The Dangers of ConsolidationΒΆ

I mentioned in an earlier post that I thought Barnes and Noble was largely responsible for the ongoing and impending collapse of the publishing industry, and that’s just the sort of thing that I couldn’t leave a lone without a little bit of further pondering.

The assertion is that Barnes and Nobel, and Borders particularly as they competed for near total domination of the local-book retail market, forced a consolidation of the publishing industry at the very moment when the worst possible thing for publishing was consolidation.

Consolidation allows an operation to make a bunch of money quickly. The mechanics of this are pretty simple, after all. When yo consolidate you can cut all sorts of mundane expenses, from the physical costs of maintaining parallel operations, to hard costs like printing and shipping costs that can benefit from collective organization.

Amazon had a role in the consolidation of sale of books, certainly, but Amazon has always been a distribution and data company, primarily. Their strategy is to find a way to turn a profit on the sale of goods, any goods: they do this by having a complete inventory of everything and levering a lot of data concerning buying habits and browsing habits to make sure people who are shopping find something to buy.

Where Amazon’s limiting factor is connecting people who want to buy things (books) with books they might like to buy, the “traditional” book sellers, are limited by the amount of shelf space they can use to display and promote books. So they edged all of the little booksellers out of business by having huge stores and coffee shops and so forth, and then faced with too many books and not enough shelf space, they used their muscle to push the publishing industry toward increased consolidation and a “blockbuster” business model.

Blockbusters are how the movie industry works. Production companies make a bunch of movies, on the premise that if one or two turn a huge profit, they can afford to make a number of movies that flop or that just break-even. Hence the great power of reliable successes: another John Grisham novel, Return of the Mummy King VI, etc., the “copy-cat” phenomena and the erosion of the independent movie production business.

Book sellers were culpable as well–consolidation is attractive in what are essentially commodity businesses–and selling easily produced paper-based volumes is a commodity business. Maybe it would have happened anyway, but the undeniable market success of Barnes and Nobel is not, given what I can tell from where I’m sitting, a marker of success of the publishing industry as a whole.

And you know, when you’re a book seller, throwing the publishing industry onto the tracks before an oncoming train, to achieve some mildly impressive profits for a decade seems... not incredibly bright. And not the kind of thing that I’m interested in supporting or putting my faith in.

It strikes me that this “consolidation meme” is a common feature of unsustainable and inauthentic economy, and it extends beyond book retail into other failed and failing sectors of the ecomony.

  • Banks. Obvious here. The big banks lost track of the micro economics that make the macro economics go, and we got things like sub-prime morgages, because while they make sense from the consolidated-bank perspective they don’t make sense to people. Like, the John Grisham-esque Legal/Drama/Thriller book makes a lot of sense to the booksellers and the publishers, but most people can only really read so many of them before loosing interest.
  • Software. Microsoft’s production of windows makes a lot of sense if you’re a big company, but if you use computers in a specialized way, Windows is like an illfitting suit from Target. It works, but it’s uncomfortable and rough around the edges. There is general consensus that “The Microsoft Way” isn’t the best technological solution to the various problem, even among people who use it regularly (developer tools might require a slightly more complex investigation).
  • Your Example Here. Leave a note in the comments.



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