The Problem of Deseret Book Part 3: Unresolvable?

11.12.05 | | 10 comments

This is the third in a three-part series on the role of Deseret Book in the LDS Market. As the largest player in the market and because it is owned by the LDS Church, it occupies a unique, but problematic, in my view, position. You can still read part 1 and part 2.

Before addressing whether or not this situation can be resolved, let me address one subject that came up in the comments to the first part of this series, which I don’t think I discussed well. That subject is control. And this turns out to be the key issue.

In Deseret Book’s case, the control comes from two different sources; the fact that it is owned by the LDS Church, which gives it a certain authority, and the fact that it is the largest player in the market.

Deseret Book gets a certain degree of its control because it is owned by the LDS Church. This control means that the books it publishes are considered, if not authoritative, at least ‘more safe’ or more orthodox. Given the choice between two similar books on the same subject, LDS Church members will more often purchase the Deseret Book title because of its association with the Church.

This authority also passes to Deseret Book’s stores. Church members are more likely to shop in these stores, knowing that they are owned by Deseret Book, simply because they assume that Deseret Book has approved the titles sold there.

Deseret Book’s size, on the other hand, also plays an important role. Its size means that bookstores, reviewers and newspapers, and even customers pay more attention to the titles it publishes. This size also means that customers are more likely to find and shop at a Deseret Book store or make their purchases from Deseret Book’s website, rather than someone else’s website.

In addition, the combination of being a publisher and a chain of bookstores means that Deseret Book can profit from every point on the chain from publisher to distributor and to bookstore. It also means that both its stores and its publishing company can favor one another over other players in the market — the bookstores can get special deals on titles from the publisher that other publishers can get, and the publisher can get better shelf space and stocking than other publishers can.

Of course, these advantages do have a downside. Because Deseret Book is owned by the Church, many members expect orthodoxy from the titles it publishes and the books it carries in its stores. Its employees also face possibly more drastic consequences if the General Authorities feel it hasn’t lived up to expectations of how it represents the Church. And its publishing operations probably also face an expectation that books by General Authorities (or at least by the Quorum of the Twelve and First Presidency) will be published there, regardless of marketability.

So what’s the solution? Since Deseret Book’s control comes from two different sources, a solution should ideally address both sources. Severing the official connection to the Church would reduce the authority Deseret Book gains from being owned by the Church. And splitting Deseret Book’s publishing and retail operations would address the company’s size and would simultaneously address the unfair advantages that Deseret Book gains from being simultaneously the largest publisher and the largest retailer in the market.

Could such a split happen? Well, there is some precedent. Until the early 1970s, the LDS Church owned hospitals throughout the intermountain west. In 1974 (if I remember correctly), these hospitals were spun off into a separate company that is no longer owned by the Church, Intermountain Health Care (IHC). Why did this happen? Well, the Church simply decided that healthcare was no longer part of its core mission, and what became IHC no longer fit in its investment portfolio.

On the other hand, its quite easy to argue, in my opinion, that Deseret Book is part of the Church’s mission. The Church has always had some kind of publishing operation, and much of the time has owned several operations. In addition to Deseret Book, which is one of the for-profit companies the Church owns through its Deseret Management holding company, the Church also owns the Deseret News (also part of Deseret Management), its slate of magazines (i.e, the Ensign, Liahona, etc. These are published directly by the Church — they don’t carry advertising and are a non-profit operation), and LDS Church Distribution, which distributes Church published books and materials.

This last operation, LDS Church Distribution, actually argues for the idea that Deseret Book may no longer be part of the Church’s mission. The books actually published by the Church have been reduced to just those the Church wants to be considered official Church publications — the Scriptures, missionary materials, sunday school, priesthood and auxiliary manuals, and books like Our Heritage, Jesus the Christ, and the Miracle of Forgiveness. If the Church can already publish officially what it likes, why does it need to own an unofficial publishing company?

Indeed, the substantial growth of independent LDS publishing over the past 30 years or more shows that there are many publishers who are able and interested in publishing what the Church wants published unofficially. And recently the Church has even been able to get a succession of unofficial works published by national publishers like Doubleday.

Should Deseret Book be considered anything but an investment anymore?

The case for splitting Deseret Book’s publishing and retailing operations into separate companies is somewhat easier to understand. Even on a theoretical basis, economists see potential ethical and competitive difficulties with vertical integration, the practice of one company owning operations from start to finish in a supply chain. In most countries around the world, anti-trust laws frown on vertical integration along with monopolies or cartels because of the ability to abuse the power they give.

On a practical basis, other companies in the LDS market already believe they have been disadvantaged because of the combinations like Deseret Book and like Covenant Communications-Seagull Books.

But splitting Deseret Book into two is not without its difficulties. While I don’t know a lot about Deseret Book’s internal operations, I would not be surprised to find that its publishing operations and retail operations share common computer systems, a common warehouse and even personnel in key areas. Deseret Book has long maintained that it has a “wall” between its publishing and retail operations, but exactly what this means isn’t clear. I’ve long assumed this simply meant different personnel in different locations, and not separate computer systems, warehousing, etc. To the extent that the publishing and retail operations share resources, splitting the two operations is difficult.

What should happen? I think ideally Deseret Book should be spun off into an independent company, not owned by the Church, and split into a book publisher and a chain of stores. Yes this would make each of these companies smaller, and possibly weaker. But it would clearly solve the problem.

