Random Penguin? What the merger of two great publishers might mean

The news that Penguin and Random House are considering a merger will scare some in the publishing industry - yet it could just save their skins.

Penguin and Random House are in talks about merging

By Sameer Rahim, Assistant Books Editor

The Telegraph -  26 Oct 2012

The news that two of the most famous publishers in this country – Penguin and Random House – are considering a merger may provoke a shrug of the shoulders from many readers. After all, how many buyers really take much notice of the icon printed on the book’s spine: a penguin looks cute, that’s true, but much more important is the book itself. The author is the brand, not the publisher.

But there are important reasons why the proposed merger – which would mean the company Twitter is already calling “Random Penguin” would have a 27 per cent share of the UK’s book market – might have serious consequences for the way we read.

Firstly, it’s important to note that both Penguin and Random House are already made up of merged groups of imprints that were usually once smaller independent publishers. For example, Penguin’s literary imprint Hamish Hamilton, which publishes authors such as Zadie Smith, was founded in 1931 and after notable successes such as JD Salinger’s Catcher in the Rye changed hands until it was folded into Penguin in 1986. Though it has editorial independence, the money essentially comes from the same pot filled by Jamie Oliver’s cookbooks and the lucrative education textbooks market.

Similarly, Random House has owned Jonathan Cape, the highbrow imprint that publishes both Martin Amis and Julian Barnes, since 1987 but also has Arrow, which publishes Fifty Shades of Grey.

So mergers, acquisitions and cross-subsidising are nothing new in the publishing world. Medium-sized independent publishers such as Faber, Atlantic, Canongate and Granta are often hailed as the ideal model; but even they have in the last decade formed an alliance to share resources and cut costs.

The real owners of Penguin, the media company Pearson, and the real owners of Random House, the German media conglomerate Bertelsmann, are keen on doing the same thing. Joint warehouses and printing presses will cut costs and the larger the group the more likely one of those unexpected bestsellers – Fifty Shades, for example – will help support less profitable but more culturally valuable parts of the business.

So what’s the problem? Well, anyone who works at either publishing house might be startled to read these words of my colleague Damian Reece, the Telegraph's Head of Business: “the competitive threat of online retailers makes mergers such as this one logical, although to make it work one party must have control to unleash serious cost-cutting and streamlining in order to properly leverage its scale”. Given that Random House is now the biggest publisher in the UK and Penguin the third largest, the latter might well be worried that slashing and burning may ensue.
A company that controls a quarter of the book market will also be able to drive down advances – not good news for authors. And the more a company grows the more ravenous it becomes for even greater profits. Yet the book market is fairly static: readers don't tend to go dramatically up or down. The way to grow is to find cheap bestsellers: hence the avalanche of books by celebrities in recent years.
Yet the many excellent editors who work at both companies can still provide one thing the moneymen know they cannot do without: cultural capital. Go into the lobby of any publisher and you will see posters of its most serious, prize-winning books, not necessarily its most profitable ones. Executive vanity can be an important asset in any cultural organisation and should still be exploited by canny publishers.
Full story at The Telegraph