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Media reacts to Penguin-RH merger

Mixed opinions have been voiced by commentators on both sides of the Atlantic on the Penguin/Random House merger, with some arguing the move may weaken the strong Penguin brand and may lead to infighting between executives, while others see it as the first of many similar mergers, anticipating widespread "consolidation" within the industry.

In the Independent, Profile m.d. Andrew Franklin took a downbeat line in a comment piece, saying: "There is no celebrating among competitors or authors, and the atmosphere at Penguin Towers and Random HQ is apparently one of deep gloom." He argued that consolidation and the ability to "face down the monopolists of the digital age" are the two reasons behind the merger: "This is consolidation and both authors and readers will have less choice and less diversity". He said it is a "racing certainty" that Penguin will be bought out by Bertelsmann in either three or five years, and also questioned whether Bertelsmann will be able to keep the character of Penguin in tact: "When Allen Lane founded Penguin in 1935, he chose the bird because he enjoyed its combination of 'flippancy and dignity', qualities Penguin have kept alive all this time. A German-managed corporation can, no doubt, do the dignity bit. But the flippancy?"

Writing in the Guardian, Dan Sabbagh said the deal had its benefits but also faced problems: “It is not at all obvious that either Penguin or Random House needs a deal, however wide is the Amazon that currently divides them," he said. "But when in doubt, being big has its merits. Neither party can quantify synergies either, officially because it's too complicated to work out which warehouse may stay and go. Sceptics say the truth is that there are very few, and argue that there is a risk executives will be distracted fighting, and not trying to reinvent publishing. The history of joint ventures is very mixed after all.”

The Sun and the Daily Mail focussed on what they saw as the incongruous mix of Random House’s Fifty Shades of Grey trilogy sitting alongside Penguin’s classics. Rhodri Phillips in The Sun also said: “The deal is seen as essential in the fightback against the rise in popularity of ebooks.”

Publishers Marketplace, from an interview with Random House c.e.o. Markus Dohle, tackled the value of the combined business: from Random House's €1.75bn in 2011 revenues you need to subtract the "more than 300 million euros" in business comprised by Random House Germany, which stays separate from the deal. To Penguin's £1.045bn in 2011 sales, you need to add approximately $100m in revenues from the recently acquired Author Solutions, creating a merged company with annual sales of about $3.66bn, with $1.89bn from Random House and $1.77bn from Penguin.

On the BBC news site, Pearson chief financial officer Robin Freestone said Pearson and Bertelsmann are confident that the merger will be approved by regulators, and that Pearson would sell "bits and pieces" to ensure this is the case.

In the New Statesman, Martha Gill argues that it will be a positive move: "With larger franchises like the newly created Penguin Random House there is the breathing space to experiment with new authors . . . it [also] creates one considerably wealthier, and therefore more adventurous publisher". She concludes: "The enemy is not the merged company, but the behemoths Amazon, Apple and Google that are driving the e-book business and edging publishers out . . . Industries that are not the tech industry must combine forces to avoid being subsumed."

On a Channel 4 blog by culture editor Matthew Cain writes that "the merger is still significant because it provides the first taste of the future of publishing in our increasingly digital world". He adds that the interest from NewsCorp in acquiring Penguin shows that "it's still very much an industry worth fighting for".

Across the pond, the Wall Street Journal noted: "The deal highlights how the rapid adoption of digital books is changing book publishing," and linked the moment when the talks between the two companies began, five months ago, with the US Justice Department filing its antitrust suit just a few weeks before. It continued: "For book publishing, an industry dominated by a half-dozen big players, consolidation was one answer. Combining forces would allow publishers to gain more heft in negotiating terms with retailers, including Amazon, industry executives said. By moving first, Pearson hoped to gain an advantage, a person familiar with the situation said."

The New York Times also anticipated that the merger "could set off a long-expected round of consolidation as the industry adapts to the digital marketplace", and said: "Now that Penguin is out of the picture, News Corporation will most likely be looking for a new partner for HarperCollins", reporting also analysts' views that smaller, indie houses could "matchup" with the large publishing houses.