At a minimum, I would like to see the Church sell off one of the two, preferably the bookstores, since the argument that the publishing company is part of the Church’s mission is stronger.

Do I think this might actually happen? No. I suspect that even just as an investment, Deseret Book makes sense. I estimate its sales must be about $75 million, and most companies in the industry earn 5-10% of sales, or $3 to $5 million a year. And because Deseret Book is so specifically oriented to the LDS market, I think it would be very difficult to sell it. No other company in the LDS market is large enough to buy it, and those outside the LDS market would likely shy away.

So, I think we’re stuck with the status quo. In the mean time, let’s work on reducing Deseret Book’s domination of the market. Perhaps I’ll take a stab at that in a future post.

10 comments: “The Problem of Deseret Book Part 3: Unresolvable?

  1. Anonymous

    Part of the solution rests with the 12 & GAs:

    Refuse to publish with DB or auction out/do bidding on the books.  

    Posted by lyle

  2. Kent Larsen

    Good luck with that Lyle. I won’t hold my breath for the 12 & GAs to stop assuming that Deseret Book is the only Mormon publisher to work with.

    Of course there has been one notable exception among books by GAs — President Hinckley’s “Standing for Something” which was publishe with a national publisher.

    But, as I understand it, even this was done through Deseret Book. Sheri Dew made the arrangements for the book’s publication.

     

    Posted by Kent Larsen

  3. Mark

    “What should happen? I think ideally Deseret Book should be spun off into an independent company, not owned by the Church, and split into a book publisher and a chain of stores. Yes this would make each of these companies smaller, and possibly weaker. But it would clearly solve the problem.”

    Who’s problem would it solve? It seems to be pretty clear to me that DB doesn’t have a problem. That’s why it’s not likely to happen…

    MRKH

     

    Posted by Mark Hansen

  4. Kent Larsen

    I agree, Mark.

    Who’s problem? The problem that Church members in general, the consumers in this market, face — the problem of fewer outlets than should exist, the problem of fewer types of books published, the problem of less choice in what exists in bookstores, the problem of weaker bookstores in those that now exist.

    You are right that Deseret Book doesn’t see a problem. But I do think that the Church should recognize that there is a problem.

    Still, I am pessimistic even about that — since I don’t think the Church recognizes the problem, in part because it owns Deseret Book.

    As I said in the post, we’re stuck with the status quo.

     

    Posted by Kent Larsen

  5. Naiah

    It is mentioned on DB’s website that part of their mission is to provide “a good return” to the church, as a for-profit holding. This, of course, means dollars, but, what is interesting is that, being owned by the church, that return can also be in souls. There’s also the concern of public image. So long as DB is church-owned, there can be some church control of its appearance, etc. We have been misunderstood and maligned for so long that having a public face like their stores is good. I think that, to some extent, being owned by the church guarantees continuity for DB, and in the past that has probably pulled it through several times.

    With the bourgeoning LDS market, I would expect that to change in time. I do not think that time is yet. We’re not quite that mainsteam, and I don’t know if we ever really will be. I am sure that there is a threshold (either in sales or in church membership) where breaking it up/selling it off becomes viable, but as you mentioned at the end of this installment, it just doesn’t seem to be there yet.

    I look at the problems that you are pesenting here, and, yes, DB is the juggernaut of LDS publishing, no doubt, but while its presence is undoubtedly a problem for other LDS publishers, I do not see so much that it is DB who needs to solve it.

    I mentioned in another comment that it would be good to see a better public presence from the other publishers. Perhaps the LDS Booksellers’ Assoc could run an online store, or publish a quarterly “master catalogue of member-publishers’ titles” I see the responsibility for balancing the scales here not to be downsizing DB, but, rather, a further effort on the part of the other publishers.

    As a consumer, I would welcome more choices, more titles to browse. Just point me in the direction! I would recommend more advertising on their part, and a better web presence. A central hub, like the LDS Booksellers’ Assoc website would be ideal. It would have to be a good site, easy to browse, and stocked with good information. It would be a huge undertaking–a sort of LDS-Amazon. Huge undertaking means huge cost, but potentially huge return. All business is risk, and these other publishers, if they are as hard off as it would seem, might just need to dive in and take that risk sometime soon.

    As a potential customer, I’d be only too happy to oblige. They just need to show me where. 

    Posted by Naiah Earhart

  6. Mark Hedengren

    I do believe that an upside to recent years has been amazon.com. Such retailers are a good way for people out side of the Utah/Idaho area to get books. Of course LDSliving.com did a good job of this before they were bought by Deseret book. I but it is easy to forget that there are other retailers out their. Every Boarders and B and B in utah have an LDS section. Also independant lds organizations such as LDSsingls.com LDS Living magazine (which is still independent) gives people a new way to get the word out on there products.

  7. Kent Larsen Post author

    Mark, I’m not sure its a complete upside. Amazon.com does have its benefits. But Amazon does NOT get all Deseret Book titles (DB’s choice), and it doesn’t really present LDS titles in the same way that an independent website could. Because the LDS titles are there along with all sorts of other titles, many LDS titles don’t get the amount of attention they would get at an LDS-oriented site.

    Of course, the biggest problem with Amazon.com is simply that it doesn’t reach everyone — especially those that need LDS titles the most. Not everyone has internet access, and this is especially true among the poor. And even among those who do, they don’t seem to use it for Church-related things.

    So, yes you have a good point. But it solves only a fraction of the problem.

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