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The largest book publisher in the United States is set to expand. ViacomCBS has agreed to sell Simon & Schuster to Penguin Random House for more than $ 2 billion in a deal that will create the world’s first mega-publisher.
Penguin Random House, the largest book publisher in the United States, is owned by the German media conglomerate Bertelsmann. The addition of Simon & Schuster, the third-largest publisher, would create a book giant, a combination that could trigger antitrust concerns.
The deal includes provisions that would protect ViacomCBS in the event that a sale is crushed by the authorities. Bertelsmann would pay what is known as a termination fee if the transaction fails.
The sale of the company will profoundly reshape the publishing industry, increasingly becoming a win-win business in which the biggest companies compete for branded authors and guaranteed bestsellers.
The book industry has seen wave after wave of consolidation over the past decade, with the merger of Penguin and Random House in 2013, News Corp’s purchase of romance publisher Harlequin and the acquisition of Perseus Books by Hachette Book Group. This fall, Houghton Mifflin Harcourt announced that he was considering selling his specialty publishing division and could be an attractive target for a large publishing house like Macmillan or Hachette.
Simon & Schuster, who publishes eminent authors like Stephen King, Don DeLillo, Bob Woodward, Doris Kearns Goodwin and Walter Isaacson, had long been rumored to be the next big company to go on sale, and he made an attractive price. for the largest publishing houses seeking to develop through acquisitions. It has an extensive backlist of over 30,000 titles.
Founded in 1924 by Richard L. Simon and M. Lincoln Schuster, the company began as a crossword publisher. It eventually grew into a sprawling business with over 30 publishing units and a list of literary treasures including the works of Ernest Hemingway and F. Scott Fitzgerald, Henry James and Edith Wharton.
The past year has been tumultuous for Simon & Schuster. In March, it went on sale, just as the first wave of the coronavirus pandemic hit, destabilizing the economy and forcing bookstores to close, hampering a major sales channel. In May, Carolyn Reidy, the beloved chief executive of the company, passed away suddenly and was later replaced by Jonathan Karp, former publisher of Simon & Schuster, the company’s flagship house among dozens of prints. The company has also faced legal action from the family and the Trump administration, as the president tried and failed to block the publication of critical books by John Bolton and Mary L. Trump.
The company has had a profitable year despite these obstacles. Revenue rose to $ 649 million through September, an increase of 8%, and profit before tax rose 6% to $ 115 million.
Mr. Karp and Dennis Eulau, COO and CFO of Simon & Schuster, would remain at the helm of the publishing house under a new owner.
ViacomCBS has received more than half a dozen inquiries from interested buyers, including financial companies and the French company Vivendi, which holds a minority stake in Hachette through publisher Lagardère. The top two contenders were Bertelsmann and Rupert Murdoch’s News Corp, which owns HarperCollins. The Financial Times reported earlier that Bertelsmann was close to a deal.
A deal would likely attract the attention of antitrust regulators.
The sale will likely result in the loss of editorial and marketing positions and impressions, leaving fewer opportunities for new books. It could also have a ripple effect throughout the literary ecosystem. Larger houses are better equipped to negotiate favorable terms with large retailers like Amazon, Barnes & Noble and big box stores, and are also able to develop direct-to-consumer marketing and sales networks so that they are not too dependent on retailers.
For literary agents and authors, the wave of consolidation has reduced the number of potential buyers of authors’ books with no proven experience.
“There are projects that would have sold for $ 150,000 years ago that might not sell at all to the Big Five, whereas the book that would have sold for $ 500,000 might go for a million,” he said. said literary agent David Kuhn. “They would prefer to go further for what they have the most consensus on.”
Some industry analysts say the sale will accelerate a long-standing trend that has taken hold over the past decade, with publishers becoming increasingly reliant on hit titles and backlist sales, resulting in less opportunities for new writers and mid-list authors.
“For some books, there will only be four possible customers, compared to five,” said Mike Shatzkin, founder and CEO of Idea Logical. “This is another sign of the weakening of the professional publishing ecosystem.”
With its imminent acquisition of Simon & Schuster, Penguin Random House will eclipse the other major publishers, giving it an estimated market share of around 30% of the US book market. The company has developed sophisticated online marketing networks and is the only major publisher in the United States whose warehouses ship books seven days a week.
“It certainly extends their dominance,” Shatzkin said. “It will be a strengthening elixir.”
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