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Originally Posted by fjtorres
The thing is, a fair amount of corporate mergers don't add to the bottom line at all. In a lot of cases the short-tern disruption and distraction from the merger efforts negates the estimated benefits. And in a lot of cases a merger designed to achieve higher efficiencies through consolidation results in higher overhead because the combined company ends up with a lower market share than the two individual companies held.
The economist has a column on this, from last week:
http://www.economist.com/news/financ...america-may-be
The question here is that the reason publishing has become concentrated to the extent it is (whether it is 'too concentrated" or not) is for a series of reasons that in many cases no longer apply. But the gut reaction of the bigger players continues to be to try to get bigger because it has always worked for them in the *past*.
As the Economist points out, getting bigger sooner or later hits a point where it becomes counter-productive.
In the case of the Random Penguin the stated rationale for the merger bodes ill for consumers and authors but the people who should be most leery are the stockholders. |
It is a complex subject. And as the scholarly kitchen says
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There will of course be huge cost savings in the back office from this merger, but perhaps the primary rationale is upstream, with the relationships with agents and authors. In the print world, publishers typically pay a royalty of 28% of their net receipts for hardcovers, half that for trade paperbacks. (Let’s not get into how those figures are derived, as there is nothing more complicated than a publisher’s discount schedule.) With e-books, publishers routinely pay royalties of 25%. There is a big push by authors to move that number up to 50%, which would dramatically increase the costs of publishing houses everywhere, and not even the most assiduous cost-cutter could find enough people to fire in the warehouse, in accounting, the production department, and elsewhere to offset that increase in author royalties. A combined Penguin Random House, however, would be in a position to get agents to toe the line, and also in a leadership position in the industry, inviting other publishers to say, If Penguin Random House does not pay 50%, why should we? You don’t have to collude over a lunch table to get uniform practices in an industry where certain players have common interests.
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Perhaps the rationale is to lower royalties. Perhaps it is to lower other costs or to cash in on the growing ebook market. Possibly a combination of these factors and others. A smaller market share than the total market share the two companies had could still increase the bottom line significantly if the market itself is growing and costs are lowered.
As you said this does not bode well for authors and worse for the many employees who will probably lose jobs. As to stockholders and consumers only time will tell.
Helen