Monday, May 12, 2008

Is the World Watching Random House?

The FT speculates with the aggrandising title, All Eyes on Random that we are all on the edges of our seats wondering who will be the next CEO of Random House. The paper suggests that RH is set to be managed by someone outside the industry either from the services unit Arvato or the Direct Group. From the article:
People familiar with Random House’s parent Bertelsmann said that the German media group had decided against promoting Random House UK head Gail Rebuck or German chief Joerg Pfuhl in order to bring a fresh pair of eyes to the
business. In his first high-profile personnel decision, Bertelsmann chief executive Hartmut Ostrowski is expected to opt for a Germany-based executive from either media services division Arvato, the unit he once ran, or book-clubs unit Direct Group.
Bertelsmann is famous for placing relatively young executives in positions of high responsibility and the paper goes on to mention one Marcus Dohle a 39 year old executive at Arvato.

Noting how Arvato under Ostrowski was able to expand the size of their competitive marketplace by expanding their business offering, the paper suggests that is how Ostrowski would like Random House to think. Other publishers in the professional and information segments have been doing this successfully for a number of years, but the strategy has yet to be proven in trade. Publishers such as Elsevier and West now compete in markets that are an order of magnitude larger than what could be considered traditional publishing. I believe something of the same model can be developed for trade and all of the major trade publishers will be thinking the same thing. Time will tell which publisher gets there first.

And there is more from New York Magazine:
A stronger personality might have disciplined Random, but there’s a good case to be made that the conglomerate was a victim of its own strategy. Size gave it strength against bookstores, but big-box outlets and Amazon provide sales velocity now. Random, and the rest of the industry, has little or no leverage with them. Were they really going to keep Grisham out of Costco? What would they get in return?
Meanwhile, Random’s size became a liability. Even with megahits like Bill Clinton’s memoir and The Da Vinci Code, the company’s annual revenue has been stagnant. To maintain its 20 percent share, the company has to publish around 2,000 titles, while more-efficient rivals like Hachette do under 500 titles for about 10 percent of the market. It’s a quarter of the work for half as much market share.

Personally, I find the construct of this article a little silly. It ends with the suggestion that Olson saw himself as 'last of the publishing moguls' - did he? I'm not too sure that one holds up.

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