Why did the Big Publishing Houses get so big?

[CommonReader]

Originally Posted by Andrew H.

I think the formulation "has been allowed to grow unchecked" is strange in this context, as it seems to suggest that someone should have stopped Amazon.

Despite Amazon's very strong market position it has been allowed to buy competitors like "The Book Depository" and to join up with Waterstones for selling ebooks. Even companies that have achieved a dominant market position all on their own can be subject to restrictions to avoid abuse of their dominant position.
As to the argumant that Amazon is a stronger postion vis a vis Random House Penguin that is debatable. While it is not as large as Amazon Bertelsmann isn't a minnow and there are markets where a loss of the Random House Penguin / Bertelsmann books would massively damage Amazon's standing in the market place.

[fjtorres]

Originally Posted by CommonReader

While it is not as large as Amazon Bertelsmann isn't a minnow and there are markets where a loss of the Random House Penguin / Bertelsmann books would massively damage Amazon's standing in the market place.

Uh, you did see the part of the PR notice where it says that Random Penguin is a standalone joint venture that is to be prepared for an IPO, right?
Pearson is looking to divest itself of Penguin and Bertlesman is trying to monetize Random House.

There are lots of aspects to the deal that have nothing to do with "KILL AMAZON!!!".

[fjtorres]

Originally Posted by speakingtohe

Who has actually stated this as the intent? The scholarly kitchen has said that perhaps it is the rationale behind the merger, but did not quote anyone as saying this was the intent. If a Random house or Penguin person has actually stated that that is their intent as you seem to be saying, then I am wondering why this has received less media attention and mass protests from authors, consumers, courts etc. While not collusion, such a statement of intent would seem to be enough to squash any merger.

Helen

It was in the original blog post/press release.
It has been quoted extensively in PW, the euro media, and the rest of the publisher-friendly sites.
The Economist also made a point of it in their coverage.

As to why nobody is screaming; hey, it's Amazon they intend to screw over...

[CommonReader]

Did anyone say anything about killing Amazon? So what's the point of the hyperbole?
Anyway, Bertelsmann is a family operation and they aren't much into IPOs, even if they say so in a press blurb. If they are happy with the numbers they are more likely to buy out Pearson.

[fjtorres]

Originally Posted by CommonReader

Did anyone say anything about killing Amazon? So what's the point of the hyperbole?
Anyway, Bertelsmann is a family operation and they aren't much into IPOs, even if they say so in a press blurb. If they are happy with the numbers they are more likely to buy out Pearson.

The kill amazon stuff is not in the press release, true.
The "Industry analysts" that see the merger and consolidation of market power as a *great* move are the ones bringing that up. In pretty much ever article.

As for reading Bertleman's mind, that's not a productive endeavor.
All I know is what has been publicly stated about the joint venture; that there is a pre-negotiated mechanism for an IPO and that if the IPO is not viable, the fallback is for Bertlesmann to buy out Pearson.

To me that reads as Pearson wants out at any cost, ASAP, and Bertlemann will get out *when* they can get a good enough price in the IPO.

Perfectly reasonable when you consider the ongoing evolution of the business; Penguin and RH both have very deep backlists so the IPO should be quite profitable even if the combined entity stops buying new manuscripts altogether. I'm thinking that a lot of people are undervaluing the BPH's backlist contracts and way overvaluing the active infrastructure and staff; as time goes on, the former will be moving to the fore and the second will get downsized. By separating the combined company from the rest of the media conglomerate they can get the investment community to properly value the assets. (This *has* happened before.)

The Random Penguin might very well go the way of MGM.
http://en.wikipedia.org/wiki/Metro-G...C_and_Parretti

[speakingtohe]

Originally Posted by fjtorres

It was in the original blog post/press release.
It has been quoted extensively in PW, the euro media, and the rest of the publisher-friendly sites.
The Economist also made a point of it in their coverage.

As to why nobody is screaming; hey, it's Amazon they intend to screw over...

Sorry for asking as it seems argumentative, but could you post a link or two to the actual statement of intent by the companies involved and not an interpretation, assumption or perhaps this is what they are doing interpretation/assumption of intent.

I am sure they are there but I have not found them.

Thanks

Helen

[DrNefario]

The fact that both owners are trying to cash out makes me think that maybe this isn't the great deal those analysts seem to think.

