Tuesday, October 30, 2012

Penguin and Random Merger Will Create Global Publishing Giant

News that the merger of Random House and Pengiun Books will go forward has all facets of the industry speculating on how this marriage between giants will impact the book business.

But The Telegraph broke the worst news of all: one of the best ever opportunities for a pun has been missed. There will be no Random Penguin, as so many had hoped. And no Penguin House. Instead, as Katherine Rushton notes in The Telegraph, “the merged company will be more conservatively christened Penguin Random House.”

As Rushton points out, as currently planned, Penguin Random House will have between 25 and 30 percent of the global publishing market, though “considerably more in certain genres such as travel, where Random House owns Fodor’s guides and Penguin has Rough Guides and Dorling Kindersley.”

Though the papers have been drawn and the merger seems likely to go forward, “This deal feels like a dead cert for referral to the competition authorities.”

The fact that regulatory approval will be required is a given and industry analysts anticipate that we aren’t likely to see that until well into 2013, though Rushton doesn’t see it as a huge hurdle:
At the moment, Pearson and Bertelsmann are both confident that they will win approval, but analysts think there is a 50/50 chance that the company will be forced to sell off some of its “imprints”, such as Ebury or Viking, which operate like fiefdoms within each publisher, each with their own style and list of books. Paul Richards, an analyst at Numis, draws parallels with Universal’s recent £1.2bn takeover of EMI, which only won regulatory approval on condition that Universal sold off valuable labels.
Even with that obstacle to get through, according to The New York Times, the merger isn’t much of a surprise:
Facing [new media] challenges, the major publishers have been expected to join together, getting smaller in number and bigger in size. The other four houses among the so-called Big Six are also owned by larger media conglomerates: HarperCollins, which is part of News Corporation; Macmillan, owned by Georg von Holtzbrinck of Germany; Hachette, whose parent company is Lagardère of France; and Simon & Schuster, a division of CBS. They could all now face increased pressure to consolidate in response to a combined Penguin Random House. 
“I wouldn’t be surprised if all the major trade publishers were having conversations like this,” said Ned May, an analyst at Outsell, a research firm. “I would expect to see similar realignment.”
HarperCollins has already signaled its interest in consolidation. News Corporation approached Pearson informally over the weekend to explore its own bid for Penguin, and that interest sped up what was already an expedited process with Random House, said one executive briefed on the negotiations. Now that Penguin is out of the picture, News Corporation will most likely be looking for a new partner for HarperCollins.

While the media speculates and the media giants reimagine themselves, Publishers Weekly points out that, aside from Frankenstorm, it’s business as usual in New York.

Jason Ashlock, an agent and founder of Movable Type, who spoke on the record, said that it would be very difficult to ignore two of the biggest publishing houses when shopping a project. For now, Ashlock, like others, are betting on what this unified super-publisher might look like. "Though we can't and won't know how the two companies will structure their divisions once all is revealed next fall or winter, we can guess, and my bet is that the strength of the big divisions will remain. [In other words], I can see Penguin becoming two or three groups alongside Crown, Doubleday/Knopf, and Little Random. It's difficult to ignore Random House and Penguin when submitting a property."

Regardless of how Penguin Random House is actually structured, though, Ashlock said agents need to be focused on the bigger picture. The more important thing is "projecting what the landscape will look like in two years when all this shakes out. That's where agents have to put a lot of their thinking: as consolidations continue, it is not going to be a seller's market."

Meanwhile, PW reports on how Hurricane Sandy has impacted the NYC publishing scene here.



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