Welcome back to another issue of Industry Insights. Today, I'm talking about none other than the merger between industry giant Penguin Random House and Simon & Schuster (also one of the "big" publishers, of course). If you're even slightly interested in being published in the traditional sense, today's post is definitely for you.
So, here are the basics: Penguin Random House is acquiring Simon & Schuster for $2.18 billion, which will, if allowed, make it an unstoppable force in the publishing industry (which it almost already is — with over 300 imprints worldwide and 15,000 new releases every year, it already has the advantage over its competitors).
And there lies the root of the drama behind this merger.
By absorbing one of its biggest competitors, Penguin Random House will basically position itself as the apex predator in the publishing industry. However, despite the fact that this deal was negotiated and agreed upon a year ago, the process has been virtually stopped due to governmental interference (of all things).
I don't want to butcher the technicalities of this, so I'll refer to an article that does a great job of explaining this:
Earlier this year , President Biden signed an executive order focused on spurring competition across the economy. He has appointed skeptics of corporate concentration to the Federal Trade Commission and his economic policy team. His nominee to lead the Justice Department’s antitrust division, Jonathan Kanter, is a lawyer who represented critics of the tech giants.
And the federal government has gone to court to block a series of corporate deals this year, including a merger between insurance brokers and agreements to consolidate the operations of American Airlines and JetBlue in the Northeast.
Tuesday’s antitrust lawsuit, filed in the United States District Court for the District of Columbia, is a sign that the administration is willing to make more aggressive cases against corporate giants in court. It argues that the acquisition, because it would merge two publishers that are often the final bidders on the same books, would be detrimental to authors and result in lower advances.
The lawsuit focuses much of its attention on the market for the rights to books publishers believe will be top sellers, and documents several bidding wars between Penguin Random House and Simon & Schuster that went into high six and seven figures.
“If the world’s largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry,” Attorney General Merrick B. Garland said in a statement accompanying the lawsuit. “American authors and consumers will pay the price of this anticompetitive merger — lower advances for authors and ultimately fewer books and less variety for consumers.”
While I am currently self-published, I have spent years of my life deeply entrenched in the world of traditional publishing — and from what I've seen, it's absolutely true that when a book goes to auction, that's where the real magic happens for authors. I can't imagine a way in which a merger such as this benefits its authors, frankly. Penguin Random House insists that they have no plans of paying authors smaller advances than what they normally would, but without the counter-offer of one of its biggest competitors, it's ridiculous to assume that a merger like this would come without consequence. At the very least (after what we've seen from HarperCollins's acquisition of Houghton Mifflin Harcourt and a handful of other smaller scale mergers), a reasonable point of concern is the reality that with fewer publishers, there will be fewer editors and thus fewer imprints, which leads inevitably to a "less varied literary landscape."
With that being said, it is interesting (and even uncomfortable) to witness the government's increasing involvement in big business. It's hard to say what legal grounds the administration has to prevent this merger, and all we can do is wait to see how this all unfolds. What do you think is best for the industry? Large mergers that mitigate competition, or a series of smaller-scale publishers that ramp up auction offers?
Note: I've referenced a series of articles on this topic, but have referenced this one the most frequently, as I've found it to be the most detailed. (I've attempted to summarize it here on my blog, but if you'd like all of the details, check it out here.)