Reaction in major parts of the book world to the announcement last Wednesday that Bertelsmann, parent company of Penguin Random House, will buy Simon & Schuster for $2.175 billion has been mainly negative, with concerns about a further consolidation of the big U.S. publishing houses and its effect on authors, independent bookselling and the kinds of books published. For its part, PRH said that its market share isn't as large as estimated, that it will keep S&S's editorial identity and that the deal is a sign of its commitment to book publishing.
Allison Hill, CEO of the American Booksellers Association, said in Bookselling This Week that the ABA will urge the Justice Department "to challenge this deal and to ensure that no further consolidation of power be allowed in the U.S. book publishing industry." She called the sale "alarming. As the dominant player in the publishing industry, PRH's purchase of another 'Big 5' publisher, further reducing the market to the 'Big 4,' will mean too much power over authors and readers in the hands of a single corporation."
Hill added that earlier this month, in reaction to the proposed sale of S&S, she had sent a letter to the chair of the Federal Trade Commission saying that if S&S were bought by Ingram, Amazon or any of the other Big Five publishers, "the consolidation of publishing that this sale could represent threatens to undermine competition in the book industry, harm the interests of American consumers, and put bookstores and authors at risk."
The Authors Guild also called on the Justice Department "to challenge" the deal and "refuse to allow even further consolidation of the U.S. book publishing industry."
The Guild said that if approved, the purchase would further reduce "competition in an already sparse, competitive environment. For authors, it would mean there would be fewer competing bidders for their manuscripts, which would inevitably drive down advances offered.
"Less competition would make it even more difficult for agents and authors to negotiate for better deals, or for the Authors Guild to help secure changes to standard publishing contracts--because authors, even bestselling authors, wouldn't have many options, making it harder to walk away. The history of publishing consolidation has also taught us that authors are further hurt by such mergers due to editorial layoffs, canceling of contracts, a reduction in diversity among authors and ideas, a more conservative approach to risk-taking, and fewer imprints under which an author may publish."
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| Markus Dohle | |
In several interviews, PRH CEO Markus Dohle defended the acquisition, pointing to the successful merging of Penguin and Random House operations after 2013, and disputed estimates that a PRH/S&S combination would control as much as 50% of the U.S. trade book market. "We are much smaller than people think we are," Dohle told the Bookseller. Including print book sales, audio and e-book formats and self-published titles, he said PRH's market share is 14.2% and S&S's is 4.2%. "It is under 20% in the U.S., that's the point," he said. "I'm very confident, otherwise I wouldn't have signed the contract."
He added that larger publishers had lost market share to smaller ones in recent years, and that for PRH, the acquisition of S&S replaces that lost market share. He also described the publishing sector as "very fragmented and un-concentrated compared to other media markets."
Dohle told the New York Times that S&S will retain its editorial identity, noting that PRH imprints compete with one another for books. "We've done this before, so we have proof of concept," he said. "We keep the creative side of the business basically untouched." He added that concerns about the purchase creating what the Times called "a competition-stifling monopoly" are based on "politics and perception," not data.
Dohle told the Bookseller that the deal shows Bertelsmann's commitment to book publishing. "We know how to do this; we are good industry citizens. For my retail friends, who are under pressure, the only goal we have is to increase our service levels again, with lower returns and lower inventory levels and to make you more profitable again. I want to grow, and I have a growth strategy. But size is not the goal in and of itself; we can create the future of books and reading for generations to come, and [this deal means] we can now do it even better than before."