Today was a big day in publishing: the planned merger between Random House and Penguin, announced back at the end of October, finally cleared all the hurdles and closed, producing a giant new company called Penguin Random House that the New York Times reports controls over 25% of the U.S. trade book market. Let’s reiterate: PRH is huge. A couple of news outlets are reporting that the new company will employ over 10,000 people and publish over 15,000 new titles annually through some 250 imprints. Now compare that to a publishing house like Simon & Schuster (another member of the Big Five), whose website says that it employs about 1,350 people and publishes about 2,000 books annually. Numbers like those seem to take consolidation to a whole different level, but it’s important to point out that PRH is still comfortably below the 30% threshold that the U.S. government uses to loosely identify what is and is not a monopoly.
Also in the same New York Times article, Julie Bosman makes the keen observation that the company’s 25% control of the U.S. trade book market will give it “unmatched leverage against Amazon.com, a growing force in the industry.”
The closing of the deal might seem to have come at a good time, then, given the DOJ’s recent rulings in the ebook price-fixing cases, which many believe gives Amazon an unfair market advantage and basically invites it to engage in predatory pricing (the Authors Guild sums this viewpoint up pretty thoroughly in a very long filing from last year, see here). It ought to be interesting to see what effect PRH will have on Amazon’s share of the ebooks market. Under Justice’s terms, the new company has to abide by the decision the government reached with Penguin, even though Random House (which owns the larger share of PRH) wasn’t involved in the suit. So although the company won’t be able to keep ebook prices as high as they have been, its size gives it a lot more clout when it comes to settling matters of pricing and distribution.
Of course, as with any issue of this size, there’s plenty of disagreement. Dennis Johnson, co-founder of independent publisher Moby House, argues in a February blog post here that the merger is actually a victory for Amazon, because it forced Penguin, the most resistant of the publishers, to settle with the DOJ and fall in line with Random House, which has tended to let Amazon slash prices. And Adam Davidson wrote in the New York Times Magazine last November that “when you see a merger between two giants in a declining industry, it can look like a financial version of a couple having a baby to save a marriage.” Which is a great line, but possibly overly pessimistic, as Davidson himself seems to admit later in the article, noting the “two competing predictions” about the future of publishing: smaller companies using new tech to destabilize the giants, or another round of consolidation that makes the field even more compact than it already is. Davidson’s article is worth a read—find it here.
Whichever way it goes, it’s certainly mind-bending to find yourself looking at a merger of this size and wondering whether it might actually be good for competition—but mind-bending in a good way.