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Readers Would Be Harmed by Further Book Mergers

May 24, 2021 , , , ,

The publishing industry is growing increasingly concentrated as publishing house giants continue to merge. This hurts both authors and readers, in more ways than one. In a concentrated industry, prices are higher for readers, and payments are lower for authors as the publishing middleman takes a heftier cut. The book industry has been moving to a model that is harmful in other ways as well—libraries are being locked out of ebooks, and technical restrictions from ebook platforms keep readers locked in and prevent them from getting better deals elsewhere.

Penguin Random House/Simon & Schuster Merger

Penguin Random House is slated to buy Simon & Schuster for $2.17 billion in cash, reducing the Big 5 American publishing industry to a Big 4. The Authors Guild has opposed this deal, pointing out that if it goes through, the publishing company would account for 35% of all books sold. Public Knowledge has disagreed with the Guild on various copyright issues before, but it’s right to oppose this deal. Penguin has accounted for an estimated 25% of all print books sold in the U.S. in 2020, while Simon & Schuster accounted for about 9.1%. Additionally, the proposed merger would account for about 50% of all trade books published. In industries with concentration levels this high, not only do prices tend to be higher, but other anti-consumer practices are more prevalent, including limiting books with ideas outside the mainstream could have a negative impact on society. 

This merger will also hurt authors. The most obvious way is that when authors have fewer publishers to negotiate with, their payments are lower. But the merger may also hurt authors in other ways—like how independent bookshops run, their ability to leverage and negotiate, and the amount writers get paid. Additionally, the merger will make it difficult for new competitors, like publishing house start-ups, with barriers to market entry, such as establishing relationships with authors and sellers and increasing returns to scale.  

Retail Concentration 

Not only is publishing highly concentrated, but bookselling is, too. Amazon dominates online bookselling in both print and ebooks. As of 2020, Amazon has 50% of the American print book marketplace (both online and physically sold) and three-fourths of ebook sales. Extending its platform to ebooks through subscription models, like Kindle Unlimited and Audible, it has moved ahead against its counterparts like Barnes & Noble, resulting in becoming the world’s largest book retailer. (Amazon’s book publishing component, Amazon Publishing, has also continued to grow by promoting self-published works and digital advertising.)

A Penguin Random House/Simon & Schuster merger might not pose a problem for Amazon, since due to its market share, it has a lot of leverage with publishers. In 2019, the Association of American Publishers filed a statement with the Federal Trade Commission, stating that “Amazon no longer competes on a level playing field when it comes to book distribution, but, rather, owns and manipulates the playing field, leveraging practices from across its platform that appear to be well outside of fair and transparent competition.” By contrast, smaller book retailers might feel the pinch, not just paying more, but falling even further behind Amazon. 

Limits on Libraries 

Public libraries especially find it difficult to lend out ebooks with the rise of dominant digital platforms like Amazon. Until recently, Amazon was the only platform that did not make books available to libraries under any terms. With years of reducing bookstore markets and taking its place with Audible and Kindle Store, it now extends to reducing libraries’ access by limiting the selling of downloadable ebooks and audiobooks.   

Even when libraries do have access, they are met with yet more hurdles: pricing and restrictive terms. Libraries pay more for ebooks with the already limited funds they have, and lending books out is even more difficult when they come with digital locks with an expiration date or time limitation. Lending access models are still in dispute. For example, Hachette Book Group changed its licensing agreement to one where libraries may own books for a lower price with the caveat that the ebook license expires in two years, as opposed to the original higher-priced perpetual license agreement that retained access forever. A model that in the long-term makes it more difficult for libraries to fund with new license agreements is unstable. We need a universal method. Bear in mind that libraries do not need a special license or library edition of a book to add it to its collection and lend it out. Libraries can buy books from publishers directly, or any bookstore or wholesale, or accept donations. Ebooks are a completely different world.

Legislators have noticed. Maryland became the first state to pass legislation that would allow libraries to have the same license access and digital literary content that is available to consumers. A current Maryland bill would ban publishers from discriminatory business practices when selling ebooks to public libraries. If signed by Governor Larry Hogan, it would take effect as early as July 1 of this year. Other states like New York and Rhode Island have also introduced similar legislation. This will help to ensure that libraries are able to buy ebooks at the same terms and cost as others and allow them to lend it out to the public. Bills like this, or ones that go even further, are badly needed. But allowing further publishing consolidation will only increase the ability of major publishing giants to squeeze libraries and keep them from doing their job. 

Technological Locks Harm Readers

One of the main reasons that the ebook market is uncompetitive is that it is designed to be that way. Ebook sellers like Amazon and Apple Books add technical locks known as digital rights management (DRM) to books, with the full blessing (even sometimes insistence) of the publishing industry. DRM further locks in Amazon as the dominant ebook seller.

DRM harms users in a number of ways. Readers might lose access to books they’ve paid for if the company they bought them from goes out of business, or due to licensing disputes. Users who want to access their Kindle library on devices or apps that Amazon doesn’t support, can’t. DRM may interfere with the ability of scholars and students to use ebooks for research. And people who use Kindle devices from Amazon to read ebooks can’t buy them from other stores like Barnes and Noble’s Nook store, or storefronts run by your local indie bookseller. Because of DRM, most ebook readers have to pick a single store and a single app for buying and reading all their ebooks. While many smaller publishers do sell DRM-free ebooks, which can be read on any device and by any app, the big publishing industry, typified by Penguin Random House and Simon & Schuster, is highly resistant to taking this consumer-friendly step. 

DRM is said to reduce piracy. But dedicated pirates have no trouble bypassing the digital locks on ebooks. Instead, DRM punishes normal readers. They’re the ones who might have to buy a book multiple times to access it on different platforms, or who pay more for ebooks because they have no choice.  

While a world without DRM would be ideal, there is still more that publishers and platforms can do to benefit readers short of that. For example, the movie industry has an initiative called Movies Anywhere, which means that if you buy a DRM-protected movie from one platform, you can access it from another. This makes it easier for people to switch platforms, and to shop around or take advantage of deals on other services, without having to set up a bunch of redundant apps or devices. At a minimum, ebook readers should ask why books they’ve bought from their local bookshop or from Apple aren’t available in their Kindle libraries. The movie industry has shown that it’s possible—the only reason it doesn’t happen now is because powerful economic actors like Amazon, Simon & Schuster, and Penguin Random House don’t want it to.

What’s Next?

Readers are harmed by the uncompetitive publishing industry, and the Penguin Random House/Simon & Schuster merger would only worsen this. For there to be a true fair market, among other things, consumers should be able to access ebooks across different platforms, and libraries should be able to buy ebooks at retail price and lend them out. 

It will be a lot of work to get there. Policymakers also must prioritize solutions for increased bookseller competition and fairer ebook access and pricing for libraries. Additionally, they should recognize that relaxing the technological and legal barriers that stand in the way of consumer rights also harm competition at every level. But an important step will be for antitrust enforcers to block the Penguin Random House/Simon & Schuster merger.


About Aden Hizkias

Aden Hizkias is a legal intern at Public Knowledge, where she focuses on broadband accessibility, platform competition, and copyright policy. Prior to joining Public Knowledge, she worked alongside non-profits and organizations such as Human Rights Watch and Amnesty International in data collecting, resolution drafting, and community outreach. Aden received her Bachelor of Arts in English Literature at the University of North Carolina at Greensboro. She is currently receiving her J.D. from American University Washington College of Law, focusing on the intersection of Intellectual Property and Tech Law. Aden was raised in North Carolina and enjoys hiking, scavenger hunts, and creative writing.