Bad Move, Deseret Book!

12.29.06 | | 58 comments

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.]

58 comments: “Bad Move, Deseret Book!

  1. David

    A new day is dawning for LDS authors without publishing contracts written in the dark ages.

  2. Kent Larsen Post author

    You’re right, David. This is perhaps the only bright side to the merger — the demise (we hope) of Covenant’s atrocious and illegal author’s contract.

    I only wish there was some other upside to the merger.

  3. Michael A. Cleverly

    Clearly without access to Deseret Book products at wholesale Lew Kofford could not keep Seagull in business very long.

    It seems he’d have only had three possible choices: 1) go out of business; 2) sell out; or 3) litigate (but while Deseret Book is, as you say ethically a monopoly, it’d be an espensive and uphill battle to go to court).

    Apparently he chose option #2, the only option that doesn’t end up costing him substantial sums.

    It is highly improbable that Deseret Book would have made the unilateral decision they did (to cut Seagull off) if there were already negotiations underway. (And, if they did, that would be an especially underhanded move to force a lower purchase price.)

  4. Kent Larsen Post author

    Michael, you are right.

    To be honest, the more I think about it, the more it does seem like Deseret Book forced Kofford into selling — its the kind of move that seems sleazy and ethically suspect.

  5. Marion Jensen

    Great summation, Kent. I agree, I think the winners in this merger are few and far between. Lew probably is better off, DB no longer has to worry about competition, and can set prices, and deliver less than satisfactory service with no fear of customer’s taking their business elsewhere. But for authors and customers…well, we’re just kind of out of luck.

    I hope I’m being overly pessimistic, but I wonder.

  6. danithew

    Thanks for providing this information – not all of us are as plugged in to what is happening in the LDS book market, so this was useful reading.

  7. Jonathan N

    A better name for these companies would be Deseret Gifts and Seagull Gifts, since they have been shifting toward games, artwork, music and toys than books. Even the books they do sell are increasingly designed as gifts (art/photo collections, illustrated short stories, etc.)

    A look at their upcoming titles suggests a further push in this direction.

  8. Stacy Whitman

    The plain fact is that publishers shouldn’t be in the bookselling business, and LDS publishing is example #1 of why that’s true. The hand-in-glove aspect of all this maneuvering has not only put a bookselling chain out of business, essentially, but gotten rid of the main publisher competition in an already tight market. I agree with the commenters above that Covenant’s author contracts were criminal and that it seems that’s the only thing that’s a plus out of this whole deal.

    Though honestly, I don’t mind the “Mormon Harlequin” market losing a little market share to better-written books.

  9. Kent Larsen Post author

    Clark (#7):

    I doubt very much that Kofford would be affected any more than anyone else in the industry. Kofford Books is owned by Greg Kofford, son of the now former owner of Covenant and Seagull.

    It is my understanding that the two haven’t seen eye-to-eye on business issues, and Greg (who also runs an investment company after years of working as an investment banker here in New York City) is not interested in taking over Seagull or Covenant — leading Lew to his crisis over an exit strategy.

    Unless Lew is suddenly willing to invest in Kofford Books (probably not a needed investment, Greg has plenty of resources), I can’t see that this will make any difference in how successful Kofford Books is, or what it publishes.

    At least no more than any other small publisher in the LDS market.

  10. Kent Larsen Post author

    Stacey (#9):

    You’re right, I just wish it was easy to get there.

    Last summer I read one suggestion that the Church should divest the retail stores completely, and keep the publishing operation. IMO, it would certainly solve a lot of problems.

    As for the “Mormon Harlequin” market losing a little market share to better-written books, it would be very, very nice. But I’m not at all sure that it will happen to a significant degree. More likely the other publishers in the market who also publish “Mormon Harlequin” will pick up the slack.

  11. Marion Jensen

    Stacey, I don’t know if the contracts will in fact be going away. I receive an e-mail today from Covenant that said, “Contract and royalty structures will remain the same.”

  12. Kent Larsen Post author

    I suspect the contract statement is meant to reassure. I can’t believe that DB’s lawyers won’t review the contract eventually.

    On a practical level, the major effect of the “we get all your books forever” clause is simply that authors “THINK” that they have to give Covenant all their books forever. I believe any author who checks with their lawyer will discover that the clause is unenforceable and can be ignored.

    The immorality of the clause lies in what it makes authors think, not in what it does.

  13. M. Bailey

    Kent Larsen speaks of “Covenant’s atrocious and illegal author’s contract.”

    Stacy Whitman said that “Covenant’s author contracts were criminal.”

    The Covenant contract is basically in force for a 5 year period. If no extension is signed during a 5 year period (as occurs when each new book is accepted) then the entire contract expires.

  14. Kent Larsen Post author

    M.:

    I have heard complaints about Covenant’s contract for more than 5 years. It is my understanding that the contract requires the author to give Covenant the rights to ALL future works the author writes during the life of the contract.

    The idea that ANYONE is forced to provide their services to any one company borders on slavery, and is an illegal restraint of trade.

    Now, I admit that I am not a lawyer, nor have I actually read the Covenant contract. However, I have so many reports from credible sources, including at least one lawyer who deals with intellectual property and who has promised to send me a copy of the contract, that I believe what I understand is most likely true.

    If you want to dispute the issue with me, please send me a copy of the contract first, and I’ll be glad to discuss it.

  15. Trace

    A deal between two bookstores the “most significant event of the year for Mormon culture”

    Really?

    I would have thought the 2 temples dedicated, 3 temples broken ground for, and 4 temples announced were fairly significant for our culture.

    No?

  16. M. Bailey

    Kent Larsen writes: “It is my understanding that the contract requires the author to give Covenant the rights to ALL future works the author writes during the life of the contract.”

    This is called the ‘right of first refusal’ and extends to all book-length works that deal with the LDS Church in some fashion.

