Last week, news broke that Pearson and Bertelsmann were planning to merge their trade publishing divisions, Penguin and Random House. On Monday, it was announced that the merger would indeed take place and would be finalized in late 2013. CBC Books got together a panel of publishing experts to discuss what this means for the future of publishing, both here and abroad:
This transcript has been edited and condensed for posting.
CBC Books: Let's get started on discussing the Penguin and Random House merger. What was your initial reaction to this news?
Bill Harnum: My initial reaction was surprise, but not shock. These are the two largest consumer book companies on earth, and I am sure that they realize that there comes a point in which competition becomes less profitable than collusion. This is why we have, in North America, strong anti-monopoly laws.
Sarah Weinman: I wasn't surprised when the deal was announced, having had a few days to digest last week's leaks and go through publishing's version of the Kubler-Ross stages. Now come the more immediate questions: how long will it take to complete the deal? What degree of regulatory approval in the U.S., Canada, the U.K. and other countries will allow the merger to go ahead or be scuttled? Can one country (or governing body, like the EU) hold the thing up? And that's just looking at the legal ramifications, without touching on the myriad of publishing ones.
Becky Toyne: After last week's leak, this week's news felt inevitable. But last week I responded to it with sadness. It came in the midst of a week's worth of very sobering publishing news at what is usually a celebratory time of year in the industry. The official line is always that competition and literary diversity will be maintained, but of course that is only true up to a point: a combined list publishes fewer titles that two separate ones, and employs fewer people to do so. I look at this year's publishing grads and wonder where the heck they're going to find a job.
CBC Books: What do you think led to this deal?
Bill: This deal was probably motivated by declining revenues in consumer publishing caused by the rise of ebooks and downward pressure on prices brought by Amazon and other mega-stores. Costs of publication are high, and revenues are flat, hence this kind of deal would appeal to the people responsible for the bottom line of such media conglomerates.
Sarah: It's also worth pointing out that a merged Penguin-Random House entity allows for greater scale to compete with, and dictate terms to, Amazon. Having that degree of scale will also make it easier for Penguin Random House to navigate when it comes to looking for, republishing, and marketing backlist, acquiring global rights, finding properties à la E.L. James [author of the Fifty Shades trilogy] -- self-published or published by a very tiny press that's garnering tremendous word of mouth -- and breaking out a much better and larger sales track, especially in multiple countries.
David Caron: Consolidation among the larger publishers has been predicted for some time, for reasons on both sides of the format line. To be increasingly effective in ebook distribution, a publisher has to build a more and more robust system, but with very few limits on how much it can handle. The more titles or sales, the more the expenses can be spread out. On the other side of the line, as less books need to be printed, the need for warehouse volume (and in-house sales forces) shrinks. However, publishers either own or lease such warehouses, and will want to fill that missing volume. So the best course is to merge publishers, and consolidate warehousing and ebook distribution.
CBC Books: Do you see this merger being successful in Canada? And if so, how will this merger affect the Canadian market?
Bill Harnum: I think it very unlikely that our government will deny regulatory approval to this merger. The key determinant for Canadian competition policy is consumer damage. Unless the government is convinced that this merger will reduce consumer choice or increase consumer prices, they will not be troubled by it.
David Caron: I'm with Bill. The government will worry about consumer choice (which won't be affected) and author options. Since Penguin and Random House were two of the top three multinational publishers bidding on authors in Canada, it might push them even more to officially sanction Simon & Schuster or even Hachette to bid on publishing authors from their Canadian branches. But there are lots of Canadian companies that can publish such authors really well! And we're much less likely to consolidate into larger companies these days!
Becky Toyne: I think it will be allowed to go ahead. As for the effect on the Canadian market, it seems to me that the possibilities for making your living as a Canadian writer being published in Canada are already bound up with the multinationals, and that effectively removing one giant player from the game will have a huge and significant effect on this. That the news came a week after Douglas & McIntyre filed for bankruptcy protection only rubs salt in the wound as far as choices for writers goes.
CBC Books: What does this merger mean for Canadian readers?
Noah Genner: Looking at this from the reader side is interesting. I think it will be hard to find a reader/bookbuyer who cares, and that isn't also an author/publisher/retailer/media/etc. Readers rarely care about publishers, it just isn't that important to them. There are exceptions to that statement of course. Penguin might be one and there are many publishers that are very well known in particular subject areas or communities, but for the most part the publisher as brand is not how readers think. So, will they even notice? It will remain to be seen how this affects pricing, but that will always concern readers/buyers. "Market dominance" (a combined Penguin and Random House, with distribution clients, would hold almost 23 per cent of the market in Canada) is a scary proposition for anyone, but most readers won't even notice unless prices suddenly go up. Does it mean more content (self-publishing?), or less, for readers? Not sure about that. Better content? Not sure about that either. More readily available in the formats they want? Perhaps. Will a combined company have more money to invest in capital projects that might get content/books out to more people in more interesting ways? Again, perhaps. I could go on, but it is mostly unknown.
David Caron: Since it's good to some debate going: I want to counter what Becky wrote, that only the multinationals can provide a living for Canadian writers. It's not that the Canadian-owned sector cannot. They can. ECW alone pays out more than $350,000 a year in royalties, and there are authors every year that earn a living wage from the royalties we pay. And we're just one of 150 active publishers in Canada. The difference is that we're not high-risk publishers compared to the multinationals. We can't afford to pay out large advances to several authors, that doesn't earn out when it comes to the sales. But the multinationals have the deep pockets to take such risks. And it's always the advance that gets the media attention, not the royalties paid on the back end. That speaks to how Canadian readers will be affected. As well as strong multinationals in Canada, we have a great Canadian-owned publishing sector. We offer Canadians the diversity of reading choices that enrich lives in communities across Canada, and we pay authors lots of royalties while doing so. So I don't think readers or authors will suffer at all.
CBC Books: Thanks to everyone for participating. There's a lot of food for thought here, and it's certainly a discussion that will continue as more details of the merger are revealed.
House of Anansi VP Operations was on As It Happens on monday, October 30 discussing the merger. You can listen to his conversation with Carol Off below:
This month's #CanLit Twitter chat discussion focused on Penguin/Random House merger and the future of publishing. You can watch the chat replay below.