Penguin Random House has sold its controversial self-publishing division Author Solutions.
Author Solutions, acquired by Pearson in 2012 for $116m (£74m), for integration into Penguin, was sold to an affiliate of Najafi Companies, an Arizona-based private investment firm, on 31st December. Financial terms were not disclosed.
In a note to staff, PRH c.e.o. Markus Dohle said: "We thank the entire Author Solutions team for their hard work and dedication during their time as part of Penguin Random House, and we wish them all the best and much success under the new ownership. With this sale, we reaffirm our focus on consumer book publishing through our 250 imprints worldwide, and our commitment to connecting our authors and their works to readers everywhere."
The acquisition of Author Solutions by Pearson/Penguin was always controversial, with then Penguin c.e.o. John Makinson having to defend the company against accusations that the buy would muddy its brand image.
Makinson said at the time: "This acquisition will allow Penguin to participate fully in perhaps the fastest-growing area of the publishing economy and gain skills in customer acquisition and data analytics that will be vital to our future.”
Author Solutions continued to be run as a separate business, with Penguin staffer Andrew Phillips transferred to run it in place of former c.e.o. Kevin Weiss in 2013. Phillips confirmed that he would remain as chief executive of AS.
The self-publishing division was the subject of a lawsuit in the US, which was settled out of court last August, during which the business faced accusations from plaintiff authors of seeking to make money from authors, rather than for authors. Author Solutions lawyers maintained the suit was "a misguided attempt to make a federal class action out of a series of gripes”.
Jonathan Helliwell, an analyst at Panmure Gordon & Co, told The Bookseller that since Penguin bought Author Solutions in July 2012 before the Pearson-Bertelsmann joint venture to merge Penguin with Random House which completed in July 2013, it was likely that Bertlesmann had not agreed with Pearson's decision to buy Author Solutions.
"Buying the key self-publishing platform was always a controversial move for a large publisher to make," Helliwell said. "It looks like Bertelsmann doesn't agree with Pearson's original thinking; or self-publishing is not proving to be as significant a part of the market as was thought or feared at the time of purchase in 2012."
Analyst Sarah Simon at Berenberg Bank said that PRH most likely sold Authors Solutions because it was not a good fit for the company.
"In brand terms if it’s been sold it was probably not getting a lot of management focus or investment." she told The Bookseller. "So being cut free could imply it’ll have more room to do its own thing."
David Reynolds, an analyst at Jefferies International Ltd, meanwhile, said that he suspected from a Pearson perspective that "it was a decision that didn’t occupy its emotion for too long," because the company is ultimately looking to exit trade publishing.
"Having put Penguin into the PRH joint venture and having made it relatively clear Pearson will exit (commercial publishing) at some point, I don’t think it really contemplated the dynamics in the consumer publishing industry too closely. Pearson will remove itself from that probably at the latest by next year."
He added: "It will have zero effect on Pearson's share price…The financial terms of the sale were not disclosed but it was probably materially sub $100m, which doesn’t really touch the sides from a Pearson perspective with a view to materiality."