medium (dead tree pulp codex, for example) then no, “books” won’t look to be fungible. Textbooks can’t (usually) substitute for one another nor can a Nora Roberts novel replace an art book. However…

        Things have changed from the days when a book publisher had an educational division, a fiction division, a reference book or catalog division, and a printing plant or two. Publishing businesses have specialized and are consolidating by consumer market. And within some of those markets books *are* broadly fungible. As you said yourself, in certain sectors consumers are in fact looking for whatever title is available and this has been so since last century. Those sectors are the genre markets, plural. Now, the literati and academics don’t like to deal with genre, but genre is where the non-institutional money is found. And while literati and academics don’t like genre (or to be most specific *entertainment* reading) publishers like money.

        Thus we come to the specific business that is at the heart of the OP and the DOJ’s misguided lawsuit. It isn’t about the non-funglible markets like education, reference, news, etc. But about publishers of *entertainment*. And that is what you need to focus on.

        Entertainment books, those are fungible now.
        They were even more fungible *before* the last three technological disruptions hit the entertainment book market, when “fresh produce” and jobbers and “out of print” were the norm. In those days consumers bought whatever they could find that caught their fancy. Because if tbey didn’t it could be gone in a week never to return.
        Shoppers were conditioned to buy “close enough” because it was that or do without.
        That is how genre was born. And why genre books are generally fungible.

        Now, times have changed but genre is entrenched because technology has exploded availability beyond what any single shopper can encompass. Also because the genres have evolved and specialized and spawned subgenres. And shoppers decision trees more often than not follow their tastes in genre, subgenre, and *then* author.

        Entertainment book fungibility isn’t absolute but it is real.

        And, worse, it isn’t constrained to books.
        Which is where the OP and the DOJ go off the rails: the defining feature of the entertainment book market isn’t the format (books) but the function of the widget (entertainment).

        Follow that line of analysis and lots of things become clear: Why is the entertainment book business stagnant?
        – Because entertainment shopper options have exploded since the internet became mainstream. Video evolved from theaters to theaters plus broadcast, to add cable, tape rental, tape sales, DVD sales and rentals, on-demand cable, to digital rental and sales (even on mobile platforms), to risk free smorgasboard on-demand subscriptions. Gaming has evolved from pixelated tennis to deeply immersive role playing narrative built off “bibles” from top selling autbors as well as creatives who don’t even bother with books to bring tbeir visions to the masses.

        – Because creatives have options beyond the tradpub query go round or agented Hollywood screenplays. Over decades video has evolved from buying and adapting narratives to work for hire scripting teams. Entire swaths of video games are built off unified narratives; RPGs, action adventure quasi-movies, shooter campaigns, and even 2D indie platformers. (Fans frustrated with Martin’s endless delays in getting out the last volumes of his SONG OF ICE AND FIRE series can be excused for grinding tbeir teeth at hdaring of his involvement with developing four new video series but most will likely through their arms in disgust when THE ELDEN RING video game hits early next year. He created the wofld, magic system, backstory and core narrativdpe. He is hardly alone. R.A. Salvatore for one has been doing the same for a couple decades now.) Even worse for tradpub, a lot of tbe younger creatives are taking their talents and visions straight to the video, gaming, and especially, Indie worlds.

        – Finally, genre shoppers can get their preferred type of entertainment in abundance from video, gaming, and direct from Indie authors, as well as the eternal backlist of known good works. Tradpub is no longer mandatory or even necessary.

        New century, new rules.
        Stagnant sales, declining content suppliers (and declining quality of submissions), increasing competition from way bigger ($$$) businesses.
        Are those signs of a healthy business?
        Rather those are the signs of a business that needs to consolidate just to survive.
        Fungibility is the least of tbeir challenges.
        Relevance is the biggest.
        And DOJ posturing will help nothing.

      • Stop by the spinning book rack in any airport.

        While the connoisseur of fine books sits bored in a middle seat, the widgeteer is immersed in the “something to read on the plane” that he grabbed ff the rack. Something, anything, a widget.

  3. “If this weren’t true, then Simon & Schuster would not be up for sale. ViacomCBS would keep it and mine the inventory for projects for various TV, streaming, and movie projects, not to mention gaming rights and other things. A book publisher owned by a media company? Sounds like a surefire way to make even more money, right?

    Nope. ”


    Nope indeed but not the way she sees it.
    VIACOM is doing tbe right thing for themselves in getting out of corporate trade publishing, just as Torstar and Pearson were right. The world has changed.

    What KKR is missing in this particular case is a basic problem of trapub: ROI.
    Book publishing is low margin to start with and the BPHs are minimizing the benefits of the higher margin, low upfront investment format to protect the lower margin pbook formats.

