Das Book - Why German, French, and British companies are devouring American publishers. By Daniel Gross

Today in Slate, Daniel Gross considers why German, French, and British companies are devouring American publishers:

Time Warner earlier this week agreed to sell its publishing arm—with imprints such as Little, Brown and Warner Books—to Lagardère, a French media company, for about $537 million.

In some ways, it's a natural fit. Like the French, book editors enjoy languorous lunches and batting ideas around. Like the French, some U.S. publishers and editors (viz. l'affaire Frey) seem to have adopted Derrida-esque attitudes toward the nature of truth. The French work 35-hour weeks. Ditto for publishers. France is a one-time giant that, having lost its status in the world, is fighting a rear-guard action against 21^st-century capitalism. Check....

But there's something else going on. Random House, the largest U.S. publisher, is a division of Germany's Bertelsmann. Germany's Holtzbrinck owns the venerable Farrar, Straus & Giroux and Henry Holt, along with the not-so-venerable St. Martin's. Britain's Pearson owns the sprawling Penguin Group, which includes American imprints Viking, Riverhead, and Putnam. And Rupert Murdoch's News Corp. (OK, he's an American citizen and the company is based in New York, but both are of Australian extraction) owns a lot of American publishers, too, including Harper Collins and William Morrow & Co.

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Why do foreign media firms find American publishers attractive even as U.S. media conglomerates look to dump them?

Publishing, alas for all the authors among us, is a small business in the scheme of things. Time Warner may be the fifth-largest book publisher in the United States, but the unit accounts for only a tiny sliver of the company's revenues and profits. Time Warner has a market capitalization of about $85 billion. At $537 million, the publishing arm accounts for only six-tenths of 1 percent of the company's total value....

For American companies, book publishing is a slow-growth niche business. For the Europeans, it's something quite different. These foreign companies that now own U.S. publishers generally lack the scale of U.S. media conglomerates. Pearson and Lagardère have market capitalizations of about $10 billion and $11 billion, respectively. And French and German companies operate in home markets that lack much in the way of organic growth. To them, a near-stagnant U.S. market represents a rich, comparatively rapidly growing market. For a French or German manager, a business that grows by 2.5 percent a year is handily beating the pace of domestic economic growth....

Book publishing may turn out to be another one of those industries that diversified, hypercompetitive, publicly held American companies can't afford to be in. (Independents like John Wiley & Sons or Scholastic can probably stick it out.) We've seen this process happen before. In manufacturing businesses, when margins plummet and the prospects for profitable growth decrease, Americans tend to abandon them and move on to the next thing. For IBM, the personal-computer business had evolved into low-margin manufacturing competing in a saturated, mature market. Its shareholders were happy for Big Blue to get rid of it and focus on higher-margin software and services businesses. But for the buyer—China's Lenovo—it represented an opportunity to acquire a brand name and an entree to a potentially lucrative market. Where you stand on the merits of a business depends on where you sit.