    The contract does not cover anthology books, BYU Stuides articles, FARMS articles, etc.

    If a book manuscript is rejected by the Covenant committee then the author is immediately free to take that maniuscript to another publisher.

    If there are some manuscript issues that the Covenant committee would like altered (but not serious enough to warrant outright rejection) then Covenant can hold onto the manuscript for 2 years. If rejection still occurs after that time then the author is free to shop the manuscript around.

    Is Deseret Book’s contract somehow different? Do they not claim the ‘right of first refusal’ for contracted authors? Do they only enter contracts on a book-by-book basis?

  17. Jeff Savage

    Funny how many people are sure they know what’s in the Covenant contract, and what an atrocious, illegal, and immoral tool it is. And yet, how many of you have actually seen a Covenant contract?

    As an author with Covenant for over five years and four books, I can tell you that I—along with most Covenant authors—think I’ve got a pretty good deal. And lest you think I don’t know anything about contracts, I have been in high-tech management positions for over fifteen years and have evaluated and negotiated contracts for the majority of that time.

    Allow me to point out a few misconceptions. First, there is no “Covenant” contract. Not only has my contract changed significantly over the years, but most authors actually have different clauses.

    My contract allows me to offer non-LDS titles to anyone I want without Covenant’s approval. It pays me comparable royalties to other LDS publishers and other national publishers of similar size. I can also get out of it if I don’t renew for five years.

    What’s so scary about that? The main sticking point for most people seems to be the right of first refusal. As stated earlier, my ROFR only applies to the LDS market. So essentially it means I can’t build up my reputation with Covenant and then move on to another LDS publisher. This actually happened to Covenant quite a bit early on, and they lost a lot of money marketing an author only to have them move to DB.

    Since DB doesn’t currently publish a ton of fiction, and the sales of other LDS pubs is much lower than Covenant, what exactly am I losing?

    As far as the doom and gloom talk—I guess we’ll have to wait and see, but here are my thoughts based on conversations I and others have had with top management at DB and Seagull.

    1) This is not a merger. This is an acquisition of a publisher and a chain of stores. Both publishers will remain independent as will both retail chains. DB fully intends to keep both sets of stores open.

    This is actually a fairly smart strategy. When you go into a mall and shop for clothes, you think all the stores are competing with each other, but the truth is that many of the different stores are owned by the same companies. They cater to different people and build up separate followings, but the money goes into the same bank.

    This is also true with DB and Seagull. So there is a DB and a Seagull in Spanish Fork. What’s the problem? In the past they were competing for business, now they get it all. Some people like the low-cost store, some prefer the upper-end, in-store bakery, feel.

    2) This could be a great thing for LDS authors. In the past, you could write a great book for DB or Covenant, but it would never get decent exposure on the shelves of the competitor unless your name was Hughes or Stansfield (or you were a GA)

    Now a good book has a chance to be promoted in both chains. Why is this such a good thing? Because, maybe . . . just maybe . . . an LDS author can dream of being a full-time writer instead of balancing writing, a family, and a full-time job.

    Will there be fewer novels published? Possibly. But that might not be a bad thing if it means the overall quality of LDS publishing goes up.

    (And just as a side note, enough with the “Mormon Harlequin” crap. What does that even mean? Is it a slap at LDS romances? Is it a slap at genre novels? Is it some high-brow, I read better books than you, thing? The bottom line is the bottom line. A Big Mac may not be a Cheese Soufflé, but people keep buying them. Read whatever you want to read, but stop complaining about what others choose to read. As long as people enjoy “Mormon Harlequin” novels. Who is it hurting? Certainly not the bookstores which sell them or the authors who write them.)

    3) Why did Bookcraft fail? Do you really think DB bought them out to get rid of competition? Sounds good in conspiracy theories, but it almost never happens in the real world. You buy a company because you think you can turn a profit with it. Unfortunately, DB tried to make Bookcraft part of DB and they failed.

    This time they plan on doing it right. DB has taken out a long term lease on the Covenant headquarters building. They are not laying off anyone. Covenant will continue to run as a separate and competing publisher (complete with their own contracts.)

    I believe this gives DB a chance at succeeding where they failed last time.

    So am I being starry-eyed about this whole thing? Maybe. But from everything I am hearing the intent is to do the right thing. This could fall flat on its face or it could be a major step toward creating a legitimate opportunity for LDS authors to do what they love doing while continuing to give readers more choices.

    I personally admire Covenant and DB. Without them, we would not have come nearly as far in the LDS literary community as we have. Of course there are things I would like to see changed, but I would be happy to publish with either of them.

  18. M. Bailey

    Kent Larsen wrote: “If you want to dispute the issue with me, please send me a copy of the contract first, and I’ll be glad to discuss it.”

    I hope for the sake of your own disputations that you are aware of the content and meaning of Covenant’s CURRENT contract.

    I would be very interested in seeing a qualified lawyer demonstrate that the current Covenant contract is somehow criminal, illegal, or unenforcable – seriously.

  19. William Morris

    Trace:

    The purpose of A Motley Vision is to cover Mormon culture. Although each of those events you mention are incredibly important to active LDS (myself included) on a spiritual and sociological level — their impact on Mormon cultural production i.e. the creation, publication, distribution and marketing of Mormon-themed books, films, artwork and other products has not been what the purchase of the second-largest retailer of Mormon cultural products by the largest retailer of Mormon cultural products.

    This is not to say that they shouldn’t be valued and discussed. But AMV’s focus is cultural and always has been. I would imagine that some of the other blogs that deal with more devotional, doctrinal and sociological themes have discussed the new temples. If not, perhaps you could suggest that they should.

    ———–
    M. Bailey and Jeff Savage:

    Thanks for your qualifying of Covenant’s contracts. I have no idea if Kent is correct or not because I don’t have the experience that he has in the business.

