1. Trends & External Forces

Friday Eye-Opener:  Is It Possible To Guarantee Competition By Stifling Competition?

by Kevin Coupe

The “On Tech” newsletter written by Shira Ovide for the New York Times has a fascinating piece this week about how US regulators are suing to stop the acquisition of publisher Simon & Schuster by Penguin Random House, which would “shrink the number of large American publishers of mass-market books from five to four.”

The government’s rationale is pretty simple:  the purchase would effectively reduce competition in the book business, hurting authors who will have fewer places to peddle their wares and potentially hurting consumers by raising prices.

But, Ovide writes, it isn’t that simple:  “The elephant in the room is Amazon. Book publishers want to become bigger and stronger partly to have more leverage over Amazon, by far the largest seller of books in the United States. One version of Penguin Random House’s strategy boils down to this: Our book publishing monopoly is the best defense against Amazon’s book selling monopoly. 

“As the dominant way Americans find and buy books, Amazon can, in theory, steer people to titles that generate more income for the company. If authors or publishers don’t want their books sold on Amazon, they may disappear into obscurity, or counterfeits may proliferate. But if the publisher is big enough, the theory goes, then it has leverage over Amazon to stock books on the prices and terms the publisher prefers.”

Ovide writes that “we know that a few technology companies — including Amazon, Google, Facebook and Apple — have enormous influence over entire industries and our lives. We’re all trying to figure out in which ways their power is good or bad for us, and what, if anything, government policy and law should do about the downsides. This disputed merger of book publishers is one example of the reckoning over these essential issues.”

And, she quotes Barry Lynn, the executive director of the Open Markets Institute, as saying that “if Amazon’s dominance is hurting book publishing companies, readers, authors or the American public — and he believes that it is — allowing a book company to grow more muscular to bully Amazon is counterproductive. The best approach, he said, is to restrain Amazon with laws and regulations.

Stephen King, the prolific author, also has come out against the acquisition – and he is published by Simon & Schuster, and it isn’t hard to see that he could actually benefit from the merger.  But, as NPR points out, “he has a history of favoring other priorities beyond his material well-being.”

That said, King knows something about publishing mergers:  “He has been a published novelist for nearly 50 years,” NPR writes, “and knows well how much the industry has changed: Some of his own former publishers were acquired by larger companies. ‘Carrie,’ for instance, was published by Doubleday, which in 2009 merged with Knopf Publishing Group, and now is part of Penguin Random House. Another former King publisher, Viking Press, was a Penguin imprint that joined Penguin Random House when Penguin and Random House merged in 2013.

“King’s affinity for smaller publishers is personal. Even while continuing to publish with the Simon & Schuster imprint Scribner, he has written thrillers for the independent Hard Case Crime. Years ago, the publisher asked him to contribute a blurb, but King instead offered to write a novel for them, ‘The Colorado Kid,’ released in 2005.”

King believes that “the more the publishers consolidate, the harder it is for indie publishers to survive,” hence his decision to testify for the government in the case.

It is an interesting case, and the court’s decision will be Eye-Opening one way or the other, telling us something about the degree to which regulators will be able to successfully oppose mergers of giants.  It seems to me that this isn’t just about book publishing – the resolution of the case will be just one chapter in a complex tome that may well decide the degree to which the small will survive, consumers will be able to protect themselves (if they want to) from big tech, and the shape not just of business but also of society going forward.

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