If you’re a writer, you’ve probably heard about the proposed merger of Simon & Schuster with Penguin Random House. If you haven’t, you probably will. It’s a fundamental issue in the shaping of the publishing industry that may actually be litigated by the Department of Justice.
Here’s what you need to know and why it matters, simplified.
Who is Penguin Random House?
Penguin Random House (PRH) is the biggest publishing house in the United States. It was already a powerhouse publisher when it acquired Penguin in 2013. Owned by a German media conglomerate named Bertelsmann, PRH publishes 15,000 titles each year, has 95 imprints, and is the only US publisher shipping books from their warehouses seven days a week.
Who is Simon & Schuster?
Simon & Schuster (S&S) was founded almost a century ago and was originally opened as a publisher of crossword puzzles. The company is owned by Viacom CBS. Currently, S&S has thirty distinct divisions.
The company evolved into a much more sophisticated entity than just a publisher of puzzles. It publishes 2400 titles a year and owns a catalog of 30,000 books and the rights to multiple “classic” authors, including a backlist of titles for Ernest Hemingway, F. Scott Fitzgerald, Edith Wharton, Ray Bradbury, and Stephen King.
Simon & Schuster is a gutsy company, this year publishing some “brave” books that went against the power politics of the time. The company published John Bolton’s book, The Room Where It Happened; Mary Trump’s tell-all, “Too Much and Never Enough: How My Family Created the World’s Most Dangerous Man; and Disloyal, by Michael Cohen.
The publication of those books required large outlays of cash for legal defenses against the Trump family, a move that may have been worth it since Mary Trump’s book sold 1.35 million copies in the first week alone.
Simon and Schuster also shelled out $65 million dollars to acquire the Obama books, including Michele Obama’s Becoming, and former President Barak Obama’s A Promised Land.
Viacom, the owner of S&S, is willing to peel off its book division and concentrate its efforts toward streaming content, not printed books.
Penguin Random House did not go after these politically-risky books but did offer $2.2 billion dollars to buy S&S, twice the asking price, and one that no other publishing house could match. NewsCorp, a division of Harper Collins and the owner of Hachette, denounced PRH’s offer, “buying market dominance.”
PRH’s offer to buy S&S would create a behemoth in the book industry, taking an industry that once had dozens of companies down to just four. Remember Harcourt Brace — which was purchased by Houghton-Mifflin? How about Harlequin, acquired by NewsCorp in 2014? Ever heard of Perseus, now a part of Hachette?
If the sale goes through, there will be four publishing houses left, and PRH will be the largest of them all.
Six Reasons a Merger Is Sounding An Alarm
Mergers and acquisitions happen in business all the time, so why is the merger of Penguin Random House with Simon & Schuster sounding an alarm in the publishing industry?
Because the book industry is a different beast than a manufacturing company.
It deals with ideas, with art, and with freedom of speech, intangibles whose value can’t be replicated en masse.
No matter how many sources you read about this merger, five major concerns come to the surface:
- The size of one company
- The dominance of bland, homogenous, money-making books
- The loss of jobs in the industry
- The loss of competitive bidding and opportunities for authors to sell their work
- The demand on the printing plants
- The depletion of diverse, unusual, defiant, or “risky” books
1) The Size of One Company
One of the difficulties with deals in the publishing world is that there are so many divisions, some which compete against each other, that it’s hard to get a clear count on the market share of each company.
The CEO of Penguin Random House, Markus Dohle, uses this fact. He says,
“The book publishing industry is very unconcentrated and fragmented compared to other industries. We’re very confident we’ll get clearance fo the deal, and we are also confident that we can increase the service level for authors, agents, and retailers.”
If the merger between S&S and PRH happens, estimates are that the new company will own over 30% of the book market in the United States. One estimate suggests that this one company will possess 70% of the US literary and general fiction market.
