Publishing Industry Market Update; Vol. 2, Issue 11 -November 4, 2021

The United States v. Penguin Random House  

Well, at the last minute, the Department of Justice decided to make a little noise in the PRH/S&S merger that we’ve been talking/worried about. In recent issues, we reported that PRH CEO Markus Dohle assured literary agents on a video conference that after the merger the imprints of the “Big Two Become Huge One” publisher would continue to bid against one another for publishing rights—something that would be an industry-first for co-owned publishing imprints. But the DoJ doesn’t believe them. In the suit, the DoJ called that a “proposal that defies economic sense, can be evaded or violated without detection, and is unenforceable.” The DoJ scoffed, pointing out that, “in short, after securing nearly half the market for publishing rights to anticipated top-selling books, PRH asks this court to trust that PRH will not use its market power to maximize profits for the benefit of its shareholders but rather, it will essentially compete with itself to reduce those profits.”

So, the Justice Department’s Antitrust Division has filed to block the sale, claiming that the post-merger 1600-pound gorilla would collectively control more than two-thirds of the publishing market for acquiring new books from authors, resulting in “substantial harm” to those authors, and ultimately to consumers as well. That “outsized influence” would allow PRH to exert pressure downward on what authors are paid for their work, the DoJ states.

Predictably, Bertelsmann’s PRH immediately issued a statement through Dohle that it will “vigorously defend” the suit, attempting to claim that the merger will “benefit all constituents, including authors, agents, retailers and, ultimately readers, and will do nothing to undermine the robust, competitive publishing landscape that currently exists.” 

Not surprisingly, S&S owner Viacom issued a similar statement opposing the DoJ’s interference. Though that’s to be expected since Viacom was the recipient of a bid by PRH about which the next highest bidder for S&S (NewsCorp/HarperCollins) said “[t]here is clearly no market logic to a bid that size – only anti-market logic. Bertelsmann is not just buying a book publisher, but buying market dominance as a book behemoth.”

This one's gonna take some time to work its way through the D.C. District Court, but you can count on Author Coaching (and the lawyers at Yates & Yates who geek out on this kinda stuff) to keep you up to date on the blow-by-blow.

Cooling Off for Summer…and Beyond?

After a scorching initial 6 months, 2021 has cooled slightly. The sale of print books was down 2% in the summer quarter compared to a year ago, after seeing January through June exceed the prior year by a whopping 18.5%. The first half of the year numbers clearly benefited from the COVID-soft March and April 2020 comparison. And Q3 2021 was going up against a presidentially fueled Q3 2020. For year-to-date 2021, we still find print books holding an 11% lead over its 2020 cousin.

NPD BookScan analysts forecast that we’ll finish 2021 6%-9% over the stellar numbers we saw in 2020, so that’s good news. Holiday consumers are buying early this year, pushed mostly by the dire supply chain news (see last month’s Market Update). And historically consumers who shop early spend more. With supply chain problems persisting at least through the gift-giving season, most experts expect that shoppers may not buy the book they are looking for, but are still likely to purchase an available book instead. That’s good news for backlist titles still occupying shelf space, which were already accounting for 69% of all print book sales year-to-date (up 2% from the prior year).

The projections for 2022, however, are not quite jolly, as the supply chain debacle and the possible erosion of consumer confidence brought on by the threat of inflation will in all likelihood lead to a soft Q1…at least.

Amazon’s Woes

Relative as they may be, Amazon’s numbers are showing that even the world’s most dominant company isn’t exempt from the supply chain and labor shortage issues affecting so many (if not all) industries. Amazon Q3 2021 sales growth from its online store division (what we all think about when we think about Amazon) slowed to 15% over the prior year’s numbers, when the world went online to buy just about everything, fueling Amazon’s growth of 33% in Q3 2020 (and 50% in Q4 2020). Even though sales were still up, Amazon’s net income fell by half in Q3, from $6.3 billion in Q3 2020 down to $3.2 billion this year. The drop is the result of billions more in costs to the online retail giant, from labor to shipping costs (fuel prices affect everyone).

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