Penguin and Random House merge: should we care?

Instead of a big six in publishing, there will be a big five, as the corporate owners of Penguin and Random House have announced a merger.

The deal, analysts said, would give the new company, to be called Penguin Random House, greater scale to deal with the challenges arising from the growth of electronic books and the power of Internet retailers. Publishers are increasingly worried about the leverage wielded by Internet giants like Google, Apple and, especially, Amazon. These companies have vast resources to invest in new technology, like digital sales platforms, and the size to let them negotiate better terms on prices.

The Times article mentions the usual “synergies” that come from a merger–combine warehouses, for example, and you can decrease per-copy costs of printed books.  There’s also something about emerging markets that I suppose makes sense.  But the big issue seems to be ebooks and digital media.  The Wall Street Journal says:

Mr. Makinson [Penguin CEO] said the merger will allow the companies to invest more heavily in social media and other new technologies. With fewer traditional bookstores around, he said, “it becomes harder and riskier to take a chance on new writers because you can’t be sure of finding an audience.” Social media can help remedy that.

I find this pretty baffling.  What kind of investment do you need for Facebook, Twitter, etc.?  And big publishers haven’t been taking a chance on new writers for decades now–how is digital media going to make this change?

The Times article also suggests that the new company might develop its own e-reader, which is beyond baffling:

The combined company is expected to invest heavily in e-books and what Mr. Dohle called digital product development. He said that did not necessarily mean it would produce its own e-reader device, as some in the industry expected.

And what does it mean to invest heavily in ebooks?  What is there to invest in?  Anybody can create and sell an ebook for approximately zero dollars.  What does the additional investment get you?  (Actually, I’m just talking about fiction here; I can see all kinds of cool things publishers could do with nonfiction ebooks if they got creative.  So let’s hope that’s what they mean.)

Anyway, for major authors, this can’t be good news.  Even if the new company doesn’t reduce the overall number of imprints, it’s hard to believe they’ll be competing against each other as aggressively as if they were separately owned.  For new or minor authors, maybe there’s some benefit, but I can’t quite figure out what that is.

For readers, the news could be bad if somehow the combined Penguin Random House manages to negotiate a better deal with Amazon, forcing Amazon not to discount as much (including their ebooks, once the agency model goes away).  But that’s going to be a hard sell if Amazon controls, say, 75% of the market (it currently has about 60%, but that will presumably rise once it can discount again).

Meanwhile, Senator has dropped to #3858 on Amazon.  Damn–what did I do wrong?

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