The Big Question: Is the sale of Ottakar's bad news for publishers and small bookshops?

Do we still read books?

In an age of dazzling technology, with the explosion of the internet, the arrival of multi-channel television (terrestrial or satellite), DVD, computer games, mobile telephony, and the surge of interest sport and shopping, it is perhaps surprising that we read so many books. For despite the claims that modernity would kill off the printing of words on dead trees, book sales are buoyant. According to Nielsen Bookscan, we bought 216 million books in the UK last year.

And the value of sales is rising year after year, by a little more than inflation. Mintel estimates that sales are rising by about 3 per cent a year, hitting £3.7bn in 2005. The number of books sold is rising, too - 12 million more last year than in 2004. And, just to give an idea of the staggering variety of literature published, there are almost two million titles in print.

In 2005, publishers brought out 180,000 new titles, from Evolution of the Insects by David Grimaldi and Michael S Engel to Harry Potter and the Half-Blood Prince by JK Rowling, the best-selling title of the year.

So what's the problem?

Just as you cannot judge a book by its cover, these headline figures do not tell the full story. There is anguish in publishing circles, and almost everyone in the book trade has a gripe. Authors complain it is hard to get publishers interested in new and challenging books, especially first novels. Publishers complain profits are being squeezed by the power of retailers, led by the big book chains. The big book chains complain their market share is under pressure from internet traders and the supermarkets. Only the latter, the Amazons and the Tescos, seem quite happy.

Why does Waterstone's want Ottakar's?

Waterstone's, Britain's biggest specialist bookseller, has been struggling; it has lost market share in the past five years. Lastmonth, its owner, HMV, announced sales at the book chain had slipped 5 per cent in the first four months of 2006.

Waterstone's argues that buying Ottakar's, its nearest rival, will allow it to expand to counter the ever-growing threat from supermarkets and the internet.

How do they compare?

Waterstone's has 190 stores, and made up 14 per cent of the UK market in 2005, down from 16 per cent in 2001. Ottakar's has 141 stores, making up 8 per cent of the market. By joining forces with Ottakar's, which has been expanding aggressively across the UK with a reputation for high-quality stores and excellent children's selections, Waterstone's has a chance to increase its buying and marketing power against the discounters from cyberspace and retail parks.

So what's the problem?

Authors and publishers have been incensed by what they see as a further diminution of the freedom of choice for writers and readers. The Society of Authors and the Publishers Association are both against the merger. Allowing this big merger would load the dice against the independent book shops and the small publishers, they say.

Author Nick Hornby summed up the feeling when he said: "Waterstone's has not been a great force for good - the choice is becoming smaller. All these three-for-two book deals, I don't think it's a great place to go if you're seriously interested in books."

What has happened?

On 6 December, the Office of Fair Trading asked the Competition Commission - the successor to the Monopolies and Mergers Commission- to investigate whether the proposed merger was in the public interest. A panel of five came back with the final answer on 12 May. The deal could go ahead as it would not damage UK publishing. Yesterday, the merger entered its final stage. Ottakar's accepted a bid of 285p a share from Waterstone's, valuing Ottakar's at £62m.

Why has the deal been agreed?

The Competition Commission does not believe the merger will significantly affect the number of titles offered by the stores, their price or the overall number of books published. Chairman of the panel, Diana Guy, said both chains stocked books on the basis of local and head-office decisions, and that was unlikely to change in the merged group. And she suggested the book market was robust. "Despite the substantial changes in the industry following the abolition of the Net Book Agreement [which fixed prices], with new types of retailers entering the market and increased concentration in publishing, sales have continued to grow," she said. "We do not see any reason why the merger would change this or reduce the number of titles published."

Doesn't this threaten the diversity of the high street?

Regardless of the merger, independent bookshops are likely to struggle to survive against the big chains. Across the high street, independent traders, from bakers to ironmongers, are going out of business as they compete against big companies with massive buying power that can force down prices with suppliers. Meanwhile, the amount of books sold by supermarkets and online is likely to rise. Last year, online sales accounted for 12 per cent of the market. Supermarkets had 8 per cent.

So where should you shop?

Think about what kind of book-selling you really want. If you only want to pick up the occasional best-seller and care about price, the internet or the supermarket is ideal. If you like the service and range of specialist book chains such as Borders and Waterstone's, then shop there and enjoy the on-site cafe. If you wish to preserve the endangered one-man independent bookshop romanticised in the film Notting Hill, then purchase one of the 180,000 titles published every year. Britain still has a rich literary scene.

Do independent bookshops have a healthy future?

Yes...

* Independent bookshops are able to specialise, giving them a niche market

* Their owners and staff communicate a passion for reading and develop a more personal relationship with buyers

* Customers seek the distinctive, individual atmosphere and design of solo shops

No...

* Independent bookshops cannot compete with the buying power of big chains and e-tailers; their titles are too expensive

* Big stores can offer more choice ,with extensive collections on topics as diverse as business and philosophy

* Independents are too small to offer the chance to read on a sofa or buy a coffee from an in-store café