    I can confirm, however, that the perception I’ve developed of both Covenant and Deseret Book (and not just based on info from Kent) is that they are rather provincial in their dealings with authors. I’m also aware that after the DB-Bookcraft deal that there were several authors left out to dry. I know that happens with any publishing merger and that the industry is a tough one. However, some titles I would have liked to see come to press didn’t make it. That may be understandable from a business perspective, but from a cultural perspective, it was a loss. And because it was a loss, one wonders if it needed to happen.

    ——-
    Regarding the Mormon Harlequin comment. I don’t quite have the jaded perspective Kent does. If any readers out there are willing offer up a critical (in the criticism meaning of the word — not negative) look at Mormon Romance, please e-mail me. I’ve been wanting to have more posts on Mormon genre fiction. It’s an area that I don’t know well — and because I don’t have the resources (either financial or library) to really get to know the market, it’s an area that will be a weak spot for me for the forseeable future.

    So seriously — e-mail me at motleyvision AT gmail DOT com if you want to write a post or series of post on Mormon Romance.

  20. Stacy Whitman

    I was under the impression that the right of first refusal covered all books, all genres (not just LDS), with an unspecified amount of time. If that’s changed, then that’s great. Certainly right of first refusal is standard at a lot of publishers. That’s actually the only clause I had a problem with, as far as any specifics that I knew, and it was a huge sticking point for me.

  21. Stacy Whitman

    And by the way, no, it wasn’t a stab at genre fiction in total. I have read several of the worst of the Covenant romance lineup, and wasn’t impressed with the writing or the editing going on. However, I’ve seen some good stuff come out, as well–including the work of a couple friends of mine. Like I said, if a reduction in number equals an increase in quality, all the better.

  22. Kent Larsen Post author

    Thanks, William, for responding to Trace. I do maintain that this purchase is \”perhaps the most significant event of the year for Mormon culture.\” As you point out, I don\’t consider Temple dedications, important as they are, as cultural events, although they do have cultural aspects to them.

    Regarding the Covenant contract, I should probably do an analysis of the current contract, and I\’m happy to post a summary of such an analysis, as soon as someone sends me a copy of one (details specific to a particular book or deal can be blacked out).

    Having said that, I don\’t think that Jeff Savage and M. Bailey are talking about a different clause or language than I am talking about. \”Right of First Refusal\” clauses are, in fact, quite common in book publishing contracts. And if Covenant\’s clause was similar to most publishing contracts, I wouldn\’t suggest it was wrong.

    M. Bailey gave an overview of Covenant\’s clause. But most book publishers don\’t go nearly that far. IF the contract has a \”Right of First Refusal\” clause, it only cover\’s the author\’s next book, not every LDS book the author writes for the next 5 years!

    Even this mild requirement is considered almost evil among many authors and publishers. For example, Tim O\’Reilly, owner of the highly-regarded computer book publisher, O\’Reilly Media, has sworn off them (see: Right of First Refusal Clauses in Book Contracts). Other author resources warn authors against them (see EPIC \”Red Flag/Yellow Flag\” List and Contract Negotiation. And even when lawyers don\’t object to them, they do advocate reasonable limits on these clauses (see “Next Book” Provisions in Publishing Contracts).

    Covenant\’s clause is so excessive and unreasonable, that I wonder if this clause could be considered an illegal restraint of trade. If I remember my business law classes correctly, contracts can\’t overly restrict the ability of an individual to earn a living in their chosen profession. In this case, the author has to submit every work to Covenant during a five year period (non-compete clauses that restrict employees from working for a competitor are generally only legal for a year or so after the employee leaves. Why should authors be restricted for so long?)

    As I\’ve said before, I\’m not a lawyer. I don\’t claim to know what courts would or should do in these cases. But I do know that Covenant\’s clause is excessive, even for an industry known for contracts that favor the publisher over the author.

    As far as the rest of Jeff\’s observations about the Deseret Book/Seagull Books deal, I\’ll have to respond in the next few days. I\’m working on a follow-up post, covering why I don\’t believe the assurances made along with the announcement of this deal will last for the long term, and how the deal is wrong despite these assurances.

  23. Heather Moore

    Stacy:

    The current Covenant contract “right of first refusal” is for LDS BOOKS only. I publish my LDS work with Covenant and national work in the national market.

  24. David

    Good Move Deseret Book! This is a move that will open up new possibilities for authors and for retailers. This is a wonderful thing. Way to go DB!

  25. David

    The Covenant Right of First refusal is different for each author. It depends on when you signed on and if you signed the addendum to the contract Covenant put out in 2002-03 to shield their contract from potential law suits over the leagality of their ROFR clause. Even then, requiring authors to submit all their LDS themed works to Covenant stands on shaky legal ground that has yet to be tested in court. Hopefully Deseret Book which cried “legal” foul over Covenant’s ROFR (Right of First Refusal) clause will influence their newly acquired subsidiary to remove that obnoxious covenant from their contract now that there is no fear of losing authors to Deseret Book. Or is there?

  26. Kent Larsen Post author

    David:

    You’ll have to do better than simply saying “Good Move” to convince me, or anyone else, that this was a good move. It may have been good for Deseret Book. But I don’t see any benefit to Authors or retailers. To the contrary.

    But I do thank you for your second comment. I find it interesting that Covenant essentially admitted the shaky legal ground of their ROFR clause prior to 2002-3. Thanks for the information.

  27. Marion Jensen

    Unless I’m reading it wrong, my contract stated that Covenant has ROFR that last until I’m 62-30 years. And there was no ‘LDS only’ clause. I am getting a second book published this spring, so I got the addendum that limited my contract to LDS only books, and may have modified the time, I’m not sure.

    On one hand, I can see Covenant wanting to keep authors that they have invested time and money in. Covenant doesn’t want to find the next Dean Hughs, only to have them go to DB for the rest of their career. At the same time, that is all part of the ‘competitiveness’ that makes the system work. If an author starts to do well, but is locked into one publisher, then that publisher doesn’t have to work to keep them.

