Penguin Random House: Supergroup to redefine trade

Universal shock at the news on Monday (29th October) of a merger between Penguin and Random House - the most fundamental shift in the UK trade publishing landscape for a decade - is giving way to starkly polarised reactions within the trade.

The big publishers declined to comment, amid concern that the deal could prompt a wave of consolidation among the larger publishing businesses. Rupert Murdoch, chair of News Corp, HarperCollins' parent company, reportedly launched a rival bid for Penguin and was openly critical of the deal, calling it a "faux merger".

But smaller publishers were more sanguine. Faber publisher and c.e.o. Stephen Page said: "Having powerful industry players is a good thing for everyone really. For independent publishers like ourselves, this move differentiates us." Canongate m.d. Jamie Byng called the new combined publisher "a super group", which could "do extremely exciting things for their authors and for readers in general".

Waterstones m.d. James Daunt and Foyles c.e.o. Sam Husain were supportive. Daunt called it "a sensible combination of two of the best companies", while Husain hoped that the economies of the merger would "follow through to us by way of better terms".

Caroline Michel of PFD said it was "a huge relief that someone has taken this kind of step", saying: "We need to have powers in the market that have muscle for our clients." Society of Authors chair Lindsey Davis said she was "sanguine to the point of optimism‚" about the development, saying: "As a Random House author, I can say there is no need for other authors to worry too much. We are already two organisations, Random House and Transworld, and they have managed to keep their own identities."

Others took a starker view. One Penguin author who preferred to speak anonymously commented: "So called mergers never fail to mean bloodshed in-house, resulting in chaos - disruption for authors and misery for staff. Fewer houses means fewer places for agents to sell to and less competition, worse terms and worse treatment for authors." She summed it up as "bad, bad news for the industry".

The effect on competition, and therefore author advances, was a persistent concern among agents, despite the fact that Random House divisions already bid against each other to secure titles. David Higham's Anthony Goff said: "Inevitably it will reduce competition and that's bad for authors."

E-book royalty rates also entered the equation. Goff said: "Both Penguin and Random have been strict adherents of the 25% limit on e-book royalties, and we'll have to see if they use their combined negotiating power to preserve a royalty that looks ever more inequitable as each month passes."

Kate Pool, deputy general secretary of the Society of Authors said: "We would of course be very concerned if the merged company used its combined market share to impose lower advances or less favourable contractual terms on authors."

Meanwhile, independent booksellers worried that they faced becoming insignificant in the face of companies of Penguin Random House's size. Joanna de Guia of Victoria Park Books, London, said the merged company would be a "behemoth" and added: "I will certainly worry as an independent that I will be completely invisible." Other retailers suggested that with PRH's increased size and bargaining power, negotiations would now take considerably longer.

Bertelsmann will own 53% of the new venture and will have five directors on the new board, with Pearson owning 47% and having four directors. Penguin chief John Makinson will be chairman while Random House c.e.o. Markus Dohle will be chief executive. The merger will exclude Bertelsmann's trade publishing business in Germany, and Pearson will retain rights to use the Penguin brand in education markets around the world. The companies expect the merger to be completed in the second half of 2013.