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News

A pending union of giants in the book industry

As with other businesses, technological developments over the past couple of decades have had a profound effect on the book industry. With increasing choice for entertainment, fewer people are spending time with their noses in books, and those who are often either opt for cheaper – and lighter – digital versions, or take the route to the black market, downloading pirated versions.

Even in a historically literatureminded country like Russia, the situation is no different, though piracy has proven to be a more serious problem here. Over the past four years, the total number of books printed in Russia has declined from 760.4 million to 612.5 million, while digital sales have remained insignificant.

 

A remedy to the situation that is under consideration is a merger between Russia’s two largest book publishers, Eksmo and AST. The two giants have competed for the status of Russia’s top publisher, printing 67.5 million copies and 64.8 million copies in 2011, respectively.

Problems at AST

The behemoths have not been immune to the troubles besetting the industry, however, with falling sales figures affecting their profits.

AST in particular has faced financing problems. Earlier this year, news emerged that tax collectors had discovered arrears of 6 billion rubles (currently $182.7 million) on the part of AST, making the company’s future uncertain. The possibility of a merger with Eskmo was raised just last month as the only way for AST to stay afloat.

“Eksmo has an option to buy the assets of AST,” Eksmo’s general director, Oleg Novikov, told The Moscow News. “But on an operational level, the two publishers won’t integrate.”

He added that there is an agreement in principle on the sale of assets between the two firms’ shareholders, but no legally binding document has been signed. According to Novikov, the companies are beginning to share management and organizational processes, and several Eksmo managers are to be transferred to AST.

AST declined to comment on the deal with Eksmo or on the situation in the Russian book publishing industry in general.

Shoring up the industry

Eksmo hopes that the merger could make the industry healthier by reducing competition in bidding for authors.

“It is vital for a publisher to confidently invest money in the creation of authors’ brands and their promotion with a view of long-term cooperation, and that is set to lead to a healthier situation in the market,” Novikov observed.

A reduction in competition would also lead to a reduction in the amount of the bids themselves. Last year, the switch of author Lyudmila Ulitskaya to AST after 10 years with Eksmo raised a storm in the publishing sector, as the price of the switch was rumored to be €2 million ($2.45 million), an exorbitant amount for the Russian industry.

However, other players are not so sure that competition for authors was necessarily a bad thing.

“Bidding for authors ensured a stable position for authors and texts, and today, with the monopolization of the market’s fiction segment, the authors’ positions are becoming shamefully vulnerable,” Julia Goumen, co-founder and owner of the literary agency Banke, Goumen & Smirnova, told The Moscow News.

Focus on profit feared

According to Goumen, the merger is likely to lead to a reduction in the number of titles published and a decline in authors’ fees as the new giant focuses on known profitable quantities.

“Unfortunately, I don’t think that the lower number of published titles will lead to higher quality,” she explained. “Quite likely, leading editors will be cautious, focusing exclusively on established and commercially viable projects.”

Meanwhile, the size of an Eksmo or an AST does not make it invulnerable to broader issues affecting their smaller rivals: an overall decline in reading in the face of films, computer games and the Internet, and digital piracy. For Eksmo’s Novikov, these are the major challenges facing any publisher.

“I believe that publishers need to invest more actively in marketing, new projects and digital sales, which are likely to take up to 20 percent of the market over the next three years,” he said. “Today, Eksmo’s main task is to digitize all of its content and protect the content from piracy. Currently, the legitimate market is substantially lagging behind the pirates. And it is not only our task, but the entire book industry’s – to create the fullest offers for those who are ready to pay for digital books.”

 

Source: themoscownews.com