Sunday, February 1, 2015


Author Barry Eisler has been in the forefront of promoting indie publishing.  As such, he was recently at a conference contending that the Big Five traditional publishers were, in fact, a cartel.  Mike Shatzin over at Idealog took objection to this in a long winded post where he did everything but refute Eisler's basic premise.

Let's first look at the definition of a cartel. defines as cartel as "an international syndicate, combine, or trust formed especially to regulate prices and output in some field of business."  By this definition, Shatzin is correct...but only technically so.

Let's get out of the way that the Big Five traditional publishers are not a cartel.  First, they are technically domestic firms and not international ones, although they operate in an international sphere.  Since they're based in the US, I suppose one could say they're not international by the most pure definition of the word.  Second, they haven't contractually obligated themselves to each other in any formal manner.  So yes, by that legal definition, they're not a cartel.

In practice, however, they're a cartel in every practical application of the word.

To start with, there has indeed been collusion between them.  They were taken to court by the DOJ - all of them - when it was discovered that they were conspiring with Apple to artificially inflate the price of ebooks.  They colluded.  They broke the law by fixing the market so that no one could or would offer lower ebook prices.  The reasons for this are manifold, but the end result is the same - they unfairly came together to hamper market competition.

Additionally, there are the stark and nearly uniform royalty rates, as well as payment rates.  Royalties are paid every six months by the Big Five, and this is almost without exception.  Standard royalty rates are fixed for new entrants in hardcover editions rarely exceed 15%.  Then there are the non-compete clauses that every publisher tries to use so that writers cannot put food on the table publish too many books at the same time.  These features are standard for every major publisher.

Let that sink in for a moment.  Every.  One.

The defense is that they don't collude over this.  There's a reason they don't collude - they don't need to.  There's an unspoken agreement over this amongst the publishers.  The supposed standards of the industry serve to regulate prices and output in publishing, and no one violates these for fear of backlash and sparking a publishing war...or as we who've studied business like to call it, that whole "market economy" thing.

The consolidation of the major publishing houses has created a de facto cartel.  Thirty years ago, there were dozens of houses.  There are now five that matter.  Sure, some smaller presses are out there, but they're mostly niche creations that can't compete on the larger stage with folks like Hachette and Simon & Schuster.

Much like OPEC, what the Big Five fear is real competition, which is why Amazon gives them the willies.  The Big Five have a nice cozy relationship, and essentially an oligarchy that they control, so anyone horning in on their market threatens their market share.  This causes collusion over ebook prices, mostly to prop up hardcover novels, analogous to OPEC flooding the market with oil to prevent alternate methods of extraction which are, at present, too pricey at lower market value.

The only way presently to overcome this is the indie market.  Hopefully, someday, a new major house will come along that can truly threaten this cartel-like hold on the market the Big Five hold, but that will take both time and luck.  The Big Five have the resources to squeeze out any new competition that is organized, which is why the chaotic approach of indie is the best way at the moment.  They can't pick off a million smaller pieces of competition.

It's up to us to change the market, and the only way to break the power of the cartel is to refuse to do business with them.  One writer makes no difference; thousands of us can bring them down and free the market, putting more profits in the hands of writers and less in the hands of publishers who use our work to enrich themselves.

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