Tag Archives: the big 6

What Does the Random House/Penguin Merger Mean for Independent Presses?

Of course it is early to speculate about the effects of this merger, but if we think about it as the latest step in a process that has been moving forward for the last decade or so, it will not seem very surprising.

A place to start is with the lead sentence in last week’s article in the New York Times:

The book publishing industry is starting to get smaller in order to get stronger.

This is the sort of press coverage that drives indie presses crazy. It perpetuates the utterly false notion that the Big Six publishers are all that counts in the book business. In fact, they account for only about 50% of bookstore sales. I think many assume their share is much larger.

If we accept the spurious notion that the Big Six publishers and the “book publishing industry” are the same thing, then it is true that the book publishing industry is “starting to get smaller;”  actually has been getting smaller for years. Unit sales for the Big Six as reported in point-of-sale data are 23% less now than they were in 2007; these numbers actually understate the decline, because the number and kinds of stores included in the point-of sale data have increased over time.

However, the sales of all the other publishers captured in the point-of-sale data have only declined 18% compared to 2007, or 5% less than the Big Six publishers’ sales have fallen. This, of course, means that the market share of the “others,” the non-Big Six publishers, has increased. But how about unit sales in absolute terms? Indie presses depend more on sales made outside of the book trade than big publishers do, and these sales, which go mostly unaccounted for in the available point-of-sale data, have grown much faster than sales inside the regular book trade. Gift stores, museum shops, and specialty stores in general are natural customers for the niche titles independent publishers mostly produce.

Such sales are very hard to track on a national basis, but at IPG, we have seen dramatic increases in sales to such non-standard book trade customers—in actuality, much greater increases than in the regular book trade. So it may be that sales of indie publishers have increased, not just in terms of market share, but also in terms of total units sold.

There are multiple reasons to explain the growth of the indies, but a main one is that the big houses can no longer make a financial success of midlist titles. Their overheads are too high to even think of publishing a book that might only sell 3-5,000 copies—but such titles are the bread and butter of small and medium sized houses, and book buyers, who really want special interest and niche titles. So much so that the number of publishable niches is proliferating right along with the explosion of interest groups we see reflected on the internet.

The Random House/Penguin merger is just the first step in the consolidation of the Big Six and I think that their share of the market will continue to decline. Of course “the suits” say otherwise. According to the New York Times article, one spokesperson stated:

The merger would not result in closing redundant imprints and less editorial independence. The idea of this company is to combine the small company culture and the small company feeling on the creative and content side with the richest and most enhanced access to services on the corporate side.

Right—except every one of the things that will not happen will happen, quickly, right after the merger is completed. Heads and imprints will roll right and left.

Indie publishers do not have to pretend they have a “small company culture” or “editorial independence.” They come by these desirable traits naturally. As the room at the top contracts, there will be more room in more markets for us.

Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

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An Update on Amazon and a New Direction for Gone Publishing

IPG and Amazon have agreed on terms. As of Friday, May 25th, the 5,000 IPG Kindle titles that were taken down in late February have been put back up on the Amazon site, plus an additional 500 new Kindle titles prepared by IPG over the last three months have been added. To help make up for the lost eBook revenue suffered by its client publishers, IPG will distribute Kindle editions at no charge to publishers for the period from June 1st to August 31st, 2012. As for the overall health of IPG and its client publishers, year-to-date sales are up 26% over last year.

These are complicated times in the book business. While IPG certainly does not seek conflict with its customers, it may be that a certain amount of pushing and pulling is inevitable in our industry until settled terms of trade for the new electronic book formats can be agreed upon by all participants. We hope that our dispute and subsequent agreement with Amazon have helped to advance this difficult but necessary adjustment.

The recent news accounts of the way the “Big Six” publishers operate have made it perfectly clear that independent publishers inhabit an essentially different world. This blog will now return to its original purpose, which is to promote a well-informed discussion of that world. Knowledgeable guest bloggers will be invited to express opinions that challenge received wisdom, and IPG will not shy away from posting well-argued comments even if they rock a few boats.

Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

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The Trouble with eBooks: A Recap

Most of the blog posts put up in this space over the last two months have circled around three very major issues in regard to eBooks. Here they are, together with an account of what if any progress has been made in resolving each of them.

eBook Distribution: What’s the Deal?:
No one who is really privy to hard information about what is going on is able or willing to speak out.

Non-disclosure and Confidentiality Agreements, Most Favored Nation Clauses in distribution contracts, and then out of nowhere, the Department of Justice restraint of trade litigation against most of the biggest houses—all these things conspire to silence any informed debate about the issues. And to be blunt about it, most independent publishers feel abject terror at even the thought of confronting Amazon’s enormous market power. This part of the problem has not improved at all.

Market Share: You’d Be Surprised What the Big 6 Controls:
“The Big Six publishers, who control about half of the entire market for trade books, have been able to drive a better bargain with Amazon than the independent publishers could.”

A structural difference of that magnitude (roughly 20 points of discount) would put the independents out of business in short order (See also At What Discount Should Publishers Sell Ebooks to Resellers). This part of the problem may have eased a bit. The Department of Justice’s litigation could have the effect of largely taking away the discount advantage briefly enjoyed by the Big Six which would level the playing field. We will see.

The Oxymoronic Notion of Digital Content: Part II:
“The 50% plus take that Amazon insists on for distributing eBooks from independent publishers bears no relation at all to the cost of delivering that service.”

A free market and real competition would squeeze out excessive margins wherever they might be found in the supply chain from author to book consumer. So far we have not had anything like a free and competitive market for eBooks. On this issue, however, there is some very good news on the horizon. Microsoft’s investment in Barnes & Noble’s eBook programs is very welcome. Two other eBook programs, which look to be robust and publisher friendly, are well in the works. Of course for the reasons explained in point one above, I can’t tell you a thing about them.

Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

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Market Share: You’d Be Surprised What The Big 6 Controls

Independents v Big 6 Market Share
(Based on Nielsen Bookscan Data)

How Much of the Total Market for Books is Controlled by the Big Six Publishers?

I have not seen any sort of figure, hypothesis, or guess in any article or blog about this question, which is odd, because the extent of the market domination of these giant publishing houses is a crucial factor in understanding the issue of the Agency Model versus the Wholesale Model for eBook sales.

There is a quite complete account of this issue previously posted on this blog under the title “At What Discount Should Publisher Sell EBooks to Resellers,” but the short version is that the Big Six used their market power to compel Amazon and other resellers of eBooks to accept 30% of sales while all the other publishers have so far had to give Amazon and most of the others 50% of sales (Apple deals with everybody on agency terms). Obviously, the extent of the market dominated by the Big Six is a fact we need to know.

A week or so ago, I logged on to the Bookscan website (this is a subscription only service, provided by Nielsen to the book industry, that tracks point-of-sale data gathered from most of the booksellers in the US.) I added up all the year-to-date unit sales of the Big Six, and then divided by the year-to-date unit sales for all of the publishers tracked by Nielsen. The answer to this curious math problem turned out to be roughly 51%.

How reliable is this percentage? There are of course many experts who will find fault with any straightforward assertion; the Truth, they will tell you, is always far, far more complicated than you think. Here are some sample objections: Yes, this 51% is units rather than dollars. Yes, many companies that sell books as a sideline are not tracked by Bookscan. Yes, it is probably true that some professional books and text books get counted.

But let’s not allow the perfect to be the enemy of the very good. The Nielsen data is based on sales to consumers, not on shipments by publishers to stores, which used to be the only data we had. The actual market share of the Big Six may well be some points higher or lower than 51%, but so what? All we need here is a reliable generalization.

Is 51% a large share or a small one? I think it is about right. The book industry needs some very large players with big marketing budgets and high-profile authors to keep the American public excited about books. And if the big guys have 51%, that leaves plenty of room for some quite big and well-established independents such as Norton; for quite a few middle-sized prosperous ones like Chicago Review Press; and for the thousands of small houses who are prospecting for the new authors and subjects that will feed our intellectual life in the future.

So if these independents have 49% of the market, isn’t that enough for them to find a way to get a fair deal with the resellers, a deal that does not keep them at such a tremendous competitive disadvantage to the Big Six?

Curt Matthews

CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

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