Strategy: The Big Merge
So in a way, to take McCarthy's view on things, the inherent growth involved in merging two giant publishing companies is intended to save money.
"When you read the press releases, everything is mentioned as Bertelsmann and Pearson having made these decisions," he says. "Basically, the trade book publishers are viewed as constant providers of anywhere between a nine and 12 percent margin on an annual basis. I think what's going on here is downward price pressure on ebooks—and whether or not it's real is another question, but there's a perception of downward price pressure—combined with a perception of a flat marketplace in terms of unit sales. If you're selling the same amount of product but for a lower price, decreased revenues is the conclusion one draws. The only way you can preserve margins is by cutting costs."