    I talked to a fellow Covenant Author who recently submited a book to DB, and is under a Covenant contract. DB wouldn’t look at the book unless Covenant had already rejected it. Technically Covenant doesn’t have to work hard to keep their authors happy. The authors are ‘stuck with them’. I am not saying Covenant doesn’t work hard to keep their authors happy. Only that with such a binding contract, they wouldn’t need to. Authors are bound to work with Covenant no matter what happens.

    My experience with Covenant has been for the most part very positive. I do wish that with my second book I could have ‘shopped it around’. Not because I’m unhappy with Covenant, but because I wanted the best deal possible. I was curious to see if DB might have more ‘marketing muscle’. But from what I can tell, my contract does not allows me the ‘shop around’.

    Post merger, I’m not sure what will happen. Maybe I’ll just take up curling. :)

  28. Kent Larsen Post author

    Marion:

    You might want to talk with a lawyer. It is possible that the ROFR clause in the contract is so obviously bad that you can shop around next time. You could also simply ask Covenant to strike the clause or modify it to suit you. Who knows, with the acquisition of Covenant by Deseret Book, they may simply do it.

    It can’t hurt to ask!

  29. Jeff Savage

    Okay, just a thought here. The ROFR cluase is only onorous if you as an author have a lot of clout or if there are many comperable options to go to.

    Let’s say that tomorrow, for whatever reason, I decide I want to publish with another LDS publisher. CFI, Granite, Spring Creek, Rose Haven, etc., are all great publishers, but they will also tell you right up front that they can’t compete with the big 2/1 in sales and marketing.

    Deseret Book does currently pay better than Covenant, but the downside is that they also currently don’t do nearly as much fiction. In the past, you could move to DB, only to find they just won’t have room for you the next year. Then, try going back to the publisher you sprurned.

    So if through this merger, DB and Covenant start paying the same royalties and offer the same shelf space (a big if, I’ll admit) there is absolutely no problem with Covenant’s contract at all. Where else would you want to take your LDS books?

    I still say this looks like a big plus. For authors with the smaller publishers, it could be a bigger issue, but if the smaller publishers focus on filling the niches that DB and Covenant don’t cover, the opportunity won’t be any worse and might actually be better.

  30. Marion Jensen

    You could even argue that they don’t even need a ROFR clause anymore, simply because there isn’t another publisher close to the size of DB/C. Let the authors come back, not because they are legally bound to, but because they like working with the publisher…

  31. Carole Thayne

    Hmmm, I’ve enjoyed reading the banter. As an author, I hope this will be a positive thing for me. As far as the contracts go–my contract is for LDS full-length material only. I really don’t see it as a horrible thing either. For one thing, as Jeff said, there are so few options for us. It would be great if shopping around was really an option for LDS based material. I have a question though. Why will they be cutting back on fiction published. It seems to me with more shelf space in more retail outlets, that they would be increases fiction.

    Carole

  32. Kent Larsen Post author

    Jeff:

    I’m afraid I can’t conceed your point that this could be a big plus for authors. You are correct that you personally might be just as well off for the books you already have signed up.

    But the issue is really only important when you sign up your next book. As a result of the acquisition of Seagull, one of the following might occur to you:

    1. You may find that your next book is turned down, where had the companies remained independent it would not have been turned down. Despite the fact that DB/C maintains that no changes will be made (no stores closed, no author contracts cancelled), this doesn’t mean that going forward they will acquire new books in the same way or at the same rate.

    2. Your next book could be accepted, but the royalty rate on your next contract could be even lower. (after all, what choice do you have in the market?)

    3. Your next book could be accepted, and royalty rates might be the same or even higher as you suggest. BUT the number of copies sold could actually decline because of the combination of DB & Seagull! Why? Because the even if they remain independent, the two chains are likely to coordinate their buying in some way. In general, this could mean fewer copies of your book on the shelf at their stores than before the combination, and fewer copies of your book ont he shelf would lead to fewer sales.

    4. You could also suffer some disadvantages because of accounting differences that are possible due to the combination of these companies. For example, publishers don’t pay royalties until the books are sold to the stores. But did Covenant pay royalties on copies sold to their sister company, Seagull Books? Or did they pay royalties on the sales when Seagull actually sold them to customers? How does Deseret Book handle this? Do they count as sales when books are shipped to stores? or sales when they sell from the store to customers?

    Why might that matter? Sales to stores occur earlier and are often slightly larger, because of the copies that are on the store shelves and haven’t yet been sold, and because sometimes stores fail to return books when they should otherwise.

    Of course, it is possible that some authors will see a jump in sales — but I would argue that these jumps in sales would have occurred if the companies remained separately. After all, what about this combination will lead to larger sales for anyone? Will Seagull Book and Deseret Book stores suddenly be able to sell more books? Have they developed as a result of this combination some new market or way of selling that boosts sales? I don’t see it!!

    The problem with this combination is that there is NO upside for consumers or authors, and only a potential downside.

  33. Kent Larsen Post author

    Marion:

    Yes, the acquisition does make the ROFR clause almost irrelevant. When the ROFR clause came up in this discussion, my only point ws that I thought the clause was excessive and immoral.

    In my view, the situation has deteriorated for authors. Where before, under the ROFR clause you could present your next book to Covenant, and if it was rejected, go to Deseret Book, now you will present your next book to DB/C and if it is rejected, your only choice is to go to smaller publishers without as much marketing clout.

    Yes, you are right. Let authors come back because they like working with a publisher. NOT because they are forced to by some contract clause.

  34. Kent Larsen Post author

    Carole:

    You said: “It seems to me with more shelf space in more retail outlets, that they would be increases fiction.”

    Where do you get the idea there will be “more shelf space in more retail outlets?” The overall total of the two chains will not change. They have not announced opening any new stores or expanding any new stores. Any changes in which titles get what shelf space will only come at the expense of other authors. If you get more, someone else gets less.

