"In each of the three major publishing segments -- trade, educational, and professional -- three companies dominate their respective categories and each has revenues that are well above their fourth-place competitors." ~ Jim Milliot
"With the big fish swallowing the little fish, the book business is becoming increasingly competitive and brutal. It is evolving into an industry of giants and dwarfs, with middle size companies a vanishing species."
"Like nomadic tribes foraging for food, the broadcast and motion picture media are scouring the country for product."
"In the next few years, some five or six great publishing combines will dominate the publishing scene." [This quote from several years ago has now come to pass.]
"It used to be a gentleman's business, but all the gentlemen have left."
"Publishing has ceased to be a modest business run by people who love books."
"The big problem in a big house is flow. No matter how conscientious and devoted you are, you always know if this book doesn't make it you'll have another one tomorrow. This can't help but affect your attitude and your work. When you only have a dozen books a year you have to care about everything."
"The attack on conglomerates is simplistic. As one conglomerate executive points out, it's foolish to think of one side as a small, privately owned house run by a gentleman of taste committed to books of distinction and the other as the large, anonymous, profit-oriented factory run by yahoos. Aside from the critical differences among the conglomerates themselves, there's no Alfred Knopf saying I want all jackets to be yellow. At Knopf, nobody but Mr. Knopf could do anything for 40 years. In the relative anonymity of a large corporation, there's a lot more latitude and flexibility."
"Even if there are precious exceptions, the overwhelming
number of big-money, industry-sustaining books are incontrovertibly
dum-dum things. More cynical, more pandering than any other
entertainment product. Calling them books
may be a substantial part of the problem with the book business-- it
provides undeserved and unfair dignity (perhaps there should be a way
to certify something as an actual book)."
~ Michael Wolff
"With its over-educated, overworked, underpaid legions, publishing is an industry bedeviled by pessimism. This pessimism blinds people to the fact that we are living in a golden age of book publishing in which quantity and quality rival anything in the past, in which books have never been so well published and in which they occupy a more boisterously visible place in the general culture than ever before...." ~ Toby Mundy
"It's likely that the coming years will bring even more
changes.
Publishers will think more like retailers, retailers will act more like
publishers, traditional roles will become more complicated and the
industry's two poles should come closer together." ~ Steven Zeitchik
It is difficult to keep up with who owns what. Columbia
Journalism Review maintains a Who Owns What
list for mass media, including book publishing, and it is most useful
[but may not be current]. FreePress.net has a similar useful list based in part on the CJR one.
Those concerned about concentration in U.S. book publishing usually have three concerns:
Size is a problem for several reasons. Fewer publishers with access to the book trade may reduce the opportunities for authors and readers to experience a broad variety of products. Larger publishers are likely to be more profit-oriented, more rational, and more likely to focus on works likely to sell in large numbers. Large publishers may be more bureaucratic, less innovative, and less responsive to readers. Random House now accounts for 40 percent of all hardcover best sellers and one-third of all paper ones. Ten U.S. publishers account for 95 percent of all hardcover best sellers and about 96 percent of those in paper. Some anecdotal evidence suggests that small publishers are more likely to be innovative and reach niche audiences.
Although it receives little attention here, foreign ownership of cultural and educational resources is a major issue in many foreign countries. While German owned publishers are not likely to publish pro-German books or influence our culture in Germanic ways, that is at least possible.
As book publishers become content providers and become part of larger educational/entertainment conglomerates, there is some question if those now in charge understand the nature and dynamics of book publishing. In the past, at least some publishers argued the book publishing was much more than a business. It is not at all clear that the new owners understand that. It could also be that book publishing is not unique. As publishers become more "rational," they are likely to publish books by brand name authors [Nora Roberts] and on topics likely to be popular with a large audience.
Horizontal mergers involve two firms
selling the same sort of goods and services to the same customers. For
example, when two book publishers merge, as Thomas Nelson and Word,
that is a horizontal merger. When KMart's Walden Books bought Borders
that was a horizontal merger. Traditionally, this is the way that
smaller publishers become larger ones. These mergers reduce the number
of publishers, especially larger ones, and reduce competition. For
smaller publishers, this is the way to grow and become competitive with
the big guys.
