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Writer Wednesday: Capitalism Pt 3.- A Case of Incompetence

Hello authors. Here it is, the hot, festering knot at the center of this mess. Now in case you missed the first two installments of this series, in part one, we talked about who owns the big publishing houses and in part two, we talked about the final remaining bookstore chain, Barnes & Noble whose new buying policies are a huge blow to the majority of authors. There is a reason we took a pause to talk about Barnes & Noble's decision because it feeds directly into what the Department of Justice revealed when they pulled back the curtain on Big Publishing.



Now we've come full circle. Penguin Random House first purchased Simon & Schuster back in 2020, under the corporate friendly Trump Administration. The acquisition was on track until Biden's Department of Justice slapped it with an Anti Trust suit due to the imbalanced consolidation of the market. Of the Big Five houses, Penguin Random House was already the product of a previous consolidation between Penguin and Random House. If you remember the stats from part one, this current iteration is already at the top of the heap, making over half a billion dollars more than their nearest competitor Hachette. The merger would pull in an even larger piece of the pie and heavily imbalance the publishing market.


In the weeks this case stretched, the writing community learned a great many startling statistics that were worse than they realized about the realities of publishing under the Big Five. But what compounded the frustration of the writing community as a whole was how Penguin Random House approached their defense against the Department of Justice.


When the proposed merger between PRH and S&S was first announced in 2020, the prevailing narrative was that a combined PRHS&S would give helpless publishers the leverage they needed to push back against the almighty force of Amazon. -Constance Grady, Vox

Capitalism Part 3: A Case of Incompetence


There are so many baffling aspects behind this argument. Trying to pass off Amazon as a competitor rather than another third party buyer is not a good look, because although programs like Kindle Unlimited, Kindlevella, and Amazon's self publishing tools allowed authors to 'undermine the traditional publishing machine' Big Publishing still controls 80% of the market.


Amazon is also a third party seller. Big Publishing Houses don't ignore that it exists. In fact they list ebooks, paperbacks, and hardcovers on Amazon at brick and mortar prices. This argument quickly cracks when an email surfaced from PRH CEO Markus Dole that admitted he never bought that argument and a goal of the S & S merger would be to become an 'exceptional partner to Amazon.'


During the course of the trial, PHR dropped a lot of shocking facts. How 90% of their books sell less than 2000 copies. How, of their 58,000 released last year, less than half sold over a dozen physical copies. How PHR tried to claim that anticipated top selling books weren't marketed differently than titles that received lower advances. (The greatest lie.)


PRH stated their total marketing spend encompasses 2 percent of revenues. That’s about a $55 million marketing spend on annual sales of about $2.7 billion.

Though PHR claimed they didn't know which titles would succeed in the market, those titles that had marketing thrown at them had greater exposure and thus, greater chance of making sales. The system feeds itself and the marketing controls which ones rise to the top. If a title out performs its expectations, that is good for the author because it allows them to negotiate for a higher advance next time, but when the marketing is so skewed, or marketed poorly, or non existent for so many titles, the onus falls heavily on the author to make magic happen. This is especially troubling when the mid point advances of $50-$250k that earned out are essentially vital to the big houses, but if an authors fails to earn out, they could be punished with a lower advance if they manage to sell a new book to the publisher at all.


While PHR claimed the merger wouldn't change anything in the publishing landscape, Agents and Authors were quick to point out how internally, there would be less competition for titles and lower advances for authors.


That is the real danger of the Penguin Random House and Simon & Schuster merger. Big Publishing would create a Monopsony.


What Monopsony Means for Authors


Monopsony is a buyer's market. Instead of a Monopoly where there is only one seller in town that can jack the price to whatever they see fit, there would be one buyer to sell product to.


Think of a town, where a single big business is the only employer. They can set whatever wage they want, no matter how skewed that wage may be.


If the PHR and S & S merger goes through, analysts estimated they would control 50% of the market share.


The government argues that with this combined market share, the proposed PRHS&S would be able to buy books from authors with minimal competition. It would be able to offer lower and lower advances, and authors would have no choice but to accept these lower offers. -Constance Grady, Vox

PHR claimed this wouldn't be the case due to the system of separate imprints in place that acquired titles to suit their brand, however, at the end of the day, at the top of the heap is the billionaires. PHR can argue all the incompetence they want, but this comes to money.


Barnes & Noble's move to limit hardback buying might make enough noise in the industry for the to consider changing their hard cover production policies, but if PHR/ SS becomes 'an exceptional partner' to Amazon, why would they?


Will this result in self publishing & indie houses gaining a greater piece of the market? Time will tell, but if the merger does go through and in turn throttles acquisitions, Indie publishing may see a full blown renaissance. In the sphere of Big Publishing, these changes are disheartening but may also produce substantial changes so the market doesn't run itself into the ground.


Conclusion


It's a mess and discouraging but, authors, I implore you to remember that stories are the lifeblood of society. Tell your stories. Explore new paths to share them. Not all manuscripts should be shelved when there are so many different avenues to explore. If you write the story of your heart, don't let the silence of industry stop you from pursuing your dream and remember that success has many shapes.


Resources & Further Reading


https://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/90032-doj-v-prh-all-our-coverage.html

https://www.nytimes.com/2022/08/01/business/penguin-random-house-antitrust.html

https://www.vox.com/culture/23316541/publishing-antitrust-lawsuit-merger-department-justice-penguin-random-house-simon-schuster

https://www.justice.gov/opa/pr/justice-department-sues-block-penguin-random-house-s-acquisition-rival-publisher-simon

https://www.nytimes.com/2021/04/18/books/book-sales-publishing-pandemic-coronavirus.html

https://www.tonerbuzz.com/blog/how-many-books-are-published-each-year/

https://mailchi.mp/hotsheetpub/bn-backlist?e=d650b3b0a0




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