What Good Is A Penguin Random House Merger?

Penguin and Random House are merging. This is big news because Random House and Penguin are two of the biggest of the “Big Six” publishing firms that currently rule the book business (the other four are Simon and Schuster, HarperCollins, Macmillan and Hachette). It’s also big news for devoted readers, because these are two of the most beloved historic brands in modern literature. Random House once published Ulysses by James Joyce, and its Alfred A. Knopf imprint is often considered the single most prestigious name in literary fiction. Penguin helped generations of readers enjoy great books of the past with its beautiful Penguin Classics line, and its Viking subsidiary once published On The Road by Jack Kerouac.

What good will a Penguin/Random House merger do? In my opinion: absolutely none. A book publisher merger, like a bank merger or a food company merger, is never designed to improve the products the companies sell. It’s usually an act of economic opportunism or arbitrage, a shuffling of objects to temporarily hype up their combined value. In this case, it appears that Penguin’s parent company Pearson wanted to get out of trade publishing to focus on other businesses, and Random House picked up the orphan before HarperCollins could grab it.

It does not appear that literary editors at any of these companies were consulted about the business decision, and the best possible hope appears to be that the changes won’t have a big impact on the editorial activity at either firm. The merging firms are trying to spin the announcement as good news, but we have little reason to applaud.

What does it ever mean for two companies with strong identities and mundane but stable business models (yes, book publishing is more stable than most people realize, and book publishers do make profits ever year) to seek a merger? It seems to indicate a desire to escape from their basic financial realities. It’s an act of existential denial, dressed up as innovation. We don’t know yet the particulars of the arrangement, but so far it doesn’t sound like the kind of move honest capitalists would make.

4 Responses

  1. This is interesting and my
    This is interesting and my gut reaction is like yours, what good is it really?

    Here are some quotes from a WSJ article. Pearson is still keeping 47%. The Pearson CEO makes the case that this will be better for us consumers (true or not? I am not commenting — I have no idea).

    The following are from Wall Street Journal October 29, 2012, 12:55 p.m. ET: Penguin, Random House Ink Deal by Jessica Hodgson.



    The combination of Penguin and Random House, if it clears antitrust scrutiny, would create a book-publishing powerhouse responsible for roughly a quarter of global English-language consumer book sales.


    “Together, the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers,” said Marjorie Scardino, Pearson’s chief executive.


    Under the plan announced Monday, Bertelsmann, which is based in Germany, will take a 53% stake in the new joint-venture company and Pearson will hold 47%. Bertelsmann and Pearson didn’t disclose the value of the joint venture, but a person familiar with the matter indicated that the equity valuation would be somewhere between $2 billion and $3 billion.


  2. If publishing is considered a
    If publishing is considered a sunset industry, the merger would create economies of scale.
    Whether this is of any help to writers is my only concern. The paranoid streak in me thinks of censorship. The other streak says, so what? Isn’t the natural trend of capitalism a monopoly?

  3. Hi W. J. — well, there is a
    Hi W. J. — well, there is a common misconception that book publishing is a sunset industry, but all evidence suggests that it isn’t. Every major book publisher still turns a profit every year. The combined annual sales of worldwide book publishing remains more than $30 billion, and the industry seems to be adjusting to e-book technology without losing its ability to create profitable bestsellers.

    The need to compete with Amazon may be a better explanation for this than the sunset of book publishing. And let’s not forget the major driver behind most corporate mergers in any industry — short-term greed and opportunism.

  4. Hi Levi –
    Hi Levi –

    Regarding idea that publishing is a sunset industry… I was speaking to a man I met who has been in the publishing industry longer than I’ve been alive and he made an interesting comment to me. He said that the publishing industry has been like an egg balanced on the head of a pin as long as he can remember. At least, that’s what publishers have been saying for as long as he can remember.

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