From Publishers Weekly:
Faced with worse-than-expected results in its North American higher education publishing business, Pearson said this morning that it is putting its 47% stake in Penguin Random House up for sale. Pearson has held its share in PRH since it merged Penguin with Bertelsmann’s Random House in 2013, with Bertelsmann controlling a 53% stake in the giant trade publisher.
Pearson had been expected to sell its stake in PRH at some point, but the announcement of its decision today came as a surprise, as did the reason why it was putting its share on the market: Pearson’s acknowledgement that operating profits for 2016 will be below expectations and it will not hit is goal of £800 million in operating profits for 2018, the year Pearson said it expected its turnaround efforts to start bearing fruit.
Instead, Pearson reported that sales in the North American higher education market in 2016 were much worse than forecast, particularly in the fourth quarter, when revenue dropped 30% compared to the final period of 2015, leading to an 18% decline in the North American higher education group for 2016. Pearson added that while earlier it had anticipated that the North American higher education market would stabilize in 2017, it now expects further revenue declines in the year.
To meet the lower demand, Pearson said it will accelerate a number of efforts to meet the higher demand for digital products and textbook rentals. The company has already eliminated about 4,000 jobs as part of its effort to create a more streamlined company.
. . . .
Following the Pearson announcement, Bertelsmann chief executive Thomas Rabe issued a statement saying the company is “open to increasing our stake in Penguin Random House, provided the financial terms are fair.”
. . . .
It is not clear if Bertelsmann would be interested in acquiring the full stake or only part of Pearson’s share of PRH. Pearson said it wants to divest the full stake.
Link to the rest at Publishers Weekly
PG’s analysis is as follows:
a. Pearson is having big problems in the educational publishing market.
b. Pearson has decided to get out of the trade publishing market.
c. Pearson plans to stay in the educational publishing market
d. As (almost) half-owner of Penguin Random House, Pearson has access to top PRH executives, highly-detailed financial information about PRH, etc., etc.
e. A huge public announcement like Pearson’s would not have been made without Pearson first talking to Bertelsmann, the other half-owner of PRH, since Bertelsmann would be the obvious purchaser.
f. Bertelsmann has access to top PRH executives, highly-detailed financial information about PRH, etc., etc.
g. Bertelsmann is not anxious to pay very much money to own the rest of PRH.
h. PRH is the largest trade publisher in the world.
From these facts, what can we conclude about the insiders’ view of the future of PRH and, by extension, the future of traditional trade publishing?
Happy talk to the public from top executives and the PR departments are one thing. Words are, of course, cheap.
But when one owner of the largest trade publisher in the world wants to sell out and the other owner isn’t particularly anxious to buy, what does that tell us about what smart money thinks about the future of trade publishing?
From the Guardian:
Books world alarmed by Pearson’s sale of stake in Penguin Random House
Authors and staff have reacted cautiously to news that Pearson is to sell its stake in Penguin Random House (PRH), the world’s biggest publisher and home to some of the most successful brands in books, among them Fifty Shades of Grey, Jamie Oliver and The Girl on the Train.
PRH moved quickly to address fears among staff that the sale of the 47% share to German-owned Bertelsmann would affect jobs. In a statement, global chief executive Markus Dohle promised it would be “business as usual for us”. He added: “Both Pearson and Bertelsmann continue to be very supportive of our strategy and our success, and both have been valued shareholders for us.”
. . . .
Authors and staff told the Guardian of fears that the takeover by the German-owned media corporation could lead to further consolidation at the publishing house, which is responsible for one in four books sold and the sale of 800m paper, digital and audiobooks every year.
One bestselling author, who asked not to be named, said the company was “in pretty good shape” but: “You always worry that any added pressure to streamline the business will narrow its publishing focus further.”
Echoing the concerns of other writers the Guardian spoke to, she added: “For any author, you are only as good as your last book, so it’s a worry you could be vulnerable when things like this happen.”
. . . .
Staff remained jumpy, according to insiders. “We knew it was going to happen,” said one senior executive. “But we don’t know what will happen now. Hopefully we will be OK.” Another said: “This sort of thing always makes people nervous, but especially so after what happened.”
Link to the rest at the Guardian