December 14, 2003

ONCE a Utopia, book publishing is today considered the most depressing business in the American media world. In order to sustain themselves with deep pockets, mega-publishers behave like an octopus as they carefully watch their contemporaries that are often available on sale. Those with promising financial performance are the preferred ones. One by one, publishing houses have been absorbed into huge corporate portfolios. They do so, hoping probably, to earn unreasonably high profits.

Recently the United States Department of Justice approved the sale of Bertelsmann Publishers to Cinven and Candover, two British private equity firms, and its subsequent merger with Kluwar Academic Publishers (KAP). After the merger, the Bertelsmann has been renamed as BertelsmannSpringer. This merger is going to make it the second largest publisher of scientific journals in the world, with revenues nearing $880 million. Earlier, in January this year, Cinven and Candover acquired the Kluwar Academic Publishers itself.

The Information Access Alliance (IAA), which constitutes a coalition of seven major library organizations in North America, has urged the Department of Justice to bloc this acquisition and merger. The members of this group include The American Association of Law Libraries (AALL), The American Library Association (ALA), The Association of College and Research Libraries (ACRL), The Medical Library Association (MLA), Scholarly Publishing and Academic Resources Coalition (SPARC), and the Special Libraries Association (SLA).

Mary Case of the ARL says, “We are very disappointed with the Department of Justice’s approval of the merger of BartelsmannSpringer with KAP. We foresee only increased prices for libraries and decreased access to important resources for researchers and the public as a result of this transaction.” IAA considers publishers’ consolidations nothing but a source that just makes journals’ prices soar sky high. The Alliance has been studying, and continues to study, the impact of publishers’ mergers on the academic community.

Corporate absorptions, which have plagued the American publishing industry for decades, made publishers hostile to authors in addition to the academic community. As one large multinational publisher buys another, the opportunities for authors to market their works shrink.

All the leading publishers want the high profile books and colossal profits. They take no risk of publishing books, which are less likely to become financially profitable. What pleases them most is to publish only brand name writers, such as Ann Rice, Danielle Steel, James Michener, John Grisham, John Updike, Stephen King, Tom Clancy, etc.

With the mergers becoming too frequent, more and more writers complain that they are getting left out. The old concept of book publishing, that is, to earn modest and steady profit built on a respected barn of writers and an exhaustive backlist, is an old story now. Amanda Urban, one literary agent, once reportedly said, “It’s not in the interest of any writer to have more of this consolidation going on.”

The merger of American publishers, nevertheless, goes on unabated. Theirs is a long list and an endless tale. A short article, such as this one, cannot cover them. For readers’ interest, however, the following is an abridged account of a few other major corporate mergers, their gains, and losses inflicted on key components of the publishing industry.

In March 2003, AOL Time Warner, world’s leading media and entertainment company, which owns several famous companies, such as CNN, Time Inc. (the publisher of Time), offered its book publishing division for auction. The reason was AOL had a debt of approximately $829 billion, which they wanted to pay off. AOL was hoping to raise $400 billion from this sale.

The Division comprised Little, Brown, which AOL had integrated earlier, with about $400 million revenue per annum and Earning Before Interest, Taxes Depreciation and Amortization (EBITDA) of $45 million. Twelve bidders were reported to have submitted bids. AOL Time Warner postponed, nonetheless, selling the Division as all bids were reported below their target.

Earlier on January 16 this year, Peter Olson, the chairman of Random House, forced out Ann Godoff, an acclaimed editor and publisher, as president of the Random House Trade Group. The reason, as reported, was her Group didn’t meet its profit targets. It was expected that her Division would earn unreasonably high profits.

Ms Godoff is one of the most influential publishers in the book industry. Her division, which has been famous for publishing bestseller authors, such as E.L. Doctorow, Salman Rushdie, and William Styron, had merged with Random House earlier.

