Early in November, Barnes & Noble, Inc. (http://www.barnesandnoble.com) announced that it would buy Ingram Book Group (http://www.ingrambook.com) for $600 million—$400 million in stock and $200 million in cash. Ingram Book Group, a unit of privately held Ingram Industries, is the leading book wholesaler (according to a Publishers Weekly estimate, responsible for as much as two-thirds of books shipped by wholesalers). It also serves as a major supplier to Barnes & Noble's competitors, including Borders Group and Amazon.com. With the Ingram acquisition, Barnes & Noble would acquire 11 shipping points that could give overnight delivery to some 80 percent of its online and retail store customers. Ingram has annual sales of over $1 billion and ships 115 million titles a year. With the announcement, Barnes & Noble promised that Ingram Book Group would continue to serve as a major supplier for independent bookstores, specialty retailers, and libraries. Despite the promise, the American Booksellers Association (http://www.bookweb.org/aba), an association of independent bookstore owners, immediately condemned the acquisition and promised to protest it to the Department of Justice as a violation of the antitrust laws. Most industry commentators focused on the threat such an acquisition might pose to Amazon.com (http://www.amazon.com), the major online competitor to Barnes & Noble. Amazon.com relied on Ingram for processing an estimated 58 percent of its online book orders in 1997, though that number may have dropped after the opening of a new warehouse in Delaware and other supply diversification measures. Barnes & Noble operates 504 bookstores under its own label and another 507 under the B. Dalton label. One out of every eight books sold in the United States comes from Barnes & Noble.
|What's a NewsBreak Tracker?|
NewsBreaks continue to stretch the resources and ingenuity of Information Today, Inc.'s writers and editors. Today's problem? What do you do when a story stretches far outside the scope of our usual editorial focus, but still has significant interest and potential impact on our readers? Do you try to keep pace with national press coverage? Do you only cover specific issues of interest to readers and ignore the details of the overall story?
This article represents one approach to answering those questions, one that takes advantage of the skills and talents—not to mention, the good nature—of our audience, i.e. expert information professionals. In this first NewsBreak Tracker, we will cover the story broadly with some emphasis on issues of special interest to information professionals and, at the same time, offer a quick research guide for tracking more details and future coverage. We hope this NewsBreak Tracker will help readers interested in aspects of the story conduct their own research on the topic.
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John Ingram, chairman of Ingram Book Group, will continue in that post and also become vice chair on Barnes & Noble's board. Publishers Weekly Interactive's PW Daily for Booksellers indicated that Amazon.com and Barnes & Noble had already begun expanding their own distribution centers and that this fact, combined with shrinking sales by independent booksellers, might have led the Ingram family to sell off their book business. Barnes & Noble also indicated that it would now drop plans to open two new distribution centers in Reno and Atlanta, a move announced earlier this year. Stephen Riggio, vice chair of barnesandnoble.com, the online unit owned by Barnes & Noble and Bertelsmann AG (http://www.bertelsmann.de), announced that barnesandnoble.com planned to increase Ingram's title selection. It also plans to expand Ingram's Lightning Print on-demand printing operation.
Responding to worried opponents of the move, Ingram and Barnes & Noble have promised to offer the same terms to other accounts that Barnes & Noble itself gets. John Ingram mailed over 5,000 letters to independent booksellers urging them to trust the company, that it would treat customers equally and not divulge inside market and sales information that could help its new parent compete with independents. Barnes & Noble's chairman and CEO, Leonard Riggio, echoed the promise.
Nevertheless, skepticism abounds. The American Booksellers Association (ABA), leading the charge against the acquisition, called the pending purchase "a devastating development that threatens the viability of competition in the book industry." They called on the antitrust division of the U.S. Department of Justice and the Federal Trade Commission "to investigate the proposed acquisition and to take prompt and decisive action to stop this blatantly anti-competitive combination." The ABA already has an antitrust suit underway against Barnes & Noble and Borders Group for pressuring publishers into giving the monster chains better prices.
Many independent booksellers immediately ceased ordering through Ingram, though the ABA urged members not to boycott Ingram for now. Nonetheless, Barnes & Noble issued a press release charging the ABA with "at best another attempt to disparage our good reputation, and, at worst, ... a manipulation designed to cause booksellers who should be competing with one another to act in concert against our company." They considered it "ludicrous ... to claim that, in making this acquisition, Barnes & Noble will do anything but try to increase its business with other booksellers, including every independent that chooses to buy from us."
Amazon.com's CEO, Jeff Bezos, immediately took a defiant approach: "To our customers: Worry not ... Those who make choices that are genuinely good for customers, authors, and publishers will prevail. Goliath is always in range of a good slingshot ... Our long-term strategy has been to diversify our supplier base and to increase our direct purchasing from publishers." Barnes & Noble responded with its own release: "Well, Mr. Bezos, what with a market capitalization of some $6 billion and more than 4 million customers, we suppose you know a Goliath when you see one. Your company is now worth more than Barnes & Noble, Borders, and all of the independent booksellers combined. Might we suggest that slingshots and pot shots should not be part of your arsenal." Amazon.com's same-day reply, entitled "Amazon.com Issues a Statement Regarding Barnesandnoble.com's Statement Regarding Amazon.com's Statement about Barnes & Noble Inc.," read "Oh."
In any case, if the acquisition goes through unopposed, the recent pattern of acquisition including Bertelsmann's 50 percent ownership of barnesandnoble.com might leave booklovers and booksellers facing merged operations of the biggest publisher, biggest bookseller, and biggest wholesaler. As Newsweek's Yahlin Chang expressed it ["Books Caught in the Web," November 23, 1998, p. 85], "On B&N's Web site, front and center, are these words: ‘If we don't have your book, nobody does.' Once it was a harmless slogan. Now it reads like a threat."