    I don’t know if the combination will cut back on the amount of fiction they publish or not. I SUSPECT that the combination of Deseret Book and Covenant will mean that they will combine their editorial policies to some degree. They will likely take Deseret Book’s attempts at the kind of fiction that Covenant publishes, and put them under the Covenant brand, and move some Covenant titles that fit better under Deseret Book there. THEN, in the longer term, I expect that the combined company will decide to raise its standards — weed out the titles that don’t sell as well. Publishing acquisitions tend to have that effect — they almost always reduce the total number of titles that the combined company publishes.

  35. Jeff Savage

    Kent,

    I agree with you on the shelf space issue. There won’t be any increase overall. But the question is this: Does the LDS market benefit more by having more titles or higher sales of fewer titles? The benefit of the former is that there is a greater variety. The benefit of the later is that the quality should rise to the top if an author can make more money per title. It’s my contention that more titles has hurt the LDS market. Authors tend to take less time per book and look to other markets for income. I think it also hurt independants as they had to carry more titles.

    At this point DB has no plans to combine all fiction to Covenant. They like the idea of publishers continuing to do what has worked well for them in the past. That being said, I can see fewer titles being released which is a trend that has occured the last couple of years both nationally and in the LDS market.

  36. Marion Jensen

    Kent, I appreciate your thoughts on the potential downside to authors. My concern has stemmed from several statements that seem to have been bandied about a lot with the merger announcement. They have been used so much I can’t help but think it’s their ‘buzz words’ – the phrase they want people to remember are ‘the stores will act independently’, and it will be ‘business as usual’ for the two companies.

    The problem I have with these statements is that just a few months ago DB was about to pull all of their material out of Seagull stores. They were at drastic odds. The reason they gave was that it was not being ‘marketed correctly’, whatever that means.

    So, with the merger, we can assume one of two things. First, they mean exactly what they say. Both companies are still so completely independent, that they will continue talks, try to find a compromise, and if none can be reached, then DB may end up pulling their books from Seagull. I think this scenario is unlikely. I really don’t think that the ‘independence’ is going to be that absolute.

    More likely, now that DB owns Seagull/Covenant, DB will pretty much tell Seagull what needs to happen. Sure, they won’t be making the low and mid level decisions, but I would be willing to bet that they will be involved at a high level. Either DB will go ahead and pull their books from Seagull like they wanted, or they will make whatever ‘marketing changes’ that Seagull wasn’t willing to make prior to the ‘threat’. (could it be prices are on the rise?)

    The problem with this goes back to the whole notion of competition. Prior to the merger, Seagull and Covenant made decisions based on one thing, and one thing alone. What will be best for the companies? If it hurts DB, well, that’s too bad. But all decisions were made to help the company succeed. A lot of those decisions also helped authors and customers. If Covenant sells more books (good for the author), the company succeeds. If Covenant becomes more efficient and is able to lower prices (good for the customer), they will sell more books, and the company succeeds.

    But now, with the merger, all bets are off. Is DB really going to allow Covenant/SB make decisions that will negatively impact DB? Will the ‘independence’ and ‘business as usual’ really go to that level?

    I can’t think that it will.

  37. JB Howick

    I’m not at all surprised to see the lengthy list of comments to this thread. We’ve been taking our time chewing over the consequences of DB’s acquisition because it has a dramatic impact on our business.

    1) Shelf space.

    Kent’s correct that the end result (in less than 18 mo IMHO) will be fewer stores and less shelf space. When two competitors merge (I recognize the distinction from post #19, but I believe that it’ll prove irrelevant). Our expectation is that DB will use the SBT stores as their used book outlets — meaning a lot of new book space will disappear.

    Will they keep the SBT brand? I doubt it, it’s not DB’s M.O.

    2) Publishing Consequences

    I sincerely doubt that Covenant will continue operating independent of DB for very long. Independent operation would be unusual for both DB and the publishing business in general. The result will be fewer books published.

    Will this mean Covenant authors will get a new contract? Probably not. On a side note, Covenant’s contracts may have been a bit ruthless, but they weren’t illegal. Contract law is many hundreds of years old, and it basically boils down to two phrases. First, “if you didn’t like the contract, why did you sign it?” Second, “you signed it, you’re liable.” Authors who think contract clauses are unenforceable and ignorable (c.f. post #14) should talk with an attorney, first.

    3. Massive disparity in competition.

    This is the issue that concerns us the most. DB was probably an anti-trust lawsuit waiting to happen as they were, but with the acquisition of Seagull, they’re now so much larger than any of their competition that they fundamentally control the LDS market.

    It’s important to note that it isn’t just the count of their stores, they also have “the stores that count.” My apologies to the many independent bookstores. We love you! But DB has pretty much all the stores in Utah, Idaho, Arizona, and Nevada. By store count DB now owns 50%+ of the stores in the LDS market, but as Kent mentioned, their control over the UIAN states means they control 75%+ of the English-speaking LDS market (I suspect Kent’s estimate of 75% might be optimistic). The next biggest chain is Ensign (5 stores) in Southern CA.

    The reason why we’re concerned is that DB now has the ability to literally put any publisher out of business. They’ve already decided not to carry one of our books because it competes with one they published themselves. This hurt the book’s sales tremendously (to the tune of 20% of expected sales). We’re intentionally selling to both the national and LDS markets to avoid this possible fate, but we’re not so large yet that a choice by DB to not carry any of our books would come so close to shutting us down that it’s a serious issue.

    Thus my assertion that DB is an anti-trust lawsuit waiting to happen. It’s never good to have so much control over any market.

  38. Kent Larsen Post author

    John Dehlin over at Mormon Stories invited me to talk about the Deseret Book acquisition of Seagull Book and Covenant Communications, as well as a host of other issues. We talked about the history of the LDS publishing industry (going back to 1830!), its current status, the effect of this acquisition, and the possible future for the industry.

