Thursday, February 07, 2013

The Big Merger - Interviews with some 'industry experts'

Earlier this year, Book Business Magazine asked some 'industry experts' and I were asked to discuss the pending merger between Random House and Penguin.  Four of us have some interesting perspectives.  Here is my section, but read all of them.
"Pearson and Random House have been talking about this for a while. They've been intellectualizing it for a lot longer than Simon & Schuster and HarperCollins [have] should they end up together," says Cairns, referring to reported preliminary merger talks between two more of publishing's titans.
Why are mergers and acquisitions on everyone's minds?
"I think because they believe scale is going to be the only way that they can really compete," figures Cairns. "They need to extract more revenue out of their assets, and by combining operations, they'll be able to push more content and more physical units through their operations."
Cairns cites physical properties, such as warehouses. "We know volumes in physical books are declining. They need to fill up that space with something, and it would be good if they could find other books. They'll be in a position where they'll have much greater volume and get more value out of the assets that they already own.
"My own view is that it's going to happen without too much of a hiccup," he says. "What happens next with other trade publishers is going to be interesting to see. In addition to rumors about HarperCollins and Simon & Schuster, says Cairns, "Hachette has always been suggested to have a lot of money to spend if they wanted to spend it."
With regard to the notion that the new entity will enjoy leverage over Amazon, Cairns is doubtful. "We've seen how aggressive Amazon can be in negotiating with publishers, turning the tables on them, turning off their buy button, things of that sort. I think that at best there'll be some type of equilibrium. … They've all got to sell books. Random Penguin is going to end up with a great stable of authors and that's going to be valuable, and Amazon wants to be selling them."
Read the whole article here.

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