Vertical mergers involve two firms at
different stages in the production - distribution chain. When a cloth
book publisher purchases a mass market paper publisher or an audio publishers, that is a
vertical merger. A recent example is the purchase of Dover
Publications, the reprint publisher, by the book manufacturer Courier
Corporation. The major story here is the Barnes & Noble
strategy of issuing more and more of its own books to distribute in its
stores. Publishers fear "unfair" competition and other book sellers
don't want to sell a book by a competitor. The most vertically
integrated company is Advanced Marketing Services which is a
major distributor and a substantial publisher [about 400 titles per
year]. In a sense, publishers
selling their books directly to customers, perhaps via a website, are
engaged in vertical integration.
Conglomerate mergers involve two firms that do NOT sell the same goods and services. For example, when an entertainment firm in the theme park business purchases a book publisher, that is a conglomerate merger. In the past, diversification was an appeal in conglomerate mergers. The notion was that diversified subsidiaries would balance out fluctuations in cash flow because one business would do well when another was doing poorly. More recently, the major appeal has been synergy or the notion that intellectual content created in the publishing house could be profitably recycled in other businesses owned by the same firm. A conglomerate may also represent a change in the definition of the core business. For example, we are in the entertainment business or the education business or the science business and not in the book publishing business [which could be a good thing].
Although a "merger" represents two willing firms and an "acquisition" represents one firm taking over another, these two terms are often used interchangeably.
There have been many mergers and acquisitions in the last few years. An example was the acquisition of Grolier (encyclopedia and children's books) by Scholastic (children's books). The purchase strengthens Scholastic's institutional sales, direct mail sales, and foreign sales.
Although the merger of larger trade publishers dominates the news, most mergers are of small and medium-sized publishers. For example, IDG Books purchased the Macmillan General Reference Group from Pearson. Thomas Nelson, in Nashville, acquired Cool Springs Press and Rutledge Hill Press.
Although trade publishing receives the most attention, mergers have resulted in substantial concentration in several publishing categories. Rand McNally [now bankrupt] purchased Thomas Brothers Maps. Reed Elsevier (Anglo-Dutch) and Wolters Kluwer (Dutch) are the two largest STM and professional publishers in the world. Reed Elsevier owns L-N, Martindale-Hubbell, Matthew Bender (legal publisher) (bought from Times-Mirror), Marquis Who's Who, Cahners periodicals and Chilton books. Kluwer owns the well-known Commerce Clearing House (reference works).
Bertelsmann's acquisition of Random House in 1998 created the largest U.S. trade publisher (25% - >40% of the U.S. market depending on category) by combining Random and Bantam Doubleday Dell. Bertelsmann is now the largest trade publisher in the world. It also is the leading owner of book clubs.
As original owners died or neared retirement, publishing houses were often sold to raise money for heirs, to pay taxes, or because family members were not interested in the business. Most of the larger publishing houses today are the result of such mergers and buy outs.
The Late 19th Century was the age of trusts. Most text book publishers became part of the American Book Company which at one time had 96 percent market share. At another time most inexpensive reprint publishers were part of the United States Book Company. In both cases, the monopoly faltered with changing economic conditions and a few publishers who stayed outside. The political climate for trusts also changed.
After World War II, the demand for books increased dramatically. There were more educated people, more affluent people, and people had more leisure time. Education, especially with the GI Bill, became much more accessible. Mass market paper books became popular during the war. Federal money became available for education and libraries. Publishers wanted to expand, but lacked capital. Some larger publishers issued stock to raise money and some of that money was used to purchase other houses.
Book publishing became even more popular in the 1960s when opinion leaders argued that the U.S. was now in the "Information Age." Education and re-education would be the norm. The key to educational marketing success was having the right content. Book publishers had the content. Some conglomerates purchased publishing houses to take advantage of the forthcoming educational/informational boom. They would combine their electronic hardware and software with publisher software (content). This, it was felt, would dramatically increase the market for educational machines. Every major electronics company bought publishers: IBM, Xerox, GE, Litton Industries, Raytheon, CBS, and RCA. For example, RCA purchased Random House which purchased Knopf. Book publishers were to supply the intellectual content needed to sell electronic learning hardware. Unhappily, it was not a profitable match and most conglomerates soon sold their publishing subsidiaries. Growth and profit forecasts were too optimistic. The AV revolution never materialized. Federal and local funding was inadequate. The hardware was not compelling enough to warrant adoption. Schools couldn't afford the hardware.