    The interview totals more than 2 hours! But I think its engaging and quite fun. Check it out at:

    Mormonstories.org

  39. DW

    Go Deseret Book! This is a great thing for Authors. No more terrible, subjugating, enslaving publishing contracts (think Covenant’s Right of First Refusal). This is a great thing for readers. No more sub-standard fiction (think too many releases each year for the past five years). And there is a point where readers won’t buy books. DB won’t price themselves out of the market. The only ones who seem to think this is a bad thing and a lawsuit waiting to happen are those who find themselves on the outside looking in and I hope it isn’t coming from a disgruntled minority who, for whatever reason, have an axe to grind. You go Deseret Book!

  40. Kent Larsen Post author

    DW, I don’t see your point.

    Your claim that DB will do away with Covenant’s ROFR remains to be seen. It seems to me that it is just as possible that DB will adopt this practice on thier other contracts. What evidence do you have to tell you otherwise?

    As far as your claim that this eliminates (or even reduces) “sub-standard” fiction, I don’t see how. DB isn’t known for producing particularly great fiction, IMO. And even if it were, I haven’t seen too many financially successful publishers that have a great track record picking fiction. In many ways its a crap shoot — you just can’t tell what will sell or even be considered “great fiction.” Half the titles picked up by any publisher are likely to bomb. Its just the way it is.

    And as for “pricing itself out of the market”, I don’t think anyone suggested that would happen. What happens in a monopoly is that the monopolist charges the highest price that the market will bear, instead of the lower price needed to be competitive. I think the argument simply was that DB’s prices will now be higher [Personally, I don’t think that will happen, but others have suggested that it will.]

    DW, I think you are missing the point that is most important to me: This acquisition will actually shrink the size of the LDS market and reduce the availability of LDS culture to members of the Church, especially those outside of the Intermountain West, where Mormon culture is most helpful in keeping members active and strengthening their testimonies.

    I can’t say it enough. Its a bad move for everyone (including the Church) except Deseret Book and possibly Lew Kofford.

  41. DW

    DB lawyers, through Sheri Dew, informed me that in their humble opinion the ROFR clause was on shaky legal ground, should be contested in court, was unenforceable according to Utah contract law and was something they advised DB never to consider.

    It is a new day for authors because the most ruthless of negotiators has stepped aside.

    It is a wonderful purchase because they will allow Covenant to pursue fiction, as they have in the past, but will also be more willing to market those books in their stores—-in essence increasing Covenant’s shelf space at DB. What a deal.

    It is a wonderful purchase because Segaull will continue to be the low price leader and DB will continue to be the full service leader with cool stores.

    It is a great purchase because it will increase, not decrease, the reach of LDS culture and product beyond the mountain west.

    This is an all-round terrific move. Don’t be such a pesimist. Lurk in the shadows of doubt if you must, but there is far too much good in this development not to be overly opptomistic.

    You go Deseret Book!

  42. Kent Larsen Post author

    DW:

    OK, I can conceed that DB won’t use the ROFR clause.

    I can’t conceed your “shelf space” argument. Some Covenant authors may see more shelf space. But its a zero sum game! Deseret Book isn’t increasing the amount of shelf space that it has, so if you get more, someone else gets less!! This doesn’t improve the shelf space in the LDS market overall, it might mean some reorganization, not improvement.

    Yes, as I’ve said before, I can see the two chains being maintained as separate stores — again not an improvement, because we had that before. But Seagull now has a new boss, and we don’t know what that will mean. DB could eventually decide to shutter some Seagull stores because they aren’t performing (I know they say they aren’t closing anything, but I’m sure they mean as part of the acquisition. Who knows what they will decide next year. I doubt they know yet.) They could also decide to open more stores, or have some existing stores switch brands (from DB to Seagull or vice versa).

    About the only thing that seems likely is that Deseret Book stores will probably drop their price matching of Seagull — effectively raising the prices for those who aren’t willing to go to Seagull instead of Deseret Book.

    DW, how do you figure that there will be an increase in the reach of LDS culture and product beyond the mountain west? I don’t see how this acquisition does that. Can you explain your claim?

    Sorry, but you haven’t given me enough information to agree with you, and my 20+ years in Book Publishing, my 10 years of investigating and analyzing the LDS market and my MBA make me believe you are wrong.

    Give me a bit more analysis and explanation if you really want me to change my mind.

  43. S. P. Bailey

    Anybody who thinks that DB has “cool stores” has been drinking the DB kool aid for far too long. If DW is not posting from a DB computer (if not a church office building computer), I will be truly disappointed.

    I share Kent’s reservations regarding DB (do read his series of thoughful DB posts). DB’s affiliation with the church is troublesome. The perception that getting published or sold at DB equals official churh approval probably hurts both DB and the rest of the market. DB winds up bland, risk-averse, and kitschy. The rest of the market (which by implication lacks official church approval) operates under a cloud. So I can’t get excited (a la DW) at DB eliminating a competitor and getting even bigger.

    Still, it is not clear to me that the DB/SBT thing will effect what I really care about. For example, the kind of scholarship on Mormon topics coming from the big presses (think Bushman and Givens) or academic presses (Illinois, Indiana, et al.) Or the kind of fiction and poetry that that comes out of Signature, Zarahemla, and so forth. I guess I care about the DB/SBT thing because I wish both of them were/had been entirely different animals (purveyors of serious and excellent Mormon scholarship and literature).

  44. William Morris

    I doubt that DW is posting from a Deseret Book computer or from the church office building.

    In fact, if you read his comments a bit closer it looks like he is Covenant author.

    I agree with many of the points that Kent and S.P. have made, but let me also say that it is also great to hear from Covenant authors here at AMV and elsewhere (most notably Six LDS Writers and a Frog) — especially since they are the group (other than consumers) who will probably be most affected by this acquisition.