[fjtorres]

Originally Posted by DrNefario

The fact that both owners are trying to cash out makes me think that maybe this isn't the great deal those analysts seem to think.

Not necessarily.
The hints I'm seeing suggests it is probably a great *financial* deal. Especially if they can convince people to overpay for the IPO on the basis of the "combined market power".
The problem is that a lot of analysts are projecting their own wishes/expectations onto the deal instead of asking *why* the two biggest publishers with such a large degree of overlap want to combine their operations.
The overlap suggests to me that there will be big cuts coming, resulting in a company that will not be much bigger--in current operations--than either of the two components are now but with a deeper back catalog and stronger financials (presumably from lower overhead instead of higher pricing). This is the typical outcome of mergers in industries under disruption...

Basically this merger/divestiture is to me confirmation that in *consumer* publishing there is excess capacity among the Big Publishing houses and getting(slightly) bigger is one way to restructure and shed excess capacity...

Other explanations welcome.

[DustyDisks]

Some here have said it would be better to have a bunch of smaller publisher houses to adapt to the new technology. In this I do agree!

Large company's compared to small ones are slow to adopt change and are also shackled to their own inertia. It is proven the small company's are more nimble and can adapt to change quicker than any large organization.

Edit: To address the op original question, one of the reasons that publishing houses get so big is if they are publicly and not privately owned. The shareholders demand profit!

So that can and does cause growth by forcing the company to grow by buying out the little guys.

[PainMike]

I start worrying when books containing corporate dystopia start to decline
Meanwhile, more press analytics.

[Kali Yuga]

Originally Posted by DustyDisks

Large company's compared to small ones are slow to adopt change and are also shackled to their own inertia.

Small publishers have limited funds, zero leverage with Amazon, and few alternatives.

For every Baen who can successfully innovate and avoid mainstream retailers, there are a dozen small publishers who have no choice but to accept terms of sale from Amazon, B&N and Apple with no options to negotiate.

Big publishers did drag their heels for a year or two, but then very quickly realized they had to go digital or they were done for. They did in fact innovate -- by completely redefining their relationship to the retailers, stopping bad policies like windowing, and pushing more and more back catalog into digital.

Originally Posted by DustyDisks

It is proven the small company's are more nimble and can adapt to change quicker than any large organization.

Where and by whom?

Smaller companies can also be just as beholden to an existing customer base or business model as a large one, and may not have deep enough pockets or a diverse enough brand to survive a major change in business model. They can also fail long before achieving profitability.

For example, Apple -- which is hardly a small company -- has completely revolutionized their business model, going from selling computers to making half their revenue from the iPhone, and another 20% or so from the iPad. And that's all since 2007 / 2010.

Amazon, Sony and, to a lesser extent, B&N have also moved very rapidly into ebooks. Sony and Amazon put out ebook readers years before anyone thought ebooks were feasible. In fact, those two pretty much created the market in the US; smaller companies, even ones that had good products, never gained any traction. B&N learned its lesson from the transition to online book sales, and very rapidly got into ebooks -- a very expensive move which has grievously harmed their bottom line for years.

CES in 2010 was awash in small companies putting out ebook devices: Alauratek, Plastic Logic, Bookeen, iRiver, Jinke, Hanvon, Interead, Copia, Spring Design, the Blio.... any of these edging out the Kindle, iPad or Nook? Which of these companies proved "more nimble" than Amazon or Apple?

Fusion Garage was a small company that developed the JooJoo, aka "CrunchPad," a small Linux-based tablet computer. It was announced before the iPad, shipped after it, and by late 2011 -- when Apple was on its second version of the iPad -- the company was dead. Is that what you mean by "more nimble?"

Or, the small innovator gets bought out by the behemoth. Picasa, Sketchup, Adsense, Blogger, Youtube -- that's just the tip of Google's M&A Iceberg.

I'm more than happy to be proven wrong -- but by actual proof, not citations of Fast Company truisms.

Originally Posted by DustyDisks

one of the reasons that publishing houses get so big is if they are publicly and not privately owned. The shareholders demand profit!

That's a nice theory, but analysts have known for years that mergers usually aren't good for stockholders. E.g. http://money.cnn.com/magazines/fortu...8718/index.htm