    VIACOMCBS is looking to ditch S&S because of those low margins and near zero growth rate. Their alternatives are to spin out and IPO S&S (good look with that) or to sell off their catalog and close up shop. Or to sell off the whole operation and let somebody else scavenge it. When they put it up for sales they were looking to get $1B, a bit over one year’s gross, and about a decade of net. Compared to their needs (on the order of $4B a year vs a competition spending $7-17B a year) a unit that nets $100M a year is chump change. They actually lucked out in playing Bertelsmann and Newscorp against each other to get double the value of S&S. And now the clueless idealists controlling the DOJ are looking to torpedo their windfall.

    The BPHs haven’t been merging and downsizing solely out of greed or evil intent. The tradpub business is consolidating out of necessity. It is a stagnant market and has been since the turn of tbe century. And they are out-classed by alternative entertainment markets.

    KKR is overestimating the value to tbe video market of book publisher catalogs.
    In tbis matter KKR is dreaming of an alternate universe where the tradpubs didn’t consolidate and the market is still balkanized into a few dozen small businesess. That was a viable model in the days when TV was three over the air networks and genre magazines prospered. Days when one-million-dollars! was big money.

    She knows tradpub.
    But I’m not sure she knows 21St century video. Or gaming.

    Today, all of US trade publishing ($14B) is barely 60% of what NETFLIX alone *spends* on original content ($17B). Amazon spends $7B. CBSVIACOM aspires to maybe spend $4B. Streaming is a big bucks business: Netflix grosses $25B. Disney+ alone (without Hulu, Sky+, or Espn+) grosses over $10B. The total US streaming market market today runs well over $150B. Ten times trade publishing. There is so much money in streaming tbat Amazon paid $250M for the LOTR brand and commited to an extra billion for a five year prequel series. And then tbey bought MGM outright for $9B. Considering MGM owns the STARGATE franchise, thay will almost certainly bring a bigger return.

    Disney bought the entire LUCASFILM empire and all of Marvel Entertainment for $4B a year. And what did Disney do with the hundreds of STAR WARS books? Ignore them. Not a one is canon. They didn’t pay for the books but for the *brand* and the extant movies. Marvel? The movies are inspired by the comics but not adaptations. They’ve averaged a billion a year.

    Those BPH copyrights KKR (and Shaztkin prize) are worth a lot but “a lot” is relative. And in tbe world of video and gaming (the two highest growth creative businesses) book IP isn’t worth much. Too much competition. Video is its own thing and the tech/video giants have learned acaptations are a bigger gamble tban originals. And Netflix in particular has learned that since video is a global business it pays (big time!) to tap creatives from all over. More competition for the old media companies less value for their hoard.

    Also, Copyrights protect specific expressions, not ideas. And since moving a narrative from text to video requires massive retooling, it is just as easy to pastiche it as adapt it. No need to spend on licensing. (Consider THE ORVILLE, a better STAR TREK than anything VIACOM is cranking out. VIACOM is so cash strapped tbey considered selling it but nobody bit. It’s too easy to pastiche. Or how about KNIVES OUT? Very Agatha Christie but its own thing. And successful enoughto spawn a sequel. Possibly a franchise.)

    (BTW, anybody with access to NETFLIX may want to check out the first scene of ARCANE. Its creators come from neither from Hollywood not tradpub, or the established animation worlds, but rather the gaming world. Entirely different sensibilities and narrative language. And it does more to set tone and mood and define its world with one scene than entire books.
    I can’t call it educational because what they do can’t be replicated by prose. But it raises the bar on what today’s tech allows creatives to achieve.)

    A whole new world and culture is taking shape for today’s creatives.
    New markets, new processes, more creative control, even in tbe collaborative formats.

    KKR is correct that the DOJ is coming in too late but at this point their intervention can’t achieve anything positive. The DOJ is fretting over a stagnant business and a dying business model. The market for creative narratives is moving to Indies, to Video, to gaming. And while Indies can prosper off tbe cottage industry economics of ebooks and the video and gaming economics are massively profitable, albeit expensive to play in, tradpub is neither. It will endure but it will be as a niche and backwater of the creative world. (Think: radio.)
    The future has already passed them by.
    DOJ is wasting their time fighting last century’s war.

    • Excellent analysis, Felix, and thanks for the Arcane link.

      I do think that “cottage industry” is the right term for the indie book trade, and it’s up to us to make sure that it’s self-supporting within that specific domain for our products, since struck-by-lightning is so hard to elicit.

      • You’re welcome.
        I found ARCANE to be awesome.
        As good as the animation is, the writing is better.

        The review that steered me to it said it was better than live action and I suspect that finding a full cast able to dramatize that story that effectively would be hard to do. And expensive. (The voice actors are excellent too.)
        One underappreciated benefit of streaming is that its insatiable hunger for content old and new is opening all sorts of doors for creatives that would otherwise be shut out, a bit like Indie books.

