A Publishing Cartel?
Power shifts in international publishing rarely make national headlines, but Penguin Random’s recent acquisition of rival publisher Simon and Schuster has ignited an avalanche of commentary, most of which is negative. Penguin are currently being sued by the United States’ Department of Justice (DoJ), who allege the publishing giant’s acquisition is in violation of anti-trust legislation. They argue that the acquisition will make the intentional publishing landscape smaller, more concentrated and less competitive. Which, they argue, will ultimately translate into smaller royalties for authors and less choice for readers.
The DOJ’s argument is based (predominantly) on the market for ‘anticipated bestsellers’, where publishers often offer six figure ‘advances’ for the books expected to sell outstandingly. This is not to be mistaken for the retail market of books, which is more volatile at present.
The reading public, at least based on social media activity, are sympathetic. Bestselling, and much-loved, author Stephen King, himself published by Simon and Schuster, was called by the DoJ as a witness. He testified that, in his opinion, the acquisition is against the interest of authors. The ‘American Authors Guild’, the closest thing the United States has to a representative body for authors, also opposes the buy-out. The acquisition was, interestingly, approved by the UK’s competition authority in 2021.
The Data
Even prior to the Penguin/S&S merger, publishing was a particularly concentrated industry. Both the book rights and book retail markets are dominated by five corporations; Hachette (a subsidiary by French company Legardére), Harper Collins (a subsidiary of News Corp) Macmillan, Simon and Schuster (owned by Paramount Global prior to the Penguin acquisition) and Penguin Random, themselves a result of a larger a merger in 2013, and owned by German publishing corporate Bertelsmann.
How sizable a share of the book market the combined five enjoy is difficult to determine, partially because of lack of data, and particularly because of the complexity of the industry. In their defence, Penguin’s lawyer argued that the company’s share of book retail sales has actually declined since the merger with Random in 2013; 21% from 25% specifically. The DoJ has countered that this figure includes retail sales in categories such as crossword puzzles, sudoku games and so on. These categories are potentially not rightly classified as books, and potentially products Penguin have not traditionally published a lot of. A rise in the quantity of self-published books being published and retailed could also have impacted this figure.
What’s a Bestseller Worth?
One area where publishing’s large corporations certainly do have a monopoly however, is the marketplace for ‘anticipated bestsellers’. Anticipated bestsellers can attract ‘advances’ of hundreds of thousands, occasionally millions. In their opposition to the S&S acquisition, the DoJ argue that four companies will enjoy a 90% share of this market.
An ‘advance’, for anyone unfamiliar with publishing lingo, is a sum paid to authors on the book contract being signed. It is, purportedly, based on a percentage of estimated book sales, although this is not always the case. For some authors, this ‘advance’ amounts to the total remuneration they receive from their publisher. One exception to this is when a book contract is ‘earned out’, which refers to cases where the agreed percentage royalty the author receives from each book sale exceeds the advance, after which the author receives additional remuneration.
Some examples of million-pound book deals include the $2 million PRH paid to acquire Emma Cline’s novel ‘The Girls’, and the eye-watering $20 million they paid to acquire Barack Obama’s memoir ‘Dreams of my Father’ – his subsequent excursions into memoir have commanded even higher fees. Simon and Schuster have certainly been active in this lucrative rights market. They acquired Hillary Clinton’s memoir ‘Living History’ for $14 million, and paid a €10 million advance for Bruce Sprinsteen’s ‘Born to Run’ memoir.
Who’s Right?
It is hard to see how Penguin’s acquisition of S&S won’t make the international rights market less competitive, and, as a result, the advances negotiated for authors won’t be as high. Penguin’s lawyers have argued, on the contrary, that the two companies rarely bid against other for anticipated bestsellers. The DoJ has however, provided evidence to the contrary, including emails from S&S staff bemoaning losing rights auctions to Penguin. The fact both have negotiated large advances with high-profile musicians, celebrities and politicians, suggests they are rivals in the same marketplace.
While the acquisition will certainly impact the market for anticipated bestsellers, what impact it will have on publishing more broadly is harder to determine. Or, more to the point for most of our readers, what impact will it have on the earnings of authors who are not famous; either famous for writing (Stephen King et al), or famous for their accomplishments in another field (Bruce Springsteen et all).
Those opposed to the merger argue that author earnings, no matter how modest, are benchmarked against the most lucrative advances. Therefore, such an economic argument goes, just as a ‘riding tide raises all boats’, presumably an ebbing one lowers all vessels.
There is certainly some truth to that. There is also truth to the idea that it limits choices available to readers even more egregiously than is the case at present. No matter how standardised corporate culture becomes, different companies have their own eccentricities and institutional biases. Less companies will, therefore, mean less choice. Although there is also perhaps some truth in the idea that publishing has became so concentrated the damage is already done.
Whether the acquisition is ultimately approved or not, the trial has offered some interesting insights into international publishing. Over the course of the next two weeks, I will be following the trial closely, analysing the transcripts in detail. These include testimony from some of international publishing’s leading corporate figures; Markus Dohle, Jonathan Karp & Madeline McIntosh – the CEOs of Penguin Random, Simon & Schuster & Penguin Random USA respectively. This will be of enormous value to authors, publishers and anyone eager to learn more about contemporary publishing. To stay informed, follow JM Agency on social media, check the website or subscribe to our JM Agency Newsletter below.