The Monster Publishing Merger Is About Amazon

From The Atlantic:

In 1960, Dwight Eisenhower’s attorney general, William Rogers, read the paper with alarm. He learned that Random House intended to purchase the venerable publisher Alfred A. Knopf. Rogers began making calls to prod his antitrust division into blocking the sale. In those days, monopoly loomed as a central concern of government—and a competitive book business was widely seen as essential to preserving both intellectual life and democracy. After checking with his sources, Rogers discovered that the merger would yield a company that controlled a mere 1 percent of the book market, and he let the matter drop.

Not so long ago, Democratic and Republican administrations alike wouldn’t hesitate to block a merger like the one proposed today, which intends to fold the giant publisher Simon & Schuster into the even more gigantic Penguin Random House. How big would the combined company be? By one estimate, it might publish a third of all books in the U.S. This deal is so expansive that it’s hard to find an author to write about it who isn’t somehow implicated. Based on the odds, I suppose, it’s not terribly surprising to reveal that I’m published by Penguin Random House.

. . . .

On paper, this merger is deplorable and should be blocked. As book publishing consolidates, the author tends to lose—and, therefore, so does the life of the mind. With diminished competition to sign writers, the size of advances is likely to shrink, making it harder for authors to justify the time required to produce a lengthy work. In becoming a leviathan, the business becomes ever more corporate. Publishing may lose its sense of higher purpose. The bean counters who rule over sprawling businesses will tend to treat books as just another commodity. Publishers will grow hesitant to take risks on new authors and new ideas. Like the movie industry, they will prefer sequels and established stars. What’s worse, a giant corporation starts to worry about the prospect of regulators messing with its well-being, a condition that tends to induce political caution in deciding which writers to publish.

But this merger is not the gravest danger to the publishing business. The deal is transpiring in a larger context—and that context is Amazon. The rise of Amazon accelerated the demise of Borders and the diminishment of Barnes & Noble. If it’s correct to worry about a merged company that publishes perhaps 33 percent of new books, then surely it’s correct to worry more about the fact that Amazon now sells 49 percent of them.

In the face of Amazon’s dominance, book publishers have huddled together in search of safety. Amazon’s size gives it terrifying leverage over the industry. Amazon, with its heavily visited home page, its emails to consumers, and its control of the search box on its site, has the power to make or break a title. To counter Amazon, publishers have sought to increase their bargaining power. They believe that they can match Amazon’s size only by growing their own.

When the government intervenes in a market, its actions are never neutral. One of the greatest mistakes of the Obama administration was the 2012 suit it brought against book publishers for working in concert to cut an e-book deal with Apple. The issue is not that the publishers were acting virtuously: They behaved like a cartel, which is illegal. It’s that the publishers were hardly the worst offenders. The government flogged the publishers for a technical violation of antitrust laws rather than constraining the most egregious monopolist, in spirit if not in letter.

It must not repeat the same mistake. The arrival of a new administration represents a moment to finally address Amazon’s lock on the book business; it’s a moment to focus on the core of the problem. Yes, publishers are oligopolistic and hardly sympathetic, but their continued health is essential to the survival of the book business, and thus the intellectual life of this country. If the government constrains publishers without constraining Amazon, then the government will merely accelerate the accumulation of untenable power in one single company.

Link to the rest at The Atlantic and thanks to DM for the tip

PG will limit himself to a short rant.

The attempt of all but one of the largest publishers in the United States to combine with Apple in order to take down Amazon’s books business was comically inept and stupid, a black-letter violation of US antitrust law. Once outside attorneys were hired (and presumably told their clients they would lose if they tried to fight the charges), each of the publishers promptly caved, plead guilty to antitrust charges and received punishment for their misdeeds.

Apple fought the antitrust charges and lost at every level from trial to the US Supreme Court. Under US law, you can’t lose in any more places than those.

The OP includes the following:

On paper, this merger is deplorable and should be blocked. As book publishing consolidates, the author tends to lose—and, therefore, so does the life of the mind. With diminished competition to sign writers, the size of advances is likely to shrink, making it harder for authors to justify the time required to produce a lengthy work. In becoming a leviathan, the business becomes ever more corporate. Publishing may lose its sense of higher purpose.

PG agrees that consolidation is a lose-lose situation for the large majority of traditionally-published authors. James Patterson will survive. JK will be OK.

Concerning the diminishment of “the life of the mind,” and “Publishing may lose its sense of higher purpose,” if you listen carefully, you may hear PG guffawing.

When a publisher is owned by a large international conglomerate, its sense of higher purpose is focused on what the big boys higher up the ladder (and they are mostly boys in this case) will think in Gütersloh, the 16th arrondissement of Paris, Gaensheidestrasse 26 Stuttgart, and wherever Rupert Murdoch happens to be at any given moment.

