13/02/06

The Huffington Post on the death of US publishing - and the ‘fallacy of synergy’

“It’s a given that Americans don’t read books…”

the deal actually is part of a broader trend where American media outfits are getting rid of their book publishing subsidiaries. Over the last decade European companies have emerged as dominant players in the book business, taking over increasing numbers of major U.S. commercial houses and imprints.

Random House now is a division of Germany’s Bertlesmann AG. HarperCollins is owned by News Corp. and Viking is owned by Pearson Plc, both British companies. The German media giant Verlagsgruppe Georg von Holtzbrinck controls several prestigious American imprints, like Henry Holt and Farrar, Straus & Giroux. And now France’s Lagardere will have Warner Books and Little, Brown.

After the Warner deal closes only two major commercial book groups will be owned by American companies: Viacom’s Simon & Schuster and Disney’s Hyperion. Viacom Chairman Sumner Redstone has said he’s ready to sell Simon & Schuster. And it’s only a matter of time before Disney comes to the same conclusion with Hyperion (though it likely will keep its children’s publishing division, which handles the tie-ins for Disney’s blockbuster movies.) Nobody should be surprised if the eventual buyer of at least one, if not both, of these publishing groups is a foreign media conglomerate.

and on the ‘fallacy of synergy’,

he basic idea is that two entities with similar processes and products can be run more efficiently by combining facets of the business like record keeping, inventory storage, distribution - you get the picture. Synergy always has been a logical reason for companies to merge.

The problem is that in the ’90s companies started seeing synergies beyond the physical benefits of eliminating overlapping positions. In the media industry, the Internet revolution brought an increased fascination with “content,” and many companies concluded that with this new technology there were synergies in combining different producers of “content” under a single corporate umbrella. The idea was: a publishing subsidiary puts out a book, which is then plugged in the company’s magazines, on its radio stations, by its television news division, and on its websites, and eventually winds up as a movie or television series developed by the company’s film production division.

Sounds brilliant. But there was only one problem. “Content” isn’t created that way.

Very few books are tailor-made for film or television. And broadcast, print and electronic news divisions view themselves as journalists, not corporate pitchmen. So although some books, movies and television programs may wind up being covered by a company’s news shows (see the curious relationship between Simon & Schuster and “60 Minutes”) there’s no guarantee that it will happen. In short, for content-based synergy to work news divisions would have to be pure corporate marketing arms and publishing divisions would have to be farm teams for film and television producers.

and, specifically,

Say what you will about Icahn and his tactics, there’s a very real logic to his arguments in this case. Time Warner is a dysfunctional company, with many different moving parts that probably would be better off on their own or in more appropriate environments with real synergies.

The sale of its book group is a perfect example. Synergy of “content” may have turned out to be illusory, but there are synergies in the book industry. As European publishers are figuring out, since the book market is becoming increasingly global, a company can be run efficiently by combining houses from different countries, and that print in different languages, as long as there are overlaps in various back office functions.

Following that logic, the Warner book group is an ideal fit for Lagardere. The company has thriving publishing operations in France, Spain and England, but none in America, a key book market for an operation with global aspirations.

Oh, just read the whole thing.

Posted by Peter Collingridge in Future of the book, Publishing.