Nov 02, 2021, 16:31 ET
NEW YORK, Nov. 2, 2021 /PRNewswire/ -- In response to the U.S. Department of Justice's (DOJ) filing to block the acquisition of Simon & Schuster (S&S) by Penguin Random House (PRH), both publishing houses issued this joint statement:
"This is a pro-consumer, pro-author, and pro-book seller transaction, which will allow increased investment in the publishing programs of both S&S and PRH.
The transaction will bring PRH's superior order fulfillment services to S&S's titles, benefiting consumers by making it easier to discover new titles and less likely that books will be out of stock, particularly at local retailers. Beyond the benefits to consumers, PRH's reach into independent bookstores and specialty markets will boost the sales of S&S titles, benefiting both authors and retailers.
The publishing industry is, and following this transaction will remain, a vibrant and highly competitive environment. PRH and S&S compete with many other publishers including large trade publishers, newer entrants like Amazon, and a range of mid-size and smaller publishers all capable of competing for future titles from established and emerging authors.
Blocking the transaction would harm the very authors DOJ purports to protect. We will fight this lawsuit vigorously and look forward to PRH serving as the steward for this storied publishing house in the years to come."
Markus Dohle, CEO of Penguin Random House, said: "Since ViacomCBS announced that it was contemplating selling S&S, we at Penguin Random House knew S&S would have its best home with us—a place that would be committed to carrying forward its storied legacy. We continue to firmly believe this. Our goal is for the new combined company to be truly greater than the sum of its parts, and our focus is to grow our community of distinct imprints that will operate independently and autonomously and will continue to compete vigorously among themselves and with outside competitors, a process that best serves the objective that every author finds the right editor and the best imprint for their work to develop and flourish."
"DOJ's lawsuit is wrong on the facts, the law, and public policy," Daniel Petrocelli, Vice Chair of O'Melveny & Meyers and PRH's lead trial attorney, said. "Importantly, DOJ has not found, nor does it allege, that the combination will reduce competition in the sale of books. The publishing industry is strong and vibrant and has seen strong growth at all levels. We are confident that the robust and competitive landscape that exists will ensure a decision that the acquisition will promote, not harm, competition."
The following are a few of many points that undermine DOJ's claims:
- Notably, DOJ has not alleged that the acquisition would harm competition in the sale of books. The market for selling books is unconcentrated and the combined shares are well below the levels of concern. The trade book market in the US has been growing. In fact, smaller publishers and new entrants have been gaining share over larger publishers over the last number of years.
- DOJ alleges that authors with a focus on those who tend to receive six-to-seven figure monetary advances are harmed by this deal, with the parties allegedly buying close to half of their books. Not only is this percentage overstated but also it ignores robust competition from numerous publishers that compete for advances at all levels including higher-level advances. Furthermore, advances only tell part of the story of author compensation. Royalties, which are paid after a book is published, must be included to accurately assess total author compensation, and DOJ failed to account for royalties in its market analysis.
- Competition to acquire new titles is intense, including Hachette, HarperCollins and Macmillan, as well as dozens of mid-size and smaller publishers. PRH has a demonstrated commitment to allowing competitive bidding among all its imprints. PRH and S&S imprints will continue to compete against one another for new books, even after the transaction closes. Indeed PRH is committed to keeping S&S's imprints as separate, external bidders from PRH imprints in auctions post-closing, just as they do today, even if they are the only ones left in an auction (up to an advance level well in excess of $1 million).
- The rationale for the transaction is driven by efficiencies that will allow PRH to improve distribution of the S&S titles. PRH is not planning to reduce the number of books acquired or the amounts paid for those books.
- PRH has a proven track record of mergers and acquisitions that benefit industry stakeholders, including authors. After the 2013 Penguin and Random House merger, author advances as a share of the combined company's revenue increased and editorial staff has grown even as PRH has lost market share in the broader industry. PRH has invested more than $100 million in the United States alone to support the supply chain for book sellers, and PRH plans to invest an additional $100 million to provide further help to the retail landscape with a special emphasis on independent bookstores.
- PRH believes it can successfully bring two legendary creative homes together so that the new combined company will be truly greater than the sum of its parts. PRH was selected after a competitive bidding process, and PRH is committed to being a responsible steward to S&S's authors, editors, and employees and to growing its publishing programs. DOJ's action is misguided and creates uncertainty around the future of a renowned publishing house, its employees, its authors, and consumers.
Claire von Schilling
SOURCE Penguin Random House
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