I was reading last weekend about the antitrust lawsuit against 3 of the Price Fix 6, and it reminded my of a historical footnote which adds an amusing twist to the current situation. The lawsuit moved a step closer to trial yesterday. U.S. District Judge Denise Cote has set the trial date for Apple, Penguin, and Macmillan for 3 June 2013.

That does not come as a surprise and isn’t much of a news story, but I am amused by the fact Penguin is involved in a price fixing lawsuit, given their early history.

I started reading a book this past week that sheds some light on this issue. It’s called Two-Bit Culture, and it focuses on the rise of the paperback and how the publishing industry responded. I’m still working my way through the book, but I’ve already noticed a number of similarities between the current ebook situation and paperbacks.

Paperback books predate the turn of the century, but they really got their start in the 1930s. Several companies were started in a few short years with the same general goal. They wanted to mass-produce a cheap book which could be sold for a quarter (or 2 bits, in American slang). They published classic fiction as well as reprinted books which had been successful in hardback.

There was no bookstore industry in the US in that era (not as we know it today), so these cheap paperbacks ended up in a novel distribution venue: newsstands. The paperbacks were sold alongside pulp magazines, one of the possible inspirations for the business model.

One of the companies launched to produce cheap paperbacks was Penguin. This company was formed in 1935 in the UK by Allen Lane, who had left his previous position as Publisher at The Bodley House, a well known firm. According to Penguin’s unofficial corporate history , Lane actually was inspired by the cheap pulp magazines he saw on a newsstand.

The thing about Penguin is that when they were launched, they were the period equivalent of the many ebook startups we have today. Allen wanted to sell his books as cheap as he could in order to get the largest audience, so he embraced new technologies and new distribution venues in order to accomplish that goal. He would have loved Amazon’s deep discounting of ebook prices for the simple fact that it built the market.

When I hear about Penguin being one of the companies involved in keeping ebook prices up, I snicker. Their current actions provide a stark contrast to their early history.

But it’s also not a surprise. Penguin is an example of the classic pattern of how businesses live and die. A young business adapts quickly to new markets (sometimes even inventing the new market) and does its best to grow. A mature business works at improving its position in established markets. And a moribund business tries hard to hold on to what it has, sometimes even going so far as to stifle new markets through financial pressure, backroom deals, and even criminal conspiracies.

Tell me, which stage do you think Penguin falls in?

I know some of my readers work for Penguin (discovering the one from Penguin Group South Africa was a shock) and you probably don’t appreciate what I’m saying about your company. Do me a favor and take a look at how Penguin is handling the library ebook market right now. It’s a regressive position, not innovative. It’s designed to limit the damage ebooks might inflict on existing markets, not build a new one. That is arguably the actions of a third stage company.

P.S. Much of the detail in this post comes from Two-Bit Culture. This book was published in 1984 and is regrettably out of print. Luckily you can find it on Amazon for under $10. Go buy it.

P.P.S. If anyone knows where I can find the ebook edition, please leave a comment. Thanks.

Penguin and Cheap eBooks – A Historical Perspective