Penguin Random House Schuster: a new promised land

Everyone has a love hate relationship with corporate publishing. As I wrote earlier this week following the news that Penguin Random House was to buy fellow giant Simon & Schuster, this experiment in how to operate at scale within a volatile marketplace is the reality for all of us, and most of us make do with the situation. There are, of course, downsides: it is all but impossible to get on the wrong side of Penguin Random House (UK or US) and not risk some kind of damage: that is as true of retailers such as Waterstones, agents and authors, as it is of trade journalists, and we see it everyday, from PRH's insistence on including audiobook rights in their book deals, to the influence exerted over the roll-out of tent-pole books such as Barack Obama's A Promised Land. With increased power comes extra responsibility I wrote in The Bookseller, but it also comes with increased control from the centre.

When I asked PRH's German-born US-residing chief executive—and primary architect of its $2.2bn deal for Simon & Schuster—about fears over its augmented market power, he said PRH were "good citizens" and would remain so. And in truth, I believe him—one of reasons I haven't fallen out with PRH (here or in the US) is that there's been no particular need to: they know agents are critical over their stance on audio (which by the way is shared by most of the big groups), but as far as I know they don't punish those who resist (beyond not bidding for the books). Neither do they ostracise those journalists who occasionally write about it. They accept criticism as good citizens ought to. When we got wind of a row developing with PRH and a significant other, it was dealt with professionally, and without threat of censure. That's not always the case with everyone in the book business.

Equally, a business that is not a good citizen would not have pushed out its new policies around diversity earlier this year, exposing itself to further criticism when those fresh commitments are not fully met. I'm not saying they don't make mistakes, are not occasionally hard to deal with, or won't take advantage of their market position, but they don't over-step. Some see PRH as its own planet, leaving the rest of us mere satellites to orbit on a different trajectory, but that's not borne out by the contributions they continue to make to the wider publishing universe.

I know too, especially in the UK, that though there are lots of things that drive the senior managers at PRH, none are ever quite as compelling as the urge to create bestsellers (or win the major literary prizes). I imagine for Tom Weldon, c.e.o. of Penguin Random House UK, seeing the Barack Obama book sitting at the top of the tree now and in the run-up to Christmas will be as important to him as adding another digit to its market share or profit number. These groups may be huge, but they are still run by publishers—and that matters. For Simon & Schuster, it really matters: there is no doubt that CBS—now ViacomCBS—was pretty much everything you would not want from a corporate parent, and the palpable relief in the statements made by senior S&S executives, including our own Ian Chapman, m.d. of the UK unit, is clear for all to see.

That said, good citizenry and warm words will not prevent the strong objections to this deal that we are now hearing, and which will only grow louder as the regulatory authorities in the US are pressed to look into the merger. The Authors Guild for one opposes it on the grounds that the combined publishing house would account for approximately 50% of all trade books published in the US, creating a huge imbalance in that publishing region (though less so elsewhere, including the UK). News Corp chief executive Robert Thomson said: “Bertelsmann is not just buying a book publisher, but buying market dominance as a book behemoth.” Dohle responded to me, when pressed, that when all formats are taken into consideration, as well as self-publishing (the numbers for which remain obscure) the combined businesses in the US will still make up less than 20% of this overall reading market.

In truth though, both sides will need to sharpen their arguments over the next few months. It is clearly a nonsense to suggest, as book critic Ron Charles, did in the Jeff Bezos-owned Washington Post that a combined entity would be any less willing to publish "high-risk political books, such as John Bolton’s 'The Room Where It Happened' and Mary Trump’s 'Too Much and Never Enough'" than were they to remain as standalone businesses. Neither is it necessarily true, as many opine, that a merger would lead to a diminishment in the number of imprints available to authors and agents. When Penguin and Random House merged formally in 2013, the combined group boasted 250 imprints. As Charles himself notes, seven years on PRH now operates 320 imprints. There will also again be the whiff of xenophobia about some reactions, as there was when German-owned Bertelsmann bought the UK-originated Penguin.

Dohle too will have to do some fine-tuning of his counter-arguments. When the Department of Justice looks at the merger it will want to examine not only this wider market for reading that apparently PRH does not dominate, but also who holds sway over the key channels, including visibility in stores such as Barnes & Noble, and who can compete for the bestsellers: and to that question there is a more tricky answer. There are in fact very few publishers who could sell 1.7 million copies of a political memoir on launch and that number will now be reduced, regardless of the very many smaller players that can find space in the gaps between the giants.

Dohle must also address the question of why getting bigger again has become so vital for him that he has agreed to pay far more for S&S than either HarperCollins or Vivendi were willing to offer. In my FutureBook Conference interview with HarperCollins UK c.e.o. Charlie Redmayne he spoke of how publishers are driving up prices for the big authors—it used to be, he said, when you won an auction for a big book you felt successful, now you look around the room and wonder what you've done.

When, at a Frankfurt Book Fair panel in October 2013, I asked Dohle if, in light of the merger of Random House and Penguin, he was now "big enough", he said: "I would not compare size on the publishing side with size on the retail side . . . fundamentally we want to bring our books to as many readers as possible." The opportunity around global was huge, he said. Back then Amazon's e-book business was still growing fiercely and we were just getting used to the idea that a book could begin life on a fan-ficton website and then self-publish its way to global bestsellerdom. Somehow getting bigger really did feel like a sensible move.

This time around when I asked the same question I got a different spin: "Size is not the goal in and of itself; we can create the future of books and reading for generations to come, and [this deal means] we can now do it even better than before." If that sounds a little Trumpian, I expect it's not deliberate.

These are early days of course, with a huge battle up ahead, but even so, this strikes me as a different type of answer. If the first merger was about what PRH could do for itself, perhaps this one is about what PRH can do for everyone else, with the key issue facing all trade publishers how to resist a damaging transition to an all-you-can-eat subscription model as pushed by publishing's real dominatrix Amazon. Dohle also talked about helping bookshops out with better inventory control.

Either way, Dohle is a smart guy with, I expect, ambitions beyond even Penguin Random House Schuster, and he knows that with $2.2bn of Bertelsmann money riding on the outcome, he cannot afford to mess up. Neither can success be viewed simply through the prism of margin growth—S&S already outperforms others in terms of its profitability. Back in 2013 if the key battle was global, this time around it feels more personal: Dohle has shown he can combine two giant publishers into one slightly better whole without undermining their essential purpose while remaining decent citizens. This time around, beyond the question of whether he should be allowed to go again, lies the more interesting dilemma of whether he can repeat the trick, and to what effect.

I know what Obama would say: yes he can. Others will wait for the reveal.