    A make resolutions for the new year-themed Deseret Book mailer arrived today. Two pages of fiction for adults; two pages for teens. The whole thing was very self-help oriented. I wonder if the genre works and authors Covenant publishes will bubble up a bit more into the DB marketing efforts or if they will stay in the ghetto (so-to-speak). So far the Covenant authors seem to be hopeful.

  45. Randy B.

    “Still, it is not clear to me that the DB/SBT thing will effect what I really care about. For example, the kind of scholarship on Mormon topics coming from the big presses (think Bushman and Givens) or academic presses (Illinois, Indiana, et al.).”

    These are my thoughts exactly. Anyone disagree?

  46. Kent Larsen Post author

    I’m afraid I quibble a little on this one.

    William is probably right that there isn’t an immediate threat to the scholarly and academic portion of the market. DB & Covenant didn’t really publish for that market anyway, and the books for that market aren’t found in DB and SBT stores.

    But, if I’m right that this weakens the LDS market, then it will be difficult to see the geographic growth of the market for LDS books that we would all love to see — the growth that would also increase the market for scholarly and academic books — so perhaps fewer new titles than we might see otherwise.

    I admit that this effect would be small and in the future. It may not be worth worrying over. Still, I’d like to see that portion of the market grow, and these titles show up in more LDS stores. Seems a little less likely now.

  47. William Morris

    Just to echo what Kent says.

    Even if the impact is small, Mormon letters is still in such an infant state that one or two literary/academic titles a year can have a huge impact on the field.

    Anything that dampens a title being published — or leads to some titles being published is felt. One great novel can fuel a flurry of additional creative and academic work.

    This is why so many of us hope that Zarahemla and other small publishers can make a go of it for at least a few years. Already Zarahemla has published 3 major litrary fiction titles. That’s more than Signature this year, I believe. And more than Deseret Book.

    Yes, genre fiction dominates the market. And unlike some of my colleagues, I’m not adverse to it. But literary fiction is what really gets my critical and creative juices flowing.

  48. DW

    Kent:

    You don’t need to build new shelves or expand your store to increase dedicated shelf space. All you have to do is stop giving so much space to Harry Potter, Chicken Soup for the Soul and the Golf Digest and replace them with Covenant-published books. A few window-dressing displays of Covenant products in Flag-ship DB stores are certainly in the works as well. At to that some end tables and story entry-stacks and Covenant enters a new marketing era in DB retail stores that hardly conceivable a month ago.

    Literary LDS fiction? Come on guys, that stuff is absolutely astounding, insightful, creative, well-researched and destined to remain a small sliver of the LDS publishing market. Entertaining fiction that has a few modest elements of scholarliness and a modicum of literary quality will command the larger portion of the market for our lifetimes and possibly into the millenium given some unforseen shake-up in the reading sensibilities of the majority of LDS readers. Scholars simply don’t want to entertain and entertaining authors don’t rarely take the time to research boring details enough to transform them into entertaining fare.

    Finally, Kent, my master’s degree in Psych, my BS degrees in Physiology and Chemistry and my Doctoral degree in Organizational Behavior inform me realitvely little about the LDS publishing industry. I wish I’d gotten an MBA from the English department. What I do know is that most people who view the DB/Covenant deal in a negative light tend to have a vested interest in making money in competing operations, have had their work rejected by DB or are former employees or contract employees for DB—essentially they have some competitive or emotional reason to angle this deal with a negatvie slant. So be happy. This is a great day for LDS publishing. Huge benefits to many authors. A great distribution arm and a possible synergy bewteen the art and business of publishing that may astound all of us. I suggest less ivory-tower talk and a little bit more blind, dumb, comman-man support and hope for the very best for a company that has served the LDS community fabulously for so many years. What does it take these days to get you guys to simply say have a go, good luck, we applaud what you’ve done and we’re hoping the best for you. I know, I know. Blog spots are fueled by the same thing that sells papers and increases viewership. Stir the pot, create a controversy and bingo, you have lots of bloggers blogging.

    So I say again. Way to go DB. Good luck. Have a go. You’ll do wonderfully well. And so will the other fishes in the pond. All the best to all of you. And don’t forget this publishing business is a business…a terrestrial affair destined to remain just that. Be careful or you just may get sucked into the terrestrialness of it all.

  49. William Morris

    DW:

    AMV doesn’t do controversy for controversies sake. Nor do we court readers via controversy. We never have. This is a narrow interest blog with a small yet devoted readership.

    What we are committed to is providing commentary and criticism on the world of LDS letters — including publishing and marketing.

    Your point about the readership for literary fiction is well-taken.

    I don’t have any strong theories about how this is going to play out, but I would like to see Mormon genre fiction continue to improve and I have to wonder if DB is going to accelarate or impede that process.

    I think the reason many of us are distrustful is because of what happened with the Bookcraft acquisition.

  50. DW

    Okay. Then instead of so much criticism how about the more difficult questions? If you were CEO of the new conglomeration at DB, what would you do to make it financially sound, fulfill its mission and the dreams of readers and authors alike?

  51. S. P. Bailey

    Perhaps a more interesting question: if you were a general authority, what course of action would you propose to your fellow general authorities regarding the future of DB?

  52. Kent Larsen Post author

    DW, like William, I grant that literary fiction will always remain a small piece of the pie. But the question most Motley Vision readers are interested in is not the size of the pie, but whether or not literary fiction is growing. Strong retailers and a strong retail environment help literary fiction as well as more popular fare. We aren’t seeking for literary fiction to dominate, or even necessarily be a larger share of the pie — we just want it to grow.

    Unfortunately, the rest of your comments are again long on claims and short on evidence or logic.

    You say there will be “Huge benefits to many authors.” Really? What benefits, or what kind of benefits? Why will they get these benefits now when they didn’t before?

