BOMC, Doubleday Direct to Form Joint Venture
Jim Milliot -- 12/20/99
Partnership, designed to combat industry competition, will dominate book club market

The country's two largest book clubs--Book-of-the-Month Club and Doubleday Direct--have reached a preliminary agreement to form a joint venture through which they will combine back-office operations while continuing to keep their editorial operations separate. The merger is designed to make the two clubs more profitable as their operating margins come under increasing pressure from online booksellers and discount bookstores. The deal is a 50-50 partnership between the club's parent companies, Time Warner and Bertelsmann, and is not subject to government approval. It is expected to close in early 2000.

Under the agreement, the two companies will continue to operate their existing clubs under their brand names. In addition to operating the BOMC flagship club, the Time Warner division also runs eight other clubs, including the Quality Paperback Book Club and the History Book Club. BOMC has a total of 4.2 million members. Doubleday Direct, owned by Bertelsmann, operates the Doubleday Book Club and the Literary Guild Book Club as well as such special interest clubs as Crossings and Mystery Guild. In 1997 Doubleday Direct acquired the professional book clubs from Primedia and now operates 27 consumer and professional clubs with total membership of 4.2 million

According to Markus Wilhelm, chairman and CEO of Doubleday Direct, under the joint venture competitive bidding for books will be limited. He explained that even under current conditions, BOMC and Literary Guild, because of their different audiences, rarely bid against each other for a particular title. "There will be more preempting and less bidding," Wilhelm said, and he emphasized that the new arrangement will not result in a reduction in advances and royalties to authors, unless the sales performance of an individual author is on the decline. With stagnant club sales, a larger company, where costs can be amortized over a larger base and selections widened to a bigger audience, is the only way book clubs can sustain the kinds of advances they are now paying, Wilhelm told PW. He said a bigger company will also have the resources to make the "huge investment" the clubs need to create a more competitive infrastructure and to build new e-commerce tools.

BOMC and Doubleday are estimated to control approximately half of the $1.2-billion book club market and an even larger share of the general interest book club market. Vicky Bijur, president of the Association of Authors Representatives and head of her own agency, said that from her personal viewpoint, the merger is "terrible news," observing that with the continuing consolidations, "authors have fewer choices among publishers and now fewer choices among book clubs."

The head of a major publishing company told PW that while he understands the logic of the move, "it will take some time to digest what the full impact of the elimination of competition means." He noted that if advances fall, publishers may re-think their relationships to the clubs.

At press time last week, there were still outstanding issues regarding the new partnership. Although BOMC and Doubleday Direct will remain in their respective locations, in New York City and Garden City, N.Y., the location of the company's headquarters has not been announced. In addition, a CEO has yet to be named and the six members of the board that will oversee the venture--three from Time and three from Bertelsmann--have not been announced