Writing in the American online magazine, Slate, Matthew Ynglesias said regulators should stay away from the merger, saying: “Worrying about anti-trust issues in the book publishing industry is like worrying about a horse and buggy cartel. On a forward looking basis all the establishment book publishers are going to be fighting for their lives against both the risk of diminished interest in books and the possibility of new entrants in a world where expertise in the printing and distribution of physical volumes is no longer an important part of the industry.”

Editor's blog: What happens next?

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This merger benefits the stronger smaller and emerging publishers who have better opportunities for distribution with one less major publisher. This also will benefit nonbest selling authors who have a better chance with smaller publishers. Those newer publishers such as ourselves at Simply Magazine do not have the legacy costs of the larger publishers so can market at more affordable costs for the reader. And the newer publishers generally emphasize digital delivery as we have 227 titles on iTunes, run by audible, and over 50 on Kindle. So these mergers should create a more dynamic environment for all industry stakeholders. We hope for more mergers among the now Big Five.

Brands are just that brands. It doesn't much matter who owns them as long as the integrity of the brand remains intact. Jaguar is more Jaguar (and more successful) owned by Tata than previously owned by Ford. A Rolls Royce is a BMW, a Bentley is a Volkswagen, but you won't see the parent brand in the prestige showroom that would spoil the smoke and mirrors.

What is happening in publishing is a land grab for back catalogue; brands and titles with fame. Fame is the ingredient, not literary merit, fame is the only thing that counts. The other aspect of course is famous authors' contracts.

This implosion of publishers has little to do with the future of story telling. New authors in the future will be of no interest to publishers unless they can prove they are already generating online sales.

Authors who are generating that fame will only give a publisher a slice of their action with a substantial advance and guaranteed advertising spend, which will replace the publisher's printing costs. The demise of the paperback will not only be due to the end of the bookshop. It will also be down to government legislation once the Green's catch on to the fact that every paperback is an unnecessary addition to the carbon sink.

This is the Twilight Zone for publishing as we know it.

With fewer sales and fewer staff to cherry pick from the 220,000 books self published annually, the only practical way to judge commercial success, will be the authors's Amazon self published sales reports.

http://www.darcyblaze.com/

This merger benefits the stronger smaller and emerging publishers who have better opportunities for distribution with one less major publisher. This also will benefit nonbest selling authors who have a better chance with smaller publishers. Those newer publishers such as ourselves at Simply Magazine do not have the legacy costs of the larger publishers so can market at more affordable costs for the reader. And the newer publishers generally emphasize digital delivery as we have 227 titles on iTunes, run by audible, and over 50 on Kindle. So these mergers should create a more dynamic environment for all industry stakeholders. We hope for more mergers among the now Big Five.

Brands are just that brands. It doesn't much matter who owns them as long as the integrity of the brand remains intact. Jaguar is more Jaguar (and more successful) owned by Tata than previously owned by Ford. A Rolls Royce is a BMW, a Bentley is a Volkswagen, but you won't see the parent brand in the prestige showroom that would spoil the smoke and mirrors.

What is happening in publishing is a land grab for back catalogue; brands and titles with fame. Fame is the ingredient, not literary merit, fame is the only thing that counts. The other aspect of course is famous authors' contracts.

This implosion of publishers has little to do with the future of story telling. New authors in the future will be of no interest to publishers unless they can prove they are already generating online sales.

Authors who are generating that fame will only give a publisher a slice of their action with a substantial advance and guaranteed advertising spend, which will replace the publisher's printing costs. The demise of the paperback will not only be due to the end of the bookshop. It will also be down to government legislation once the Green's catch on to the fact that every paperback is an unnecessary addition to the carbon sink.

This is the Twilight Zone for publishing as we know it.

With fewer sales and fewer staff to cherry pick from the 220,000 books self published annually, the only practical way to judge commercial success, will be the authors's Amazon self published sales reports.

http://www.darcyblaze.com/