The publishing industry is large and powerful—by some accounts, it generates nearly $100 billion in revenue worldwide. The United States Department of Justice has accused big publishers of abusing that power in the past, by conspiring with each other to raise the price of e-books. More recently, Penguin Random House has been in the legal crosshairs for an alleged abuse of power, as the Justice Department sues to stop its proposed (and allegedly anticompetitive) acquisition of Simon & Schuster.
What would more concentrated power in the publishing industry mean for libraries? In recent years, publishers have blamed libraries for all manner of ills—claiming that they unfairly cannibalize sales, among other things—to justify the imposition of increasingly expensive licensing models. But as testimony in the Justice Department lawsuit has confirmed, the publishing industry isn’t the least bit ill: it’s “thriving,” with years of double-digit growth. And although the economics of the publishing industry was examined at trial in excruciating detail, the supposed threat of library lending was nowhere to be found; libraries weren’t mentioned at all.
What of the authors? The publishing industry often claims that its actions are necessary for the good of authors, but this case does not support such a claim. The Authors Guild has publicly opposed the merger, expressing its own concern about the extraordinary concentration of power in the publishing industry and how it could harm emerging and mid-list authors. Meanwhile, at trial, we learned that the vast majority of all published books are of this sort, selling very few copies. Of course, libraries are one of the few markets for such titles: buying them, preserving them, and ensuring they remain publicly available after their commercial life is over. Unfortunately, as the trial made abundantly clear—featuring, as it did, the CEO of Penguin Random House bragging about cutting author compensation for e-books—such matters are not high on the publisher’s priority list.
So what does this portend for the future of libraries? While the outcome of the trial remains unclear, the Association of American Publisher’s view of libraries could not be clearer: “Libraries are an important part of the copyright ecosystem as authorized distributors,” they recently said. That is the world the AAP hopes for: one where our public interest institutions, and our library professionals, are little more than “authorized distributors” of whatever is most profitable for the publishers. It should be no surprise, then, that libraries remain deeply concerned that the future envisioned by these publishers is in nobody’s interest but their own.
More recently, Penguin Random House has been in the legal crosshairs for an alleged abuse of power, as the Justice Department sues to stop its proposed (and allegedly anticompetitive) acquisition of Simon & Schuster.
Would the acquisition *really* be anticompetitive, though? Sometimes things are not as they may appear at first.
Here is an example:
The United States Department of Justice has accused big publishers of abusing that power in the past, by conspiring with each other to raise the price of e-books.
This is true as far as it goes, but it does not tell the full story of the DOJ complaint against Apple et al.
First, the DOJ did not go after Apple off its own bat. Rather, Amazon filed a complaint with the Federal Trade Commission and the DOJ ended up going after Apple as a result of the complaint.
The cause of the complaint was this: Amazon wants to dictate the prices of the books it sells. In short, it is a company that claims to be “consumer driven” and one of the ways it feels it can best serve consumers is by lowering prices.
The problem? The publishers who are responsible for producing most of the books Amazon sells want to be paid for their work. The question is: what constitutes a “fair” price for a given book?
In the view of the publishers, a fair price is whatever price they decide to set for a given book. Likewise, Apple wanted to collect a 30 percent commission on anything sold through its iBooks store.
Amazon, however, wants to sell ebooks as cheaply as possible. Their take is that if they can sell ebooks at $9.99 each, consumers will eagerly buy them. However, these desired low prices mean that the publishers are expected to take a cut out of their profits to *keep* them low.
In essence, the whole fight was about who gets to set the price for ebooks, the publishers themselves (i.e. the so-called “agency model”) or Amazon. The DOJ viewed the case through a relatively narrow window, that of consumer prices. In the view of the court, anything that served to keep prices high was bad and anything that served to lower them was good.
Unfortunately, the court overlooked a vital point: when producers cannot set their own prices, but rather, have prices set by outside firms (like Amazon) *competition suffers.*
It all boils down to a judgement call as to which is better:
A) More books by more producers at higher prices.
B) Fewer books by fewer producers at lower prices.
For better or for worse, the court found in favour of the latter.
Which brings us back to this allegedly “anticompetitive” acquisition.
When it comes to pricing eBooks, Amazon knows only one thing: lower prices are better. And as far as consumers are concerned, lower prices do indeed make it more likely that they will purchase more eBooks.
But what about the publishers?
Unfortunately, when companies like Amazon insist on lower prices, something has to give: either the publishers have to take a cut in their profits, or booksellers like Amazon have to raise prices in order to make it worthwhile for publishers to produce books to be sold.
You cannot have it both ways.
My guess (and it is purely a guess on my part) is that this proposed acquisition is not as anticompetitive as it may at first seem. I suspect that, with Amazon constantly pressuring publishers to make their books available at low prices, acquisitions like this *may* be the only way publishers now have of being able to hope to survive.
Like it or not, acquisitions allow publishers to consolidate products and cut costs…at least for a time.
None of this is to say that I necessarily agree with the policies of Apple and/or the Big Five publishing houses (Simon & Schuster, Penguin Random House, HarperCollins, Hachette Book Group, and Macmillan). I write this only to point out that the laws of economics are immutable and that, if Amazon and consumers insist on low prices, the Big Five may have little choice *but* to become the Big Four in order to cut costs, take advantage of economies of scale, and deliver books at the low prices that Amazon insists on (and that consumers have come to expect).
Sure, I understand that the publishing industry is “thriving” with “years of double-digit growth.” My question is: what are their *margins* compared to 10 and 20 years ago?
Publishers selling more books than ever might not mean much if their margins are lower than ever. Are they? Perhaps someone else can speak to that.
What the hell man
I counted at least 12 thoughts before I started to pass put. My thoughts. More ideas/authors good, less ideas/authors bad.