Il blog di Antonio Tombolini

The Big Six become five: Random House buys out Penguin, and you know why?


There are six leading book publishing groups in the world (the so-called Big Six of the publishing industry): Hachette, McMillan, Penguin, HarperCollins, Random House, Simon & Schuster. Well, as of today the six become five, because the breaking news is that Random House has bought out Penguin.
In the official communications you won’t hear any talk of a takeover, but rather a merger between the two groups. But these are the facts: the company resulting from the supposed merger, the Penguin Random House (practically 25% of the English-language book market), will be controlled for 53% by Bertelsmann (owner of Random House), while Pearson (who controlled Penguin) will have a minority share, with the remaining 47%. So the ‘merger’ is just talk, then. The reality is that Pearson has decided to ditch Penguin (plagued by its ordeals caused by the digital era) and the trade book business, in order to concentrate on his core business, training and educational publishing (and there’ll be much to discuss concerning what’s going to happen in this area, which is only just now realizing that it’s about to get hit by an earthquake).
Something big, as you can see. And why on earth did the two giants do something like this? Obvious, by now publishers are always singing the same song: in order to go up against the superpower of big retailers (Amazon above all) and be big enough not to be subjected to their diktats. Just to be wicked to Amazon, then, this is the reason.
So those are the cold and hard facts. Now I’ll tell you what I think: they’ve got it all wrong.
In the digital era competition is no longer the focus of the business: integration and partnership are instead the crux of any plausible development strategy, or even just a survival strategy.
Do you want proof? Anywhere you look, you’ll read about how enormous and powerful this new entity is: “A combined Random House and Penguin would be a supplier so large it would be very difficult for any anyone to dictate terms to”, says the (so-called) guru of made-in-USA digital publishing Mike Shatzkin.
Sure, it’s huge, and it’s equally worrisome for the authors who will be crushed further by this superpower: Random House and Penguin summed together had a turnover of as much as 3.8 billion dollars in 2011!
But what about Amazon? It all falls apart as soon as someone takes the trouble to google “annual revenues Amazon”, to find out that in 2011 Amazon, alone, had a turnover of 48 billion dollars. In short, there’s no contest. Amazon will always be able to survive – even though suffering a bit – a possible boycott by Penguin Random House. On the contrary, the latter will have their weeks numbered when they stop selling books through Amazon.
And so the truth is that Pearson (ditching Penguin) is running away from the trade book market, and Bertelsmann (taking over Penguin in Random House) is blowing some smoke in the eyes of his investors by pumping up his muscles, yet demonstrating that he still has his wits shaken by the recent battles lost in the music industry. This is the same Bertelsmann that thought it was a good idea to fight Apple by merging his business with Sony Music, to create Sony BMG. And who was forced to undersell his 50% back to Sony shortly afterwards.
A concerned last appeal: Dear publisher friends, when are you going to decide to take the change that’s currently underway seriously and concentrate on how and what it means to be a publisher nowadays? There’s the whole world to be changed, and opportunities to be seized, but you just have to wrap your head around the fact that the problem is not “how to counter Amazon”, but to redesign and concentrate on your own business, and do it well.
But something tells me the new good publishers won’t emerge from the Big Six, and not even from the Big Thousand. I’m rather counting on the Small Trillions of small and new publishers and authors that prefer to view Amazon (and all the others