    You say, this merger gives authors “A great distribution arm.” A greater number of stores doesn’t necessarily make DB a “great distribution” system. In fact, one of the principal problems with this acquisition is that DB ends up with no direct competitor in the LDS market. No competition almost always means that a company doesn’t try as hard to figure out how to succeed. What about this acquisition makes DB a better “distribution arm” for authors?

    You say this yields “a possible synergy bewteen the art and business of publishing that may astound all of us.” HUH? I don’t even know what this means! Perhaps I’m blinded by how much into the industry I am, but I don’t see any connection between the “art and business” of publishing and the combination of any two publishers. How exactly might DB’s acquisition of Covenant yield a synergy of any kind, let alone one between the “art and business” of publishing (of all things)?

    You write “I suggest less ivory-tower talk” I’m really not sure what you mean by ‘ivory-tower talk’ — I’m not expecting anyone to have extensive knowledge of business theory or the publishing industry. I simply want to know the logic of how you get there. So far your logic seems to be something like ‘I like Deseret Book, so therefore this must be good.’

    You then write that we should show “a little bit more blind, dumb, comman-man support and hope for the very best for a company that has served the LDS community fabulously for so many years.” I’m not sure I agree that Deseret Book has “served the LDS community fabulously,” but I will admit that it has done some very nice book, and that many of its inspirational titles have been a comfort to many, many LDS Church members. As for “blind, dumb, common-man support” I don’t have that for anyone. As Pres. John Taylor said, ” I would not be a slave to God! I’d be His servant, friend, His son. I’d go at His behest; but would not be His slave.” It is slaves that are “blind” and “dumb.” Servants see and talk.

    Like a good servant, if I see something going awry, I say something. I’m not interested in controversy. I am interested in making the world a better place, and in seeing the gospel spread throughout the world. I am interested in spreading LDS culture as a support to that gospel.

  53. Kent Larsen Post author

    Thanks DW for asking what should happen in the future. I do think this is an important question. Here’s what I think would be a better course of action:

    1. This acquisiton should be reversed, if possible.

    2. The Deseret Book stores should be sold off to another company or spun off into an independent entity, preferably one not owned by Deseret Management.

    3. Deseret Book’s policies should be reviewed for how well they promote expanding the LDS market geographically and linguistically. Minimum order and account quantities should be small enough that independent bookstores can start easily. The bookstore chains that Deseret Book now owns should be encouraged to start stores that expand the market in these areas.

    Other suggestions that I have can probably be gleaned from the three articles I wrote last year on the “Problem of Deseret Book”, which I referenced in the post above.

  54. Preston McConkie

    S.P. Bailey said: “Also, as far as barriers to entry are concerned, one in particular stands out: DB’s affiliation with the church and the related perception of official church approval.”

    For this reason, I think any lawsuit against DB would be suicide for the alternative LDS publishers in general. They’d be branded as anti-church. Richard Dutcher threw up his hands and gave up after trying to break back into a market he created, but that got a bad reputation while he was out of action. Imagine trying to sell anything published anywhere BUT Deseret Book after some bright entrepreneur tried suing on behalf of the little guys, and the current barriers to reaching LDS readers will seem mild.

    I think anti-trust laws are important, but trusting (no pun intended) in them is hazardous. Apple Computers languished largely because it stopped being innovative while it used the courts to try to win back the market stolen by Mircrosoft. But it lost its suit.

    In the case of Deseret Book and its market dominance, there’d be no way for the little guys to win even if a lawsuit went against DB, and no matter who filed it and who could say they weren’t involved. They would be scorned and punished by the people who buy from DB.

    DB’s biggest weakness — and the way it fails to serve the LDS consumer — is its lack of innovation. Hence it buys innovaters. But it changes in the process, too, and outside innovators can continue serving the LDS entertainment/literature consumer. The problem is, they have to be really good and really committed; they’d have to do something that DB doesn’t do, and doing it well.

    It’s easier to worry about how DB is tilting the playing field. But I don’t think the courts are even capable of solving that problem, even if it were desirable.

    Comment by Preston McConkie

  55. JB Howick

    DW’s right that many of the people complaining about DB becoming monopolistic are those with a financial stake in the LDS market. What frustrates me about his response is that it assumes the opinions of LDS business owners are somehow less credible because their livelihood is involved. LDS business owners deserve more respect than this.

    I believe the LDS market is one of the most difficult in the U.S. because it lacks any independent market-wide advertising outlets and is driven by a single retail chain that is owned by the largest producer in the market. I believe this also makes the LDS market one of the slowest growing markets.

    The whole point of anti-trust laws is to give business owners a chance to build their business (and, therefore, their markets) based on the quality of their products and services without the threat of competitor-restricted trade. This concept applies equally to authors, publishers, and bookstores. DB, especially now after their purchase of SBT & Covenant, affects all three.

    1) Authors: By reducing the number of publishers in the market, authors have fewer opportunities to be published, both in terms of the number of books published each year, and in terms of culture. Fewer people to work with means fewer opportunities to find good working relationships.

    2) Publishers: Publishers are affected by DB’s acquisition of SBT due to the increased effect of the publisher-and-retailer conflict of interest. DB’s choice to carry one book over another now impacts the vast majority of a book’s potential sales — and DB can make that choice to protect the products DB creates (an unfair trade advantage that we have already experienced).

    3) Bookstores: If all publishers were equal, then removing one would not substantially change the influcence any other publisher has on a bookstore. However, DB’s acquisition of Covenant substantially increases the influence DB has over the independent bookstores. This leverage usually translates into insisting on store layout that favors DB’s products, or it can translate into larger minimum orders that reduce the bookstore’s ability to purchase other companies’ products.

    Has DB reached a size that all this doom and gloom will come to pass? I don’t know. What I do know is that a nearly 14:1 ratio in size between DB retail and it’s next closest competitor does not bode well.

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