How Dead Is the Book Business?

By ADAM DAVIDSON - Published: November 13, 2012  - New York Times

When you see a merger between two giants in a declining industry, it can look like the financial version of a couple having a baby to save a marriage. At least that was my thought when Random House and Penguin, two of the world’s six largest publishers, announced that they were coming together last month. Ever since Amazon began ripping apart the book business, the largest houses have been looking for a way to fight back. If this merger is any indication, they have chosen an old-fashioned strategy: Size.

Illustration by Peter Oumanski

A combined Penguin-Random House, which would control a quarter of the global book market, is a conglomerate designed to take on another giant, though it’s not exactly a fair fight. Because the new entity will only have about a twelfth of Amazon’s annual sales, most observers expect that this is just the beginning of a series of mergers — like those in the music business — that will take the Big Six publishers down to the Big Three and perhaps one day even the Big One. As John Makinson, Penguin’s chief executive, told The Times, “We decided it was better to get in early rather than be a follower.” The question is whether this strategy will work. 

There are two competing predictions about commerce in the digital age. One is that companies will get smaller and more disruptive as nimble entrepreneurs can take on giant corporations with little more than 3-D printers and Web sites. The other envisions a few massive companies — like Procter & Gamble, Apple and Nike — that design everything themselves, have it manufactured cheaply in Asia and use their e-commerce sites to gather information about their customers.

Full story at the New York Times