Mergers and acquisitions in the publishing world
Traditionally, publishing has been seen as the preserve of a host of family-owned firms but as technology has evolved away from old-fashioned print-based media, publishing, as with so many other sectors, has been left re-evaluating its existence and considering how it should seek to proceed in the future.
As a consequence of changed ways of working, the last few years have seen a lot of activity in the field of mergers and acquisitions, as the industry continues to consolidate in the face of much-changed market conditions. Now with the worldwide economy gradually improving and confidence returning, more clarity is beginning to emerge about how the market is evolving to incorporate both print and digital publications, and which niches each will become best placed to exploit.
Broadly, the industry is now considering how best to reflect the shifting trends in the world book market; how to gain a greater understanding of digital formats and which groups and sectors it’s most suited to, as well as embracing other technological developments as they occur.
Who’s merged with whom?
The most notable consolidation of 2014 was HarperCollins acquiring Harlequin for C$455 million, though this purchase was dwarfed by the massive merger of Penguin and Random House the year before, which combined the two largest publishers in the world. Smaller mergers and buyouts are happening too, as companies with an eye on the future seek out prey among those that have stalled and failed to adapt, but which have a foothold in a target sector.
It’s covering gaps in a company’s portfolio that is often the biggest driving force behind takeovers, as with an increasingly globalised and digitalised marketplace publishers are needing to enlarge themselves in order to provide extra negotiating leverage in a market where they’re often competing against the giant media conglomerates. It shouldn’t be forgotten that the average annual revenues of many large publishing houses barely equal a week’s worth of trading for Amazon. A sobering thought in a highly competitive industry.
This trend was seen once again in 2014 as Hachette Group’s plan to buy Perseus fell through, as the necessary agreement to close the transaction wasn’t reached at that time. The intention had been to allow Hachette to add to its non-fiction portfolio, so instead they acquired Black Dog & Leventhal at the end of 2014 to fill that particular gap. Eventually, the original intended purchase was completed in March 2016.
Impact of digital
With the digital market now beginning to mature, there is increasing consolidation among companies in that field too. Open Road snapped up two of its rivals in the same year whilst Vook did similar, allowing it to diversify into digital-content.
Another company, Start Publishing, itself a relative newcomer, also made two purchases – Whiskey Creek Press and Cleis Press – announcing its intention to build a much bigger presence in the ebook market. Start now has a backlist of more than 5,000 titles and remains ambitious for further expansion, so there is likelihood of further acquisitions in the years ahead.
Controversies over pricing
One issue of digital publishing that refuses to go away is the debate around ebook pricing, and this too makes further consolidation increasingly likely. Whilst the resolution of the dispute between Hachette and Amazon over ebook pricing in late 2014 was generally a welcome development, tensions still remain within this rapidly developing sector of the market.
It’s becoming clear that for traditional publishers, collaboration alone is often not enough; Amazon’s successful case against Apple and six other publishers for fixing ebook prices makes any form of collaboration, whether formal or informal, look worryingly anti-competitive. Hence mergers and acquisitions are increasingly seen as the best course for strengthening one’s negotiating position in a market dominated by big players.
Change on the horizon?
All this suggests that ultimately the publishing industry will be reduced to a few large houses, but that’s not necessarily so. The growth in self-publishing is a threat that could yet diminish the strength of the larger publishers as they wrestle with their inflexibility against more nimble digital specialists and independent publishers.
Already, developments in the digital field have left the way open for technology orientated start-ups to push the boundaries of digital publishing and change the way we interact with digital content, so it’s a real possibility that over the next few years it’ll be all-change once more for the publishing industry.
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