Penguin and Random House Discuss Merger
The traditional publishing houses took a major blow when interests began shifting to the less expensive and more readily available e-books, with record losses facing the ink and paper press. Their conversion to eBooks has been slow, and in the meantime, electronic publishers like Amazon, Apple and Google have marched into the lead.
Two of the six big houses, Penguin and Random House, are now talking about a merger to save their faltering publishing businesses. Penguin Group USA is among five major publishers who were named in a lawsuit filed last spring by the Justice Department who accused the companies of colluding in the prices of e-books. Three of the publishers have settled. Penguin and MacMillan have not.
The merger, if completed, would create a combined entity that would control nearly 25 percent of the eBook market. It could help them cut costs by combining resources, giving them more clout in negotiations with the e-book giants, Amazon and Apple.
Not everybody is pleased with the possible merger. As suppliers, they would be so large, it would be difficult for anyone to challenge their terms. A combined company is allowed to collude on prices. Literary agents say a merger would lead to a consolidation of publishing imprints, reducing the number of bidders vying for titles. They also worry that combining editing and marketing resources would lead to lay-offs and added pressure on authors in an already challenging market; especially those who do not churn out mass market hits.
A deal between Penguin and Random House would be subject to government approval. Pearson, one of the two companies considering a merger of their publishing division has confirmed that combining the two houses was a possibility but the companies have not reached an agreement and there is no certainty that the talks will lead to a transaction. Bertelsmann, whose senior executives were in China, declined to comment.