Monopoly or Go Fish? The Penguin/Random House Merger

Nov 15, 2012

Just as New York City publishers were bracing for Hurricane Sandy, in stormed the news that Random House and Penguin, two of the largest publishers in the world, would be merging in the second quarter of 2013. [Insert sound of a needle scratching across a record here.] Larger publishers have been gobbling up smaller imprints since the 80s but this, this is something different.

It's not a done deal just yet. Antitrust laws may well come into play here just as they did in the agency pricing brouhaha. If two of the largest publishers join forces could they have a stranglehold on the market? Would it reduce market competition? In my opinion, no. The stated purpose of the Sherman Antitrust Act is "To protect the consumers by preventing arrangements designed, or which tend, to advance the cost of goods to the consumer." If anything this merger might bring prices down. Plus, nothing is stopping anyone else from publishing their own books and Random House Penguin wouldn't control access to the market.

In essence, each book is in itself its own product. A publisher's books compete in the marketplace with those of other publishers but also with those from the same publishing house. (Plus it's not as if someone is only going to only buy one book.) Penguin Random House may have more books on the market but that doesn't necessarily mean more people will buy them. You can't quantify literary quality or consumer opinion.

Editorial independence comes in to play as well. Will individual editors at different imprints still bid against each other? That's one place where I could see some non-competition issues arise. In a bidding war for a manuscript, two of the largest players just turned into one. It could potentially hurt authors and agents who might receive a smaller advance than they would have had there been another bidder. However the final consumer might actually benefit from this "cost-saving." If author and agent feel they're not getting as good a deal with Penguin Random House they can choose to go with another publisher.

But what could the merger mean for ebooks? Well, Digital Book World's  "Publishers Power Rankings"  put Random House at the top and Penguin a close second. Amazon, which controls both the means of production and distribution for its books, came in at #9.

Random House and Penguin are both large companies in the book publishing world but not so much in the larger corporate world. Their combined forces may put them in a much better position when dealing with companies such as Apple and Amazon.

Maybe other publishers, rather than merging, should look to the farmers' cooperative as a model. After all, the profit margins are about the same.

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Random House is adding three new digital-only imprints to its line-up, according to Publisher's Weekly. The publishing giant -- which announced a merger with Penguin earlier this year -- will introduce Alibi, Flirt, and Hydra. The imprints will produce mysteries/thrillers, YA, and science fiction respectively. Random House is also, reportedly, expanding its romance digital imprint, Loveswept.