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Penguin Random House: How big is big enough?

It should be less about Amazon and more about going direct

Call me skeptical but I feel the merger between Penguin and Random House is less about creating “greater scale” and more about simple consolidation in a shrinking industry. Which organization is more likely to create the truly innovative, disruptive products of tomorrow’s publishing industry: a behemoth like Penguin Random House or some start-up working out of the proverbial garage? My money’s on the latter.

And if it’s really all about creating scale to deal better with Amazon, well, how big is big enough? Aren’t either one of those operations already large enough to manage Amazon? If not, are the two combined really going to make a difference there?

I’m not convinced the way forward for the big six is to get even bigger so they can push back on Amazon. The real solution is to create another distribution channel so they’re not  as dependent upon Amazon tomorrow as they are today. It’s called a direct channel and none of the big six are making much progress building one out. Yes, it requires a strong consumer brand. Yes, it means they need to build a site that offers compelling reasons for consumers to buy from it rather than Amazon, which is no small task. And yes, it also means they need to abandon DRM.

Instead of just merging I’d rather see one of the big six stand up like this small publisher and say “we’ve walked on eggshells for far too long…it’s time for us to get serious about building that direct channel and not worry about how our existing channel partners will react.”

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Comments: 7

  1. Direct channel == disaster for Big 6 … 5 … 4 …

    As near as I can determine, the big publishers long ago forgot who their real customers are. Their *customers* are big businesses and resellers: Amazon, B&N, etc. etc. Readers? We’re just blobs whose function is to cough up money and STFU. Complaints? Try finding direct contact information on Penguin’s web site. Better bring food and water to keep you going while you try.

    They have absolutely zero experience with people-as-individuals and the fact that their moods and responses will inevitably range from “This is the work of a god.” to  “Who at your organization can I beat to a pulp for publishing this trash.” And all other grades of response in between. And God help them deal with complaints about books, both pBooks and eBooks laden with errata. “Good Lord, man, don’t you know it costs MONEY to fix typos and eBook creation errors?”

    By all means, let them try. The public should experience them without pleasant-faced intermediaries and sock puppets.

  2. I think you’re absolutely right to see this merger as being motivated more by the usual considerations of consolidation and not likely aimed at offering any new strategic opportunities. Unfortunately, I don’t see much hope in the idea of Random/Penguin going direct–to-consumer with watermarked DRM-free eBooks–that is unless they’re willing to go head-to-head with Amazon and all the ramifications that that would likely bring. It’s one thing for a small niche press to take this route because Amazon likely won’t see the benefit of making an example out of them, but not so much with the largest publisher now turned direct competitor. I’d hate to be the CEO of Random/Penguin trying to ride out the cash-flow implications of having one’s entire list de-emphasized or eliminated from Amazon’s various search and marketing algorithms. Even the thought of this outcome would weigh heavily against going this route. And try keeping and attracting new authors if you’re on the outs Amazon while you’re working to build a customer base.

    I’d also wonder if the eCommerce entity that could be a true alternative for customers would need to be built on some profoundly different “value proposition” than the one Amazon now provides its customers. Competing with Amazon on price and ease of ordering can’t be the way to go. In addition to DRM-free eBooks, a true alternative to Amazon would have to compete on entirely different ground.

    •  “I’d hate to be the CEO of Random/Penguin trying to ride out the
      cash-flow implications of having one’s entire list de-emphasized or
      eliminated from Amazon’s various search and marketing algorithms.”

      Bezos would be utterly stupid and incredibly insane to do such a  thing. The antitrust lawsuits would keep Amazon tied up in knots for years, as well as doing massive damage to the company’s reputation. Besides, as noted in the first comment on this posting, the Big Publishers will be able to do enough damage to themselves with clumsy, inexperienced and heavy-handed “direct contact” than Amazon would EVER be able to accomplish.

      • Actually, Amazon has in the past removed buy buttons from the listings of major publishers titles during negotiations over discount terms and fees. What I’m suggesting would be a much more subtle move, having to do with Amazon’s algorithms that are used in their marketing programs (if you bought x then y, for example). This is also something Amazon has done in the past and is basically invisible to the consumer though it would strongly effect sales. I don’t see how this would have anything to do with anti-trust laws; I don’t think a retailer can be compelled to carry the products of some particular publisher or manufacturer. 

  3. I could not agree more with all of these comments. I think small presses, both “traditional” and e-publishers, are at the forefront of innovation in every area of publishing.

  4. I’d say it was five years too late to deal with Amazon, which is my go-to place to find anything, not just books for my kindle app on my phone. I love dead-tree books as much as anyone, but that’s not the only thing Amazon sell. 

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