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Penguin Random House Buys Simon & Schuster, Creates Publishing Giant

By Naya Kurdy

Damascus, Syria

The sale will profoundly reshape the publishing industry (Photo Credit: NBC)

On November 25, Penguin Random House, the largest general-interest paperback publisher in the world, announced that it was buying its New York–based rival, Simon & Schuster––whose authors include Hillary Clinton, Stephen King, Dan Brown and Judy Bloom––from ViacomCBS for $2.17 billion. The deal includes provisions that would protect ViacomCBS in the event that a sale is blocked. Bertelsmann, the German media conglomerate and owner of Penguin Random House, would pay a termination fee if the deal does not go through.

Bertelsmann completed its purchase of Penguin Random House this year, and in a press release, Bertelsmann’s chairman, CEO and chairman of the board of directors at Penguin, Thomas Rabe, said, “We will continue to expand Penguin Random House in the coming years, through organic growth and acquisitions.”

The sale by ViacomCBS, which is expected to close in 2021 and is subject to customary closing conditions including regulatory approvals, follows a strategic review of ViacomCBS’ non-core assets, which took place early this year. Proceeds from the transaction will be used to invest in ViacomCBS’s strategic growth priorities, including in streaming as well as to fund the dividend and pay off debt.

It’s also been announced that Jonathan Karp and Dennis Eulau, Simon & Schuster’s Chief Operating Officer and Chief Financial Officer, would remain the heads of the publishing house even under new ownership. In an interview, Karp said that Simon & Schuster would maintain its editorial independence and would continue to publish the same volume of books under its new ownership. “This is a company that respects the creative autonomy of publishers,” he said, “We’ll all still be competing against each other. Publishing is a business driven by individual passions for books and writers.” On this note, Markus Dohle, the company’s chief executive and a member of the Bertelsmann executive board said in an interview, “We are very proud to welcome this esteemed company, founded in 1924, to our global publishing community. We share the same passion for books and reading and will work together to give our authors the greatest possible access to readers worldwide.” He also noted that Penguin Random House’s imprints compete with one another for book projects and that practice would apply to Simon & Schuster as well.

There’s no doubt that the sale of the company will profoundly reshape the publishing industry. Combining the largest book publisher in the United States, Penguin Random House, and the third largest publisher, Simon & Schuster, will create the first mega-publisher. However, it will also potentially fuel the increasing winner-takes-all business in which the largest companies compete for brand-name authors and guaranteed best-sellers. Last week, News Corp chief executive Robert Thomson warned that a Bertelsmann win would lead to an anti-competitive “behemoth of books” that would control one-third of the U.S. book market. However, Dohle says that these concerns are based on “politics and perception” rather than data. “The book publishing industry is very unconcentrated [sic] and fragmented compared to other industries,” he said. “We are very confident we’ll get clearance for the deal, and we are also confident that we can increase the service level for authors, agents and retailers.”

With its pending acquisition of Simon & Schuster, Penguin Random House will dwarf other major publishers. The company has developed sophisticated online marketing networks and is the only major publisher in the U.S. whose warehouses ship books seven days a week.

“It certainly extends their dominance,” Mike Shatzkin, founder and chief executive of the Idea Logical Company, said. “It’s going to be a strengthening elixir.”


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