In the 1980s, foreign publishers and media conglomerates were the major buyers and this is still true today. Because the U.S. is the largest book market in the world and is often a trend setter in popular culture and entertainment, U.S. publishers are highly desired. Note too that foreign companies, by law, cannot purchase U.S. broadcasting companies. The United States has an efficient and competitive book distribution system and a "deep pool of writers and editors." These mergers/acquisitions are also driven by a strong belief in synergy or the belief that content can be recycled and reformatted in a variety of profitable ways. Book publishing can be profitable. U.S. publishers are inexpensive to purchase because of the relatively cheap U.S. dollar. "To be a major publisher on the world stage, a company needs to be an English-language publisher."
It is much easier to buy an existing publishing firm than to establish a new one from scratch, especially if the acquiring firm wants to expand into profitable niches. Buying an establishing house gains immediate access to brand name authors, both front and back list. For example, Wiley purchased Sybex, the computer book publisher and gained access to its backlist of about 500 titles. The entertainment business is exploding overseas, and U.S. movies, TV shows, music, and books are increasingly popular with audiences world-wide [ignoring recent growth in anti-Americanism].
In 2006, the leading trade houses were:
The "big five" was responsible for 83 percent of the hardcover bestsellers and 78 percent of the paper cover bestsellers. Four more publishers enlarge the paperback percentage to 83.
The 2005 mass market leaders were:The largest "deals" were:
Bertelsmann began as a 19th Century Bible publisher and may now be the largest book publisher world-wide, and the fourth largest media conglomerate in the world. Its 2006, its net profit was about $2.1 billion. It was formerly number two in the world in magazine publishing (Springer Verlag for professionals and Gruner = Jahr for the popular audience), but sold its academic/scientific publishing [Bertelsmann - Springer] with about 700 periodicals and 4,000 new books per year. It owns two major bookstore chains in France It was number four in music recordings [BMG] but has merged its music business with Sony [may come undone with anti-competition concerns]. Bertelsmann is the second largest Spanish language publisher and has partnered with Kodansha to become a major force in Japanese publishing. Bertelsmann received some negative comment for its support of the Nazi government in the 1930s and 1940s. There has been considerable turmoil in the last few years between the family owners and Bertelsmann management. Under its U.S. umbrella are:
Pearson is the largest educational or textbook
publisher in the U.S. and the World. It is usually the second largest trade
publisher in the U.S.
These publishers are under the Pearson umbrella. This firm
publishes newspapers (The
Financial Times) and magazines (The Economist), produces radio and TV
shows (Europe's largest broadcaster), owns satellite TV broadcasting
and theme parks. Pearson Education is now the leading textbook
publisher in the U.S. The Education group also owns National Computer
Systems which scores tests and provides administrative software for
schools. There is also a web-based Pearson Learning Network.
While Viacom - CBS, this firm sold all but the Simon and Schuster trade group. It no longer issues education, reference, or professional books. It remains a notable and large U.S. trade publisher. It may be for sale. Major imprints include:
Previously, the Simon and Schuster educational and trade
groups were the largest in the U.S., but they were sold to Pearson.
Viacom is substantially involved in creating and distributing films
(Paramount), cable TV (MTV, VH1, Nickelodeon), network TV (CBS), home
video (Blockbuster), and theme parks. Its publishing arm, network TV
too, is seen as "mature" in contrast to the growth assets
left
under the Viacom name.
The News Corporation (Australian) is owned by Murdoch. The publishing group includes:
The Book of the Month Club group is
now part of Bertelsmann's Bookspan.
Holtzbrinck publishes newspapers, magazines (Scientific American) and owns a TV station.
These six firms accounted for 95 percent of the hard cover best sellers. The top five firms accounted for 79 percent of the hard cover best sellers and 78 percent of the paper ones.
