Source: PandoDaily, Nov 2012
Still profitable, but under serious threat from Amazon and the shifting digital sands beneath their feet, publishers are opting to fight back by merely getting bigger. Random House and Penguin are tying up in a $2 to $3 billion deal, and the Wall Street Journal reports that HarperCollins and Simon & Schuster are mulling a deal as well. This would leave an industry already dominated by six big publishing oligarchs even cozier — and significantly more lopsided with two big giants and two smaller companies.
But Amazon isn’t stupid. They’re overpaying intentionally to keep advances high (and high advances will bankrupt publishers). And they’re also taking away all the authors who actually move units. They gave Seth Godin really favorable terms on a deal. Only a matter of time before they snag a James Patterson or some other big genre fiction name.
Amazon could probably afford to lose $20 million/year in their publishing arm just to put the other publishers out of business. I think that’s what they’re trying to do–throw money around in an industry that doesn’t have any, until Amazon becomes not only the only place where you buy books, but the only place that publishes books, too.
Given this reality, it’s clear the publishers are trying to band together to give themselves even deeper pockets. Somewhere Jeff Bezos is doing his signature cackle that the publishers have been baited into trying to play his game. It’s like bringing a knife to a gun fight, when the other guy has a semi-automatic gun that shoots crazy cash and distribution. Bezos knows what anyone with a basic grasp of math knows: They could all merge together and still not out-spend him. He can lose money on every big book deal; the publishers cannot. You think he’s not crazy enough to keep losing money until he dominates an industry? Try him.