If you haven’t yet heard, Penguin and Random House are merging their businesses worldwide (except that bits of the RH German business are, rather oddly, being left out of the equation). It’s a not-quite merger of equals, Random House being somewhat the larger party. The merger will need competition clearance and is due to complete in the latter half of next year.
The thinking behind the merger is clear. Amazon, Apple, and Google are (or are becoming) hugely dominant in the emerging digital retail landscape. Publishers are, by comparison, tiddlers, so they need to beef up to compete on level terms. In addition, Marjorie Scardino, the head of Pearson, Penguin’s owner, claims the deal will be good for the merged entity’s readers & authors – that is, their consumers & suppliers:
Together, the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers.
Although there will be a competition enquiry, the authorities allowed the music business to dwindle down to just three names, so there’s little likelihood of the deal being thwarted.
But it’s an awful deal. Companies don’t get bigger so they can shower consumers and suppliers with good things. They get bigger so they can pinch out competition. Authors will have even fewer places to sell their work, and their advances – which have been in free fall, even in nominal terms, for a decade – will get even lower. I’d be willing to bet Marjorie Scardino’s bonus that two years after this deal authors will be getting lower advances from the new entity than they were getting two years before it.
Readers won’t benefit either. It’s being claimed that the purpose of the transaction is to squeeze out central overhead and thereby create value which can be widely shared around. But that’s nonsense. Publishers don’t have much central overhead. In the context of these very large firms, the probable savings are piffling. The purpose is only to restrict competition and consumers – readers, in this case – never benefit from such a restriction. You can look forward to more Jamie Olivers and more Fifty Shades. But for genuinely interesting and innovative work, Penguin/RH as a combined entity will produce less than the two companies did separately.
I should also say that I am a Random House author in the US. I’m at an early stage of my relationship with them, but they’ve been fabulous so far – and the truth is that at an everyday level my relationship is most unlikely to be affected. But if, as I hope, we come to renew our contract for another two books, they and I will need to agree a suitable price. And if there’s one less potential taker in the market, that price will be lower than it otherwise would be. I strongly, strongly hope that the competition authorities say no to this transaction. Sad thing is, they won’t.