In what is perhaps the most significant event of the year for Mormon culture, Deseret Book has purchased both Covenant Communications and Covenant’s sister company, Seagull Books, according to a report today on KSL. The move futher consolidate’s Deseret Book’s position as the both the dominant company in the LDS marketplace, with perhaps as much as 75% of the market.
This move gives Deseret Book 69 retail locations, dwarfing the next largest groups of LDS retail stores, Southern California’s Ensign Books and Ogden’s Latter-day Harvest. It also marries the two largest and most competitive publishers in the LDS market.
Clearly, I think this is a bad thing. And I’m also glad I don’t work for either company, because there are bound to be jobs lost and stores closed.
Readers of A Motley Vision know that I believe Deseret Book’s relative size is a major problem (see The problem of Deseret Book Part 1: A Question of Size, The Problem of Deseret Book Part 2: A Question of Focus, The Problem of Deseret Book Part 3: Unresolvable?). This purchase not only exacerbates these issues, but also will create some chaos at these companies in the short term and make the LDS market smaller in the long term.
The chaos that will come is fairly easy to see. The merger of two companies always requires a good deal of effort as employees adjust to new supervisors, new ways of doing business and as computer systems are merged. Rarely do changes of this magnitude require less than a year and they often take several years.
For those that sell to Deseret Book or to Seagull Book, it may be a little more difficult, as buyers are distracted with the merger. Returns from these stores are also likely to rise, as what the stores stock is re-evaluated. Customers may even see some of this, as stores may be inexplicably out of stock of some titles or as the shelves are re-arranged.
[The timing of this purchase is also interesting. First, because it occurs immediately after the Christmas season, the busiest part of the year for retailers, probably to try and minimize these problems as much as possible. More interesting is the fact that this announcement came five months after the companies' dispute over whether or not Seagull would carry Deseret Books' titles. Could the idea of a merger have grown out of the attempts to resolve the dispute? Did Seagull Books and Covenant Communications owner Lew Kofford decide he had to sell if he couldn't get Deseret Book's products for his stores?]
Authors also may feel some effects of the merger, as the combined company re-evaluates what it is publishing. Since the lists of these two companies are similar in many areas, I’m sure that some contracts for forthcoming books will be cancelled or bought out. Other authors will see their in-print books neglected or taken out-of-print.
In the longer term, the combined company will likely shut down or merge some of its stores, especially in Utah. In at least 14 cities the two companies have stores in direct competition. While I don’t think this means that 14 stores will close, I bet at least half of them will close.
These last two areas — the reduction in the number of titles published and the reduction in the number of stores are what I mean when I say that this merger makes the market smaller.
When Deseret Book purchased Bookcraft nearly a decade ago, I editorialized on the email version of Mormon News that the purchase was a bad move. Subsequent events showed that I was right, as Deseret Book reduced the size of its list of titles published and had its first layoffs. While no one can say for sure what the market would look like today if that merger hadn’t occurred, I believe that the market would have been larger, and that we would now see three large publishers of comparable size (Deseret Book, Bookcraft and Covenant) alongside the two sizeable chains.
In the wake of the Deseret Book – Bookcraft merger, Covenant grew to become Deseret Book’s principal publishing competitor, with Cedar Fort, following its purchase of Horizon, close behind. A host of smaller publishers have filled in some of the gaps. That may happen again, as the reduction of Deseret Book and Covenant’s list of titles gives Cedar Fort and other publishers the opportunity to grow.
Unfortunately, this “opportunity” may not be there on the retail side. There isn’t another competitive retail chain in the LDS market, so Deseret Book will have a near monopoly (ethically, not legally). Simply put, no one is in a position to take the place of the Seagull Book stores that will close and try to compete with Deseret Book.
I’m afraid that this means the LDS market is worse off for this merger. And I don’t really see that Deseret Book gains much as a result.
[I expect as more information comes out about this merger, I'll have more to say. I also look forward to your comments on this breaking news.]