2) The Dominance of Bland, Homogenous Work
The industry worries that out-of-the-norm ideas will be washed away in the glut of homogenous bestsellers by already proven writers. As Dennis Johnson says in The Atlantic,
“As the big houses have become bigger and bigger, their business has become more about making money than art or protest, so that small publishers now provide a far wider variety of literature, politics, history, and journalism, of art making and truth-to-power-speaking, of actual risk-taking — and from a far more diverse group of authors — than the commercial conglomerate publishers.”
The article titled, “The Bigger They Are, the Blander the Book” goes on to argue,
“The bigger they become, the more risk averse. The less willing they are to lose money. The safer, less boat-rocking, bigger-demographic-satisfying stuff they publish becomes what the marketplace they dominate adapts itself to sell. The risk aversion becomes systemic.”
3) The Loss of Jobs
No matter the generous, compassionate talk that issues from the CEOs of merging companies, ultimately, jobs are going to be lost. No company can take every single one of the other company’s employees and make good use of them.
Penguin Random House employs 10,000 people globally. Simon and Schuster, 1,350 full-time. All mergers result in layoffs, reorganizing, and the closing of divisions.
4) The Dimunition of Bidding and Income for Authors
The loss of one company and all its divisions will decrease the amount of bidding on manuscripts, ultimately driving down advances.
In the current system, divisions of the same corporation can bid against each other as long as another publisher is still bidding. But if other houses drop out, the author will go to any one of the divisions owned by the same company in what the industry refers to as the “beauty contest.”
In addition, big companies will have fewer opportunities for unknown, first-time authors without a proven track record, further limiting the opportunities.
Author, owner, and founder of independent publisher, Polis Books, Jason Pinter notes that both authors and employees will suffer from this proposed merger:
“It’s going to force authors out of the industry and I worry that it’s going to force really great people who work in the industry out.
5) The Demand on Printing Plants
While the demand for books has increased during the pandemic, the ability of printing plants to keep up has not. In addition to paper shortages, a couple of companies closed up.
Some experts in the industry worry. Bertelsmann, the conglomerate that owns Penguin Random House, bought two printing plants in 2020. Currently, they are open to all publishers, and PRH claims to print their work elsewhere, but will that continue if they become even bigger with more printing needs than other companies?
6) The Disappearance of Diverse, Unusual, Defiant, or “Risky” Books
With the change of personnel leading different divisions, eventual layoffs, and corporate reorganization, divisions will probably be closed. Those kinds of shake-ups open the way for diverse or difficult books to disappear, erasing the democratic openness so treasured in the book industry. Dennis Johnson notes that this is
“one way politically defiant books can be disappeared from a company’s corporate memory, and eventually, from the larger cultural memory…We could be witnessing democracy getting injured in real time.”
Are We Heading Toward a Battle of the Titans?
Author’s Guild, along with Romance Writers of America, the National Writer’s Union, Sisters in Crime, Western Writers or America, and the Horror Writers Association all wrote a letter to the Department of Justice asking them to stop this merger.
The letter cites the fact that Penguin Random House’s bid to acquire Simon and Schuster is based on its belief that a company was needed that “could work with Amazon on a more level playing field.”
So are we heading for a battle of the Titans, where PRH buys up any smaller book company so they can be as powerful as Amazon?
Is Amazon Exempt from Antitrust Laws?
The proposed merger between PRH and S&S would result in about 30% of the market share of the book industry, a figure that is causing concern and will be evaluated by the Department of Justice.
But if 30% of the market share is sounding an alarm, why isn’t Amazon being subjected to the scrutiny of antitrust laws and monopoly rules? (A difficult question to ask since my small press book is sold through Amazon.)
A monopoly, according to the Federal Trade Commission, is “a term used as shorthand for a firm with significant and durable market power — that is, the long term ability to raise price or exclude competitors.”
The discussion goes on to note that most courts don’t find monopoly power for a firm that “has less than 50 percent of the sales of a particular product or service within a certain geographic area.”
Amazon has more than 50% of the market share in print books, and 75% of ebook sales.
I am not a lawyer. I don’t understand all the issues of antitrust. I have never worked in the publishing industry or have any allegiance to a particular publishing house. I only know that somehow, this will affect me, other authors, and book lovers and that when alarms sound, I ought to take notice.