        I hope it is sign of things to come.

    • Well, Felix, I object to two boundary conditions (admittedly, they’re boundary conditions that KKR hasn’t thought of, either):

      (1) No part of publishing is a GAAP industry. (Go ahead — just try to apply GAAP to a royalty statement. Really.) That means that ROI cannot be calculated based on GAAP concepts, or compared to GAAP in different industries to see if it’s “too low.” Or “too high.”

      (2) S&S is not a single business operation. It is at least eight different business operations under a single umbrella. Nobody is asking whether that is that part that makes no sense — whether there are parts that should be spun off, as is the normal KKR/hedge-fund model. Indeed, when this antitrust suit reachs a conclusion, I anticipate that certain discrete parts of any approved merger will have to be de-conglomerated (a better term than “spun off,” which wrongly implies that they grew together and roughly simultaneously). This is actually a traditional antitrust and unfair-trade-practices remedy.

      We’ll leave for another time the argument about whether ROI actually reflects an overemphasis on immediate return instead of overall growth in shareholder wealth. And it is an argument, with strong ideological and reality bases and boundary conditions that nobody really considers and plenty of divide by zero errors and problems with incompetent management and/or just plain bad luck distorting matters ever further…

      In the best of all worlds, National Amusements never would have been allowed to exist without antitrust scrutiny (and, therefore, there wouldn’t be a “Viacom” that acquired S&S in the first place). That horse left the burning barn half a century ago when undisclosed conflicts of interest were expected perks…

      • Under GAAP, it works the same as any company producing a wide variety of products. GAAP offers the choice of choosing the level at which profitability is measured. Royalty statements have little to do with it.

  4. I care a lot less about this merger than about the horrible Findaway / Spotify one that’s coming. Findaway was the only good alternative to ACX (which as an Amazon/Audible arm was predatory and awful). Chances of Findaway remaining any good after Spotify starts leaning on them are… what, nil?

    Thinking of getting out of audio entirely.

    • I now think audio is pointless for miscellaneous indies (like me). I did one on spec, years ago, to understand the indie process for it, but the “$0.25” sort of rate, and essentially non-existent (and certainly non-recompensed) “borrows” have kept me from pursuing it. It will never (in my universe) return a positive ROI, either in isolation or in adding “credibility” to my other availability formats. (Yes, mileage may vary for already-well-known folks but for the rest of us?)

      Let’s also not forget that the work-at-home crowd no longer commutes quite as ferociously, so the demand side has declined as well. Any demographic that is content to stream movies onto mobile-phone screens (while their eyes last) is not going to be happy with just-audio unless forced into a hands/eyes-unavailable situation.

    • You have ample reason to worry.
      Spotify is a marginal business right now, hoping that antitrust action in the EU might save them.
      Pivoting to audiobooks is a clear sign of distress and no, it doesn’t bode well for the combined entity.

      Music subscriptions are a hard business for anybody not named Apple or Amazon because unlike video or gaming it’s a pure middleman operation: you don’t own the content and paying anything ressembling fair rates leaves little to nothing for the operator. PANDORA is hanging on by the skin of tbeir teeth and TIDAL’s attempt to build a profitable business off audiophile quality doesn’t seem to be working: they already added a cheaper, less premium, tier and just announced tbey will be soon adding a “free” tier. (ad supported, of course).

      Spotify’s numbers show that the bulk of their userbase (65%) is on the ad-supported tier and their growth potential is limited by having to compete against Apple and Amazon. And pivoting to audiobooks only puts them in the sights of the one part of Amazon that is viciously predatory without question.

      How that might help their bottom line is something I have yet to figure out.
      I’m not sure how big Audiobooks might be in europe when ebooks are still barely ramping up.
      We’ve seen moves likd these before. They rarely pay off.

  5. There are big arguments on writers’ sites:
    What is the next genre/storyline that will be hot?
    Of course, those prophesizing want to tailor their next book to that genre, the better to ride the wave.
    It’s ridiculous.
    What is the next hot book?
    Whatever STORY has an emotional connection that grabs readers.
    And, what will that be?
    Who the hell knows?
    So much for predictions about whether Horror/Mystery/Thriller/Romance/Whatever is the Next Big Thing.
    Just write what excites you. If you’re excited, so will others be.

    • Stuff goes in and out of fashion too fast to let it rule you.
      Horror was out of fashion? Tell it to King.
      High Fantasy ala GAME OF THRONES is hot?
      Wait a bit. See how quickly something else takes over.
      Writing to market is fine as long as its *your* market. Chasing somebody else’s just gets you lost in a stampede.

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