Subsequently, Random House, Inc., merged the Random House Trade Group with its sister unit, Ballantine Books. Gina Centrello, the president of Ballantine Books, was elevated to lead the combined Random House Ballantine Publishing Group. At this merger, Random House Inc., said, “Ms. Centrello has turned Ballantine Books into one of its most profitable publishing houses. Three years back, though, the publisher had been an under-performer.”

HarperCollins purchased William Morrow in 1999. Both are leading publishers of juvenile books in New York. This takeover trimmed the quantity and variety of publishing lists and decreased attention to library businesses. They shut down Morrow Junior Books and Lothrop, Lee and Shepard, which have been instrumental in permanent liaison between the publishers and libraries. As an end result, the library promotion employees were laid off.

In 1998, Bertelsmann AG, the German media conglomerate, which already owns Bantam Books, Doubleday, Delacorte Press, Dell and Broadway Books, integrated with it in the past, purchased the Random House Publishers. This merger of the latter with the former, along with its various sister organizations — Alfred A. Knopf, Ballantine, Crown, Pantheon, and Times Books, built the largest English language publishing business in the world. The annual sale of these entities, so merged, was estimated to be around $1.8 billion.

At this merger, the Authors’ Guild and the Association of Authors’ Representatives filed objections with the Federal Trade Commission (FTC). The Guild, armed with 7,000 members, asserted that this transaction would permit Bertelsmann to control over 36 per cent of the so-called trade, or book shops, market in America. Letty Cottin Pogrebin, president of the Guild, is quoted to have said, “No single company should have this much control over authors’ expression or this much influence on our culture.”

In 1997, Simon & Schuster Viacom, Inc., the parent company, sold its Educational and Reference Divisions (Macmillan USA and other names) to Pearson PLC, the British parent of Penguin Putnam, for $4.6 billion. This transaction made Pearson an international leader in educational publishing.

In August 1988, the Crown Publishing Group merged with Random House, before the latter merged with Bertelsmann AG. Consequently, Random House emerged as the nation’s largest publisher of general-interest books.

Crown’s two businesses — a most fruitful mail order business and a promotional book operation that sells reprints, benefited Random House most. Robert L. Burnstien, former chairman of Random House, said reportedly, “We think it gives us a chance to do some direct mail to increase sale.”

Finally, it is worth knowing how booksellers look at these mergers. Booksellers feel that they are the only victims, who have had to face the aftershocks of corporate absorptions. They complain that publishers’ mergers have caused a reduction in the number of representatives.

The list of books, which they were made responsible to sell, doubled in number with an unreasonable expansion in size of the territory to cover. They also find it most confusing to order books, when a merger takes place.

The representatives’ network used to be a wonderful source. They would travel around the country to disseminate information about new works under printing and publication. They obtained such an advance information from sales meetings and, also, from buyers, who’d read the book and knew the authors’ background. Booksellers feel this is withering on the vine speedily.

Buyers, based in California or Texas, complain that they are left with a choice to deal with representatives located at distant New York and Washington, DC. They find it annoying and too inconvenient to call or meet such representatives. As a result, medium size and smaller independent booksellers have been left with fewer opportunities.

After trimming the number of representatives the publishers are instead using tele-representatives. However, compared to the interaction of a live human being, most people question the knowledge and skill of a tele-representative to help book-dealers.

Incidentally, at the same time, some booksellers were fortunate to get efficient telephone representatives. Hue Man Experience, a bookstore at Denver, Colorado, was reported to have a nice telephone representative from the Random House, who they can rely on for the buzz on African-American books. He was replaced, following the merger, by an inexperienced tele-representative, who knew nothing about their business niche.

Most booksellers feel that the publishers’ mergers have also caused confusion about the discount, cooperative policies, and returns. They think returns from the chain stores can destroy them.

Independent booksellers feel like morons in the game of mergers. They have no say. Some twenty years back, they say, there existed a three-way dialogue between publishers, booksellers and authors. Today, this dialogue is a two-way conversation between corporate boardroom of booksellers and corporate boardroom of publishers.

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