The OP also includes:

Yes, publishers are oligopolistic and hardly sympathetic, but their continued health is essential to the survival of the book business, and thus the intellectual life of this country.

PG says, “Yes, they’re oligopolistic and not the least sympathetic and a lot of other nasty things, but no, they’re not essential for anything. They are anachronistic tools that have lost their utility. Edsels.

“In the early to middle part of the last century, traditional publishers did make significant contributions to the intellectual life of the United States, but they stopped doing that quite a long time ago. This stoppage began with the arrival of corporate drones and poseurs in high positions and has only gotten worse over time.”

End of rant. PG feels much better now.

7 thoughts on “The Monster Publishing Merger Is About Amazon”

  1. Note, PG, how they conflate an entire industry, Publishing, with a handful of foreign owned predators. As if middle-sized publishers didn’t matter, as if NYC trade books were all that mattered.
    As if games and video weren’t eating the (not so big) tradpubs’ lunch as appetizers.

    Netflix has nearly 200M subscribers, PRIME 150M, HBO 125M; Disney went from zero to 60M inless than a year. PEACOCK just launched, CBSViacom unloaded S&S to free up cash for their own streaming service.

    And that tidal wave is just getting started. Discover is just launching. Apple has a content starved skeleton but plenty of money to feed it.

    They’re all in the same entertainment business because there’s only so many eyeball hours and every hour spent watching video or playing games is an hour not spent reading.

    Once upon a time, the only forms of passive entertainment were books and radio. Now theres a dozen choices. And books are nowhere close to the top. Bertlesmann thinks adding S&S makes them “big”, that they can stand up to Amazon, when in the full entertainment publishing business even a pygmy like CBSViacom dwarfs them.

    By the most recent numbers, it will take Bertlesmann 5 years of S&S profits to recoup the purchase price. Given the trends in their segment and *inflation* it may take ten years or they may never make it to breakeven.

    They got taken to the cleaners.

    • BTW, that’s not just me talking.
      Back in March, VARIETY had this:

      https://variety.com/2020/biz/news/viacomcbs-simon-and-schuster-sale-1203523803/

      Specifically:

      “Research firm MoffettNathanson has pegged the value of Simon & Schuster at $1 billion to $1.5 billion. ”

      And the general consensus was they’d be lucky to get the lower number, given recent sales trends.

      From the horse’s mouth:

      “ViacomCBS CEO Bob Bakish told investors Wednesday that the company is taking a hard look at all operations. Simon & Schuster has generated inquiries from prospective buyers in the past, Bakish said during a Q&A held as part of Morgan Stanley’s annual investor conference in San Francisco.

      Simon & Schuster “is not a core asset. It is not video-based. It does not have significant connection for our broader business,” Bakish said. “We have had multiple unsolicited inbound calls about that asset, and so as the market stabilizes, we are going to engage in a process” to examine strategic alternatives. ViacomCBS said publishing revenue in 2019 came to $814 million, down 1.3% from $825 million in the prior year. “

  2. The biggest problem with the OP — and almost all other commentary on this sort of thing — is the treatment of “publishing” as a single industry, let alone a single market (as antitrust law sort of defines that term).

    It’s not. It’s not even close. “Publishing” is the bastard offspring of a three-century-long orgy among thirteen distinct and incompatible individual industries. The three centuries of evolution have actually made things worse — during the first half of the eighteenth century, there were only six or seven industries at issue.

    The best evidence that these are distinct and incompatible is the recent purchase of Penguin USA’s trade operations only by Bertelsmann. Pearson wanted to keep the vastly more profitable nontrade industries, and did. Pearson’s internal rate of return has nearly doubled since 2015.

    I’ve been through this sort of thing professionally before; even before law school. Once upon a time — as recently as 1976 — there were eleven independent firms that could be counted on to participate in a US military one-or-two-seat fixed-wing aircraft development/contract competition. Fifteen years later, it was down to two; it’s now down to one, realistically. The shrinkage is almost entirely due to acquisitions and consolidation, not “actual” business failures.

  3. In the face of Amazon’s dominance, book publishers have huddled together in search of safety. Amazon’s size gives it terrifying leverage over the industry. Amazon, with its heavily visited home page, its emails to consumers, and its control of the search box on its site, has the power to make or break a title. To counter Amazon, publishers have sought to increase their bargaining power. They believe that they can match Amazon’s size only by growing their own.

    This is sort of a vague complaint. “book publishers have huddled together in search of safety.” Safety from what threat, exactly? Absent specifics, one has to assume the threat is that Amazon won’t necessarily promote what the publishers wish they could tell them to promote, as they can do with bookstores. Amazon sells books – how is that a problem for publishers?

    WaPo weighed in

    https://www.washingtonpost.com/entertainment/books/penguin-random-house-is-buying-simon-and-schuster-thats-bad-for-readers/2020/11/25/e53d5382-2f40-11eb-860d-f7999599cbc2_story.html

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