Obama's victory spells bad news for Apple, Macmillan and Pearson

Historically, Republican administrations have been far less aggressive in prosecuting antitrust cases than Democratic ones. Had Mitt Romney won last night, it's likely that the eBook price-fixing case against Apple, Macmillan and Pearson would have been settled on terms far more favorable to the companies, or would have been dropped altogether. That may have been one reason why the three companies refused to settle with the U.S. Justice Department--they thought that they could get far better terms by waiting a few months for a Romney administration. However, with President Obama's reelection, the Justice Department will continue to pursue its case, and will almost certainly make settlement on the same or similar terms as Hachette, HarperCollins and Simon & Schuster a condition for approval of the Penguin-Random House merger. All of this makes a settlement by Macmillan much more likely. At that point, Apple won't matter, because all of the Big 6 will be prohibited from accepting Apple's terms.

Penguin Random House: The Aftermath

Earlier this week, Pearson and Bertelsmann confirmed that they intend to merge Penguin and all of Random House except for its German-language business into a new joint venture, to be named Penguin Random House. (No Random Penguin or Penguin House for us.) Shortly before the deal was announced, word leaked out that News Corp. was considering making an offer to acquire Penguin, but the terms of the Pearson-Bertelsmann deal mean that Pearson can't consider any other offer.

I believe that, three to five years from now, the publishing industry will look much like the recording industry does today, with the Big 6 becoming the Big 3. In fact, it was Bertelsmann's experience in its joint venture with Sony Music that's said by some to be the reason that the company insisted on having a majority interest in its joint venture with Pearson. Its joint venture with Sony was 50:50, and differences in objectives and strategies between the two companies eventually led Bertelsmann to sell its recorded music business to Sony.

If the publishing industry looks like the recording business in a few years, here's a preview of the likely winners and losers:

• Publisher employees: The biggest reason for publisher consolidation is cost reduction. Penguin and Random House, and other consolidating publishers after them, will get rid of redundant distribution facilities and most of the people who work in them. In addition, they'll consolidate cross-imprint functions, such as sales, marketing, copy editing, production and design. That will put a lot of talented professionals on the street, and with fewer big publishers, there will be fewer places for them to look for work.
• Authors: Despite what Penguin and Random House have said, it's inevitable that they, and other consolidating publishers, will reorganize their imprints. Some imprints will be discontinued, and their authors will be moved to other imprints or dropped. The same thing will happen to the editors at the imprints--many will be laid off.
  
  Author acquisition will be dramatically affected. The Big 3 recording companies have all but discontinued their formal A&R (Artists & Repertoire) operations that sent people into the boondocks in order to find new artists. Their equivalents in publishing are acquisitions editors, and many of them will find themselves without jobs. The big publishers will increasingly focus on successful self-publishers as their "farm teams", and will pay big money to poach bestselling authors from each other. For their part, bestselling authors will have less loyalty to publishers, because many of their editors will be gone.
• Retailers: Some industry pundits have speculated that consolidation of the top publishers would give them more clout with retailers such as Amazon and Barnes & Noble. If the recording business is any indicator, they're wrong. Just as with books, the music retailing business consolidated, and highly influential retailers such as Tower Records, Musicland, Wherehouse and Virgin Music are gone (Virgin has closed its U.S. stores but still operates in other countries.) Music retailing in the U.S. is dominated by Apple, and the consolidation of the Big 6 recording companies into the Big 3 has given the surviving record companies little or no additional leverage with Apple or Walmart.
  
  It's unlikely that mergers between the Big 6 publishers will give them any more negotiating power with Amazon, Apple, Barnes & Noble or Kobo. The publishers will continue to depend on the retailers for the vast majority of their revenue, and the U.S. Justice Department will be watching over their shoulders in order to prevent more shenanigans like organized price-fixing.
• Independent Publishers: Independents will actually be helped by publisher consolidation, for several reasons. First, many talented publishing professionals who ordinarily wouldn't have considered working for smaller publishers, or working as freelancers, will become available to independents. Second, some of those professionals will set up their own independent publishing companies. Third, the authors that are shed from the rosters of the consolidating publishers will become available to the independents. Fourth, authors who might have been discovered and developed by the top publishers will instead go to independents. Fifth, with fewer titles coming from the big publishers, retailers will have more shelf space (real or virtual) to devote to independents.
• Self-Publishers: The big publishers will increasingly recruit successful self-publishers to fill their rosters and compensate for the loss of acquisitions editors. The success of the 50 Shades trilogy has eliminated any remaining stigma from self-publishing authors. Big publishers now know that success as a self-publisher is a very strong indicator of marketability--and it eliminates the cost of spending years to develop a promising author.
• Agents: Consolidation of the Big 6 will spell problems for literary agents. They'll have fewer authors on the rosters of the top publishers, and thus, fewer opportunities to earn commissions from big advances and royalty payments. They'll have to devote more of their time to independent publishers, which generally pay lower advances and generate lower royalties for their clients. And, they'll have to compete with other agents to represent successful self-publishers, meaning that they'll have to accept lower commissions.
• Consultants: Publishing consultants who have spent their entire careers in the publishing industry are going to find it hard to adjust to publisher consolidation. Consultants with contracts with two publishers that consolidate into one will have one of their two contracts cancelled, and the surviving contract will be closely scrutinized. (I saw this happen first-hand as the IPTV industry went through massive consolidation starting in 2008.) Publishing consultants will have to shift their focus to independent publishers, which have much smaller budgets than the Big 6.

In short, independent publishers are about the only group that will be a clear winner from publisher consolidation, followed by successful self-publishers. Everyone else will end up either neutral or a loser as a result of consolidation. 

If you're upgrading to Windows 8, read this

I bit the bullet last weekend and retired my six-year-old notebook PC running Windows XP. To replace it, I switched to an under-used Samsung notebook that I'd installed the consumer preview version of Windows 8 on earlier in the year. Unfortunately, the only option I had was to do a clean install of the released version of Windows 8 Pro. I reinstalled the software I need and transferred my data files from my XP system, but I found that writing emails and documents on the new computer was an exercise in frustration. My cursor bounced around the screen, randomly jumping back into the text, and highlighting blocks of text that were deleted as I typed.

I did some research online and learned that the problem I had wasn't uncommon, starting with Windows 7. When I did the clean install of Windows 8, my vendor-specific drivers were replaced with generic Windows drivers, and my trackpad driver was replaced with Microsoft's old PS/2 mouse driver. I downloaded and installed the latest drivers for my PC from Samsung's website, and all of the problems I had were fixed. So, after you upgrade to Windows 8, especially if you did a clean install, go to your PC vendor's website and install the current drivers. Signed Windows 7 drivers seem to work fine under Windows 8. Don't assume that Microsoft will install the latest, or even the correct, drivers for you.