Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.
Typically July is one of the slowest months in book publishing. Summer is the time for vacations and the store traffic is traditionally slowest in July. Kids are out of school and not reading as much.
But this July has been full of major news and events and each will have a long-lasting effect on the industry:
- The Penguin-Random House merger is official. It is now one huge publishing corporation with 30% of the trade market and 50% of the bestsellers.
- Apple was found guilty of collusion and price-fixing on eBooks. The DOJ claims it pursued the case on behalf of consumers. But the real winner is Amazon.
- B&N ousted their CEO after a disastrous strategy of trying to become a device maker. They have not yet named a successor.
Penguin Random House Becomes the Largest Publisher Ever: The acquisition of Penguin by Random House parent Bertelsmann is now complete. The new company is called “Penguin Random House (PRH).” The new logo is just a mash up of the existing ones and the consolidation is just starting. So, although official, the real stuff has yet to happen.
The new PRH will be a massive publisher. It is larger than the other four of the former “Big6” publishers combined. Because of its size, PRH will be able to pay the most for the top talent, create their own store, have the resources to analyze the millions of streams of data and can stand eye-to-eye with the likes of Amazon and Apple.
Because of their control over so many imprints, PRH will be a major force in how the agent-author-publisher relationship shifts over time. PRH will also be able to delve into verticals much more deeper than others. Random House currently has 19 communities for readers to join and Penguin owns self-publishing giant Author Solutions and created BookCountry. PRH is working more and more direct to the consumer. Expect this to only get deeper as the companies merge into one big enterprise.
The company is also a worldwide monster with dominant market share in the UK, Australia, India, South Africa and the rest of the English-speaking world. Penguin-Random House has 250 imprints and will publish more than 15,000 new titles a year. Many of these imprints were once independent companies. PRH has more imprints than 90% of the publishers have employees.
In short, the new PRH is now big enough that they much more control over their own destiny and can do things other publishers can not.
Apple Loses the Price-Fixing Case (or Amazon Wins Again): Or more accurately, Amazon won the case. Reading through the 108-page testimony of the DOJ’s expert witness, it is clear throughout that the government was siding with Amazon. So the real winner is Amazon and this is just a bump in the road for Apple.
Amazon currently controls the eBook market and selling physical books over the Internet. Because of the judgment, Amazon now controls the price the consumer pays for eBooks. Amazon once sold the majority of the NYT best sellers below cost and was willing to absorb that loss as it gained market-share. It now can do so again. Amazon has the flexibility to use price as a way to sell more eBooks.
Amazon does a ton of innovative things for authors and it provides a great market place. There are many fans of the company. But they have bullied publishers in the past when they didn’t get their way. Now that they control the pricing, Amazon may get aggressive again. There currently is no one to stop them. Amazon continues to maintain and build on their lead. Amazon has bought 42 companies in the past 15 years.
Amazon solidified their control over eBook retailing. After a few years of losing market share, they will start to regain share.
Barnes and Noble Re-structures Again: B&N was once the biggest and meanest book-retailer in the USA. They dominated the landscape and were opening superstore bookstores (with 120,000 titles) across the nation. A decade ago, they looked unstoppable. People were concerned that B&N was gaining too much power. The government even stopped them from buying Ingram in 1999 and also leveled the playing field by making publishers offer the same discount to all book retailers.
Earlier this week, B&N fired their CEO William Lynch. Lynch had led the company for three years and had failed to establish a profitable eBook retailer and at the same time ignored the bricks and mortar. Chairman Len Riggio is now back in charge. He built B&N into the largest bookseller starting with a single store. He previously announced he wanted to take the stores private. Not sure of what he wants to do with the Nook.
Microsoft owns 17% of the Nook. A few months ago it was rumored that they wanted to buy all of it. This sent B&N’s stock soaring. After the story was denied, the stock went back down. But given the recent changes at B&N, could this be a possibility? The Nook has been a major distraction for B&N. They need to divest of it and put the focus back into the stores.
B&N is the only national bricks and mortar bookstore chain left. They have an enormous footprint and brand. With Riggio back in the game and his stated desire to focus on the stores, could they become dominant in that area again?
B&N future is not with the Nook, but with making the bricks-mortar stores dominant again. The resurgence starts now.
It will be interesting to see what happens during the rest of the month.