Tracking the Story
In this new era of lightning-fast electronic information dissemination, it's worth taking some space here to discuss not just the story, but the story of getting and following the story. The first notice of the sale came over the wires Reuters, Dow Jones, AP, etc. Accessing the Reuters wire story through the Wired news site (http://www.wired.com/news), the story came with a set of six links to earlier stories on the players. One can get wire stories posted for free on leading portal sites, e.g. Yahoo! Finance (http://biz.yahoo.com).
In the past, the detailed coverage that one expects from leading trade press sources might not occur for a week or more, but in the Web era, many publishers with Web sites offer more current coverage online—including this publisher! Publishers Weekly (PW), the leading trade journal for the book publishing and book selling industry, offers PW Interactive's PW Daily for Booksellers (http://www.bookwire.com/pw). For special focus on the computer literature, try C|Net's News.com (http://www.news.com). General press coverage comes from the usual major newspapers—The Wall Street Journal (http://interactive.wsj.com) for the financial angle, The New York Times (http://www.nytimes.com) serving the Northeast and its many major book publishers and having its own complex commercial relationships with many players in the story, and The Seattle Times (http://www.seattletimes.com) for its special coverage of Amazon.com, etc.
When it comes to press releases, always check the original sources, the major player sites in this case: http://www.ingrambook.com/press_release.htm, http://www.shareholder.com/bks/news/19981106-5302.htm, http://www.bookweb.org/aba. One can never be sure what a reporter or other parties may have omitted or even twisted. One can also gather additional background information on one's own from such sites, e.g. general financial information on Barnes & Noble at their investor relations Web site at http://www.shareholder.com/bks, or background on Ingram's current sales and operations at http://www.ingrambook.com/Company_Info/ibchtml/Resource_Center/geninfo.htm.
To monitor actions by the Antitrust Division of the Justice Department, try http://www.usdoj.gov/atr. The Federal Trade Commission's Bureau of Competition has its own site at http://www.ftc.gov/bc. The government may not always announce all its ongoing investigations or decisions, so keep monitoring key player sites and trade press as well.
The Inevitable Outlier
As any professional searcher can tell you, the more you research a subject, the more likely you will reach an absolutely fascinating and absolutely irrelevant false lead. In this project, such a false trail turned up a few days after the announcement of the Ingram Book acquisition, when the press announced that Buy.com (formerly Buycomp.com) (http://www.buy.com) had purchased Ingram Entertainment Unit. Buy.com offers a Web superstore portal to six online specialty stores, including http://www.buybooks.com. The purchase included Ingram Entertainment's Internet-fulfillment arm, SpeedServe, and all its catalog of video games, books, home videos, DVDs, etc.
We raced to Ingram Entertainment, Inc.'s Web site (http://www.ingramentertainment.com) to check out whether this company belonged to Ingram Industries, too. The CEO was named David B. Ingram, but that didn't tell us much. On DIALOG, we checked company directory databases, but again found no certain indicators. However, a story from Publishers Weekly in the full-text archives confirmed the irrelevance of the lead loud and clear: "No Ties Between Ingram Entertainment and Book Co." (v. 245, no. 21, May 25, 1998, p. 11). Apparently John Ingram, head of Ingram Book, and David Ingram, head of Ingram Entertainment, are brothers, but each company is fully independent. Until this year, John had served on the board of directors of his brother's company, but he withdrew when they acquired SpeedServe, seeing it as a possible conflict of interest.
Now, here's where it gets really twisty. Amazon.com, threatened somewhat in its primary business by Barnes & Noble and probably looking for new worlds to conquer, has expanded into new areas of Internet commerce, including music, videos, toys, consumer electronics, etc. In late November, nine major Internet retailers including CDnow (which just acquired N2K's Music Boulevard), Reel.com, and eToys, Inc. announced they would form a new online mall or superstore called ShopperConnection. So it looks like Ingram Entertainment and its new owner, Buy.com, have entered a war zone with Amazon.com after all, but on another front.
What are the stakes here? A recent Yankee Group study forecast that online book sales will reach $700 million by the end of 1998. International Data Group forecast that 320 million people will use the Web worldwide by 2002, compared to 97 million in 1998, with total e-commerce reaching $425 billion, up from $32 billion, as 40 percent of Web users start buying goods and services, up from 26 percent now.
What does it all mean for information professionals? All the storm and fury does confirm one truth. The future for book distribution lies online. Supplier logistics continues to improve turnaround speeds, with estimates of 24-hour delivery for a Barnes & Noble fully integrated with Ingram Book. The Web, of course, allows for online shopping 24 hours a day, 7 days a week. However, the e-commerce sites have also demonstrated an interesting characteristic: They encourage sales of "unpopular" items. All book titles are equal in a catalog. Virtual stores emphasize vast virtual inventories. Customers tend to turn to the Net particularly for its promise to have anything and everything. This puts more and more pressure on e-commerce sites to worry about old-fashioned delivery logistics. It also explains the potential that analysts see in on-demand printing services, where a book stays digital until an order arrives for it.
However, the forces for disintermediation on the Net continue to press. What's to stop wholesalers from starting their own direct Web sales operations or, as in this case, from being purchased by people with active Web aspirations and operations? What's to stop producers, such as publishers, from adopting new production and distribution technologies like on-demand printing, and developing their own direct e-commerce outlets? In fact, what's to stop authors from going directly to readers, maybe with a little help from a superstore? When it comes to e-commerce, like Al Jolson used to say, "You ain't seen nothin' yet."
What happens next? Barnes & Noble executives expected the acquisition to pass government approval by mid- or late December, regardless of American Booksellers Association protests. Some experts predicted it might take considerably longer—up to 6 months—but most experts expected the government to approve the sale in the end.