The news broke last week that the Department of Justice is blocking the Penguin RandomHouse purchase of Big Five rival Simon & Schuster. My initial response was surprise and admiration, since I do believe that that merger would have been bad for authors and the overall book publishing landscape. PRH's assertion that they could pay authors more if they merged with S&S felt deeply disingenuous to me, since they've had record profits in 2021, and that doesn't seem to have dramatically increased the level of advances or royalty rates they're offering authors. That said, ultimately, I don't think it will matter that much unless this represents a SUBSTANTIAL, permanent shift in how the DOJ approaches antitrust enforcement.
For one thing, HarperCollins has ALREADY said they want to buy Simon & Schuster. Will the DOJ block that deal too? And if that deal doesn't go through, will the next company to make an offer be Elliot Management, the firm that owns Barnes & Noble, Waterstones, among its $55.7 BILLION in "managed assets" and "distressed securities"?
And in a world where somehow, the DOJ is active in preventing any of those major acts of consolidation, Simon & Schuster could just...stop publishing books and close down. That's another way that harmful consolidation happens in an industry.
We saw that situation when Baker & Taylor, a wholesaler that used to serve a major portion of the trade book market just...stopped, leaving Ingram as the only major game in town.
Toward the end of the NYT piece, it flagged that this is not the only problematic publishing consolidation: "Over the past few decades, the publishing business has already gone through a number of mergers and acquisitions as big publishing houses bought up midsize companies and rivals, and the number of major publishing houses shrunk to five. When Penguin and Random House merged in 2013, the deal accelerated a race to bulk up. Rival companies like HarperCollins and Hachette also went on buying sprees, purchasing smaller companies to expand their catalogs and backlists."
And the last paragraph really gets to the heart of the matter:
“'The target immediately moves over to Amazon,' said Barry Lynn, the executive director of the Open Markets Institute, an antitrust think tank. 'Once you’ve come in and said that this kind of consolidation and these kinds of actions are bad for authors and for readers, then you look over at Amazon and see a corporation that has 80 percent market share, there’s only one conclusion.'”
The biggest single threat to the entire book publishing industry in the United States is that Amazon owns so much of the bookselling market, paired with the fact that our entire industry is basically a rounding error on Amazon's balance sheet. In 2021, Amazon's net revenues were $470 BILLION dollars, while Penguin RandomHouse, the biggest trade book publisher, generated $2.5 billion in all revenue in 2021, of which a substantial portion is represented by sales outside of Amazon. (The entire United States book publishing industry only generated $29.9 billion.)
Amazon has been allowed to grow and acquire other companies at such a fast clip that it has become a behemoth that dwarfs the entire bookselling business and now is dwarfing other major retail businesses as well. Cheap money and optimistic investors gave Amazon a huge store of cash to buy up rivals, often after bullying them by dropping prices to predatory levels and destabilizing the entire space.
I'm not an economist, but generally it seems that recently, the US has viewed antitrust enforcement only from the perspective of trying to lower prices and prevent price gouging. However, when a lot of this theory was created, the concept of creating the kind of world-spanning business Amazon has become was beyond science fiction.
So ultimately...I'm not sure this single moment of DOJ antitrust enforcement in publishing matters much, beyond another example of exposing the inexplicable inner workings of the publishing industry to a baffled wider audience. (Below, find my initial response to the trial.)
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More to Read
Calling indie presses "farm teams" "demonstrate[s] a patronizing view of independent presses, along with a real misunderstanding of independent publishers and the role we play in the literary landscape." [my piece in LitHub]
On getting your work into the world [interview with me in The Creative Independent]