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Random Penguin? What the merger of two great publishers might mean

29 October 2012

From The Telegraph:

The news that two of the most famous publishers in this country – Penguin and Random House – are considering a merger may provoke a shrug of the shoulders from many readers. After all, how many buyers really take much notice of the icon printed on the book’s spine: a penguin looks cute, that’s true, but much more important is the book itself. The author is the brand, not the publisher.

. . . .

Firstly, it’s important to note that both Penguin and Random House are already made up of merged groups of imprints that were usually once smaller independent publishers.

. . . .

So mergers, acquisitions and cross-subsidising are nothing new in the publishing world. Medium-sized independent publishers such as Faber, Atlantic, Canongate and Granta are often hailed as the ideal model; but even they have in the last decade formed an alliance to share resources and cut costs.

. . . .

The real owners of Penguin, the media company Pearson, and the real owners of Random House, the German media conglomerate Bertelsmann, are keen on doing the same thing. Joint warehouses and printing presses will cut costs and the larger the group the more likely one of those unexpected bestsellers – Fifty Shades, for example – will help support less profitable but more culturally valuable parts of the business.

So what’s the problem? Well, anyone who works at either publishing house might be startled to read these words of my colleague Damian Reece, the Telegraph’s Head of Business: “the competitive threat of online retailers makes mergers such as this one logical, although to make it work one party must have control to unleash serious cost-cutting and streamlining in order to properly leverage its scale”.

. . . .

A company that controls a quarter of the book market will also be able to drive down advances – not good news for authors. And the more a company grows the more ravenous it becomes for even greater profits. Yet the book market is fairly static: readers don’t tend to go dramatically up or down. The way to grow is to find cheap bestsellers: hence the avalanche of books by celebrities in recent years.

Yet the many excellent editors who work at both companies can still provide one thing the moneymen know they cannot do without: cultural capital. Go into the lobby of any publisher and you will see posters of its most serious, prize-winning books, not necessarily its most profitable ones.

. . . .

Of course the behemoth in the room is Amazon, which now accounts for 40 per cent of all book sales in this country. Jeff Bezos, Amazon’s boss, said last year that “if you’re going to invent, you’re going to disrupt.”

Link to the rest at The Telegraph

Passive Guy would add that if you have a publishing contract with either a Random House or Penguin or one of their many imprints, unless antitrust authorities stop the merger, that contract and all the books associated with it is going to be owned and/or controlled by a new owner.

Any promises made by the pre-merger publisher that aren’t written into your contract are null and void even if your editor survives the inevitable downsizing. When an editor is fired, it’s possible that some or all of that editor’s books will be orphaned.

For understandable reasons, various people who work at both publishers are going to be distracted by internal politics and turmoil, so your expectations for prompt responses to emails and phone calls may may require a substantial downward revision. Both organizations will turn inward as each employee battles to avoid being voted off the island.

The Hurricane Sandy Frankenstorm about to hit the East Coast of the United States is an unfortunate symbol for the upcoming work environment of employees of Penguin and Random House.

Is there a bright spot for anyone? If Amazon Publishing wants to beef up its stable of editors, now is a great time to grab some talent and the author relationships accompanying that talent.

Big Publishing, Non-US

16 Comments to “Random Penguin? What the merger of two great publishers might mean”

  1. Any votes on what the new publisher should be called?

    I’m thinking “Random Penguin in da House” has a nice ring to it.

  2. The business presenter on BBC News this morning called it Random Penguin House. I think that’s what I’m going to call it.

  3. PG, you are saying that the contracts still owned by Penguin will hold up as they are—but anything *not* written into the contract won’t?

    I ask because I have books with Penguin and I’m waiting for the conditions of the contracts to come into play so I can start reversion of rights. I’m hoping those standards written into the contracts hold? Or will getting rights reversions be even MORE difficult?

    • The provisions of the contracts will remain the same, but it’s not unusual for standard operating procedure to vary from the specific terms of the contract.

      As far as reversion of rights is concerned, even though a contract may include a million hoops for the author to jump through, some publishers will revert rights to some books that aren’t selling particularly well if the author just asks the publisher for a reversion.

      During or after the merger, an author can’t assume such little courtesies that aren’t in the contract will be continued.

  4. Random Penguin. I like it. Sounds like a character from Madagascar.

  5. I prefer ‘Random House-Penguin’. The House-Penguin referring of course to the author. The random – well that hardly needs explaining, given the current state of the industry.

    With all the churn to come, they will probably cut loose a few authors with stories that have potential to become the next 50 shades of proffit.

  6. Having gone through the Penguin-Putnam and the BDD-Random House mergers of the 90s, all I can think is, “There’s going to be a lot of layoffs coming.”

  7. Wow, I didn’t even consider the number of jobs lost here. My editor works for Penguin, I hope she isn’t hurt by this!

  8. rec’d gushing letter from Dohle (head of RH/Bertalsmann) this morning about the merger of TRADE books only publishing between Penguin and RH. He claims it is ‘a new company.’ The absurdity of the claims in the letter about how all this is better for the authors are just that: absurd. Dohle carries on about ‘relationship’ with authors. The letter is addressed to “author”…. they dont even know our names or bother to personalize the letter–such are their severely anemic computer bulk-mail-by-name skills.

    Basta.

    Bertalsmann/RH/Penguin will be renamed: Layoffs R Us

  9. I’m curious. If I remember Random House wasn’t one of the six sued by the DOJ but Penguin refused to settle, is that correct? If so is there any chance Random House will require Penguin to settle as a condition of the merger? Or is there another way for them to avoid acquiring the liability?

    • You are correct, Cheryl.

      It is widely believed that RH avoided being sued because it ratted out the other five publishers for price-fixing.

      My guess is that a Penguin settlement will appear prior to the conclusion of the merger. In the US, the DOJ will have to approve the merger and an outstanding price-fixing suit would be a bit awkward.

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