Only two true reasonably sized independent publishers are left in the U.S.:
There are four dominant publishers:
Thomson was formerly known primarily as a newspaper publisher,
but it has left that business. Increasingly focused on digital products. Book imprints
include Gale Research, Westlaw, Wadsworth, Brooks Cole,
Delmar, Physicians Desk Reference, and Southwest as well as the
testing company Prometrics.
Reed Elsevier, known primarily for periodical publishing, is
now a major player after purchasing Harcourt's elhi publishing group.
Pearson has several well known education imprints including:
Reed
Elsevier, the Thomson
Corporation, and Wolters Kluwer
(also owns Silver Platter and Ovid) are the three largest. Kluwer has
recently left scientific - technical periodical publishing to focus on
business, health, and education. Some suggest that Kluwer would
like to sell its education publishers. Kluwer book imprints include
CCH, and
Nelson Thornes. Reed Elsevier book imprints include Martindale Hubble,
Butterworth, Shepards, Cahners, Chilton, Academic Press, Pergamon, W.B.
Saunders, and Mosby.
In contrast to the large foreign publishers, U.S.
publishers lack a global orientation and have little interest
in expanding abroad. This may be due to the fact that the U.S. is such
a large book market and also because it is difficult for foreigners to
purchase publishing houses in many foreign countries. However,
cooperative arrangements are possible and may be productive.
U.S. publishing dominates the English-speaking world and English [American?] is the major world language. Per capita book consumption in the U.S. has increased dramatically since 1947. Since 1957, the number of book stores has nearly tripled. The U.S. is a leader in trends and fads such as the Internet [social networking] and personal computers [iPod a good example]. The U.S. is a world leader in science and technology and in many of the social sciences. Book distribution channels are well-established and improving.
There has been a notable trend toward concentration in the entertainment business in the last few years. Six major firms dominate the world entertainment business:
The notion of synergy focuses on publishers as content providers. Both informational and recreational content can be used in a variety of ways by the same firm. Content from the book publishing house can be made into films and TV productions. For example, novelizations based on Star Trek films issued by Paramount are published by the house publisher Simon & Schuster. As a reporter said about Time Warner: "At one end is a rich lode of raw materials, with singers like Madonna; the journalists at magazines like Time, People, and Sports Illustrated; the producers of films like the "Accidental Tourist," and the authors at publishing houses like Little, Brown. At the other end--ready to distribute to the nation's living rooms the music, words and images that emerge--is a powerful entertainment engine that includes the nations' biggest pay television channel, HBO; the nation's largest cable television operation, and a publishing force that could even be exploited to spread more widely the good word about Time-Warner's personalities." However, Time Warner has sold its "mature" book publishing operation.
Subsidiary rights are kept in the house. For example, audio rights go to the house audio book publisher. Evidence on the success of synergy is fuzzy; it is not at all clear how much is hype and whether the claims are inflated. There are also questions about the ability of a large firm, especially a multi-national and multi-media one, to be creative and flexible.
After a considerable interest in synergy, those involved seemed to lose interest. This was especially true since in some cases it was notably unsuccessful. Sony is a good example. Its content did not help its playback device sales. However, in the last year or so, interest has bloomed. For example, HarperCollins works with the TV arm of NewsCorp to create programming based on its mystery and thriller titles. Random House has partnered with a division of NBC Universal, Focus Features, to develop, co-finance, and co-produce "a substantial slate of feature films" based on books published by Random House. Perhaps synergy is real after all.
There are several arguments in support of the larger publishing house. Acquiring smaller, focused houses is the best way to gain access to a growth area with minimal effort. Bigger houses have larger back lists and that may result in large, steady sales year after year [lots of cash flow opportunities]. Synergy is easier in a larger house. Larger houses find it easier to get the capital to compete for the big book or the brand-name author. Larger publishers have more visibility and impact in the marketplace. Larger houses may be able to take advantage of some economies of scale.
Critics fear that fewer and much larger publishing houses will mean fewer choices for authors wishing to submit a manuscript and fewer choices for the reader looking for something different. Large, profit-oriented publishers seem to emphasize a few brand-name authors and publish books that may have popular appeal but lack quality. Large media conglomerates typically demand profit margins of 12 to 15 percent. Traditional book publishers might expect 8 to 10 percent. Independent book stores complain that there are notably fewer mid-list titles and a substantial reduction in sales representative to "sell" new books and handle problems.
Costco created and printed 100,000 copies of Entertaining the Costco Way to be sold only at its stores. This cookbook and practical guide to entertaining focuses on brand name products available at Costco and is low priced. Similarly, Barnes and Noble has its own growing publishing list and these items get good visibility in B & N retail outlets. Some titles are not available for distribution elsewhere. Being able to provide unique items is one way for a retail outlet to distinguish itself from the competition.
While not always accepted, some students of book publishing argue that it is more than a business. Rather it is a combination of business and culture that makes a difference. As publishers become a part of a larger entertainment or information conglomerate, the special nature of publishing may be ignored. There is too much emphasis on brand-name authors and fad topics. Fewer quality books appealing to smaller audiences may be published. The identity and personality of the house merged into the larger firm is lost. Too, senior managers with experience in other sorts of consumer business may simply not understand book publishing and how to be successful in it.
Although rarely voiced, a few are concerned that the most of the largest and most visible U.S. book publishers are owned by foreign firms. There may be the possibility that foreign values and goals might not be in the best interest of the U.S. So far, no evidence of that.
As publishing houses merge or are acquired, there is less competition. Both authors and book buyers have fewer choices. For example, six companies have more than half of the market for K12 textbooks. About 70 percent of the magazine distribution business is controlled by five companies. There is only one national distributor for comic books.
Fewer firms also lead to layoffs that reduce morale, create dysfunctions, and provide fewer opportunities for those who wish to work in book publishing.
Since "economy of scale" does not appear to work well in most aspects of book publishing [it does work in book manufacturing and in fulfillment], it seems doubtful that the larger firm will be more efficient and effective. The "synergies" expected may not happen.
There is considerable anecdotal comment, but little evidence on the impact of
mergers and acquisitions on the author, the reader, and other book
publishers. In particular, impact on specific editorial decisions
appears to be minimal. Corporate focus on greater profitably has led to
increased emphasis on brand name authors and "hot" topics. Competition
for "commercially attractive" books has increased.
Book publishing is easier to enter than ever before. The
number of new firms continues to grow, but many face difficulty in
connecting their product to the likely reader/buyer. At the same time,
book prices have increased and traditional distribution channels have
narrowed.
Anecdotal evidence suggests that innovation is more likely to come from smaller firms.
Most mergers still involve two publishing houses. Mergers increase when business conditions are good.
Often, the acquired house appears to retain a reasonable amount of autonomy and their personnel do stay on.
Large publishers do retain some concern for their image and wish to publish some quality titles.
We seem to now have a two tier trade book publishing environment. Tier 1 consists of large firms who produce best sellers and brand-name merchandise for the chains. Tier 2 consists of smaller, generally personally held houses producing for independent book stores, direct mail, libraries and specialty stores.
There is more concentration today than in past. One estimate is that two percent of U.S. publishers are responsible for 75 percent of all titles published. The top 30 percent of U.S. publishers are responsible for 99 percent of all books published.
We are in a new age of multinational or transnational publishing with a few publishing houses dominant in several important Western countries. There are no U.S. equivalents. The largest U.S. publishers are small in comparison and seem uninterested in expansion abroad. These large foreign houses have the financial mass, product lines, and market management to move rapidly into new products and technologies.
At the same time, there has been major consolidation in the book selling business. The ten leading national bookstore chains account for more than 60 percent of total annual retail book sales.
As a librarian, discuss the assets and liabilities of the large, multi-national publishing house.
To what degree does "synergy" justify the acquisition of publishing houses by large entertainment/information firms?
To what degree will the Internet level the playing ground between smaller and larger publishers, allowing Americans to continue to have access to a wide variety of book content?
To what degree might "economy of scale" apply to a large publishing house or to a multi-format content provider?
To what degree does ease of entry eliminate concerns about
concentration and "bottom line" orientation in contemporary U.S. book
publishing?
Last major revision: July 2007.
