The case for book publishing monopolies

The other day I told my son I’d buy him a book. His curt response was, “Get with it, man”. He meant no thanks, only Kindle.

The next day I offered my 75-year-old sister to buy her a book on Kindle. “Don’t be an ass,” she said equally curtly.

A few weeks later, I was travelling around in Europe. Old and young, though only a small percentage, had ipads. The rest had their phones. I didn’t see anyone carrying a book. No one. Nor was anybody reading from a Kindle. On ipad they could have been reading anything but on Kindle it had to be a book. So no Kindle, no book.

I asked myself if people actually read books on their phones because in iphones you can download the Kindle app. It can be done — I do it occasionally — but it’s not much fun. It’s ok if it’s a short story, just about. But a whole book is a peak too far for most people.

Nevertheless, lakhs of books are now available for reading on screens. But how many people actually read them? No one has any idea. My son, however, says everyone reads books on screens. But publishers say very few. Clearly, there is an information problem here that needs solving.

In any case there don’t seem to be many bookshops left anywhere in the world. And shops that sold secondhand books have almost completely disappeared. What happens to old books, then?

That problem aside, are people buying printed books online the way I do and, increasingly, most people I know also do? The discounts are very attractive. That seems to be the obvious answer to the disappearance problem, not least because it raises some interesting questions about the economics of publishing.

Degrees of competition

Ideally, from a supply-demand viewpoint, book publishing should be a monopoly in each country because, first, it would allow much-needed scale which is currently missing and which, secondly, would allow massive cross-subsidisation between subjects and even genres. But exactly the opposite situation obtains in almost all countries.

If you think about it, this monopoly-type thing has already (almost) happened on the distribution side because of huge online aggregating platforms who access from small booksellers. Gone are the days when there were book shops that specialised in particular subjects.

There is a completely non-sentimental reason this should happen on the production side as well now. The current cottage or micro-industry structure is completely idiotic from every point of view. It helps no one.

This will infuriate many people who think that a monopoly will suppress certain types of books. That objection sounds noble but suppression happens even now, except it’s not called that. It’s called market insufficiency, which is jargon for “no one will buy this rubbish”.

The worst offenders here are the small publishers who operate with very little capital and even less editorial quality control. In fact, the capital inadequacy means these publishers necessarily have to be picky. The lack of quality control means the opposite. It’s ridiculous.

In contrast a monopoly, because it can cross-subsidise, is unlikely to suppress anything. It is highly volume dependent and volumes need more variety, not less.

In that sense it’s no different from a soap company which needs a few, huge brands and scores of other less successful ones. At one time Procter & Gamble had 70 brands of body soaps.

Monopolistic exploitation

Another objection to a monopoly could be that it will increase the base price of all books. Even the prices of bestsellers could, or will, double for no good reason at all. Greed will dominate pricing.

This is possible but not probable. I would like to see a single multi-brand monopoly that indulges in price gouging in its most successful brands. It is a problem but probably not a serious one in the books business.

Had it been so every publisher who signs up a bestselling author and thus becomes a monopolist would have exploited the opportunity because it would help the suppliers of books — the authors and the publishers — immensely. Both would make more money. But the opposite has happened. Bestsellers are the lowest priced. That’s how the market works.

There remains the question whether if print nearly vanishes, would a monopoly be good for electronic books. Absolutely, because then even the distributor could be eliminated.

When will this happen? In the next two decades. It’s happened to films. So why not books, too?