Paying the price

Last week I was reminded that corporate publishing is a recent experiment. It is true that the agglomeration of trade publishing was already in full swing when I joined The Bookseller in the late 1990s, but still back then most publishing businesses were relatively small local affairs, with the global giants seen as something of an aberration, and in truth to be resisted. The hostile takeover of the independent Collins in the late 1980s by Rupert Murdoch’s News Corp group had left a bitter taste.

Two decades on and the experiment is now the reality for most authors and agents, with this week’s announcement that Penguin Random House’s parent Bertelsmann has agreed a $2.2bn deal for Simon & Schuster reducing the giants from five to four, having earlier, through the merger of Penguin with Random House, reduced it from six to five. For those who wonder if the experiment is succeeding, we might just look at the numbers: at $2.2bn, the premium paid is almost three-times S&S’ last annual turnover figure, not quite the valuation put on trade publishing in the 1980s, but significantly higher than the multiple applied to Penguin’s turnover when Bertelsmann first acquired a share of it in 2012—or anything since. 

We could also look at the publishing: just last week PRH rolled out Barack Obama’s A Promised Land, selling a record 1.7 million copies in North America. S&S US is no slouch either: ViacomCBS’ latest results announcement has the publishing unit revenues up 30% year on year, with profits a whopping 20% of its sales figure. 

None of this will necessarily please agents, competitors or customers. When Penguin and Random House merged, it was seen as part of a wider context, a circling of wagons, if you like, in the face of Amazon’s continued growth and the rise of the e-book. But in reality, while a strong PRH has clearly acted as a brake on Amazon, and in particular subscription services, where PRH has really gained an advantage is over other publishing groups, such as HarperCollins, Vivendi (both under-bidders) and Hachette. In judging the price, Bertelsmann will have factored in both the value of keeping those competitors down, as well as the obvious risk (now shared by both PRH and ViacomCBS) that the deal will not get through the regulators in the US. It is also a testament to how publishing has grown in stature during the pandemic. [Unsurprisingly when I interviewed PRH c.e.o. Markus Dohle this week he chose to emphasize the last point.]

I have never taken the view that corporate publishing is bad in and of itself. This week Hachette said it was raising its entry-level salaries to £24,000 as part of a move around pay transparency. Here we really do see a value that arises not just because of size, but because portfolio publishing tends to smooth out the risks—every year, at least one division will overdeliver. Much as we all look to times past, I also remember how difficult it was to raise the salary question back then, with smaller publishers acutely wary of their vulnerabilities and that the markets they operated in were volatile. 

Whatever else we’ve learned over the past two decades, one thing holds firm: with increased power comes extra responsibility. Whether that is also factored into the price here remains to be seen. Coincidentally, £24,000, adjusted for inflation, is exactly the pay I received when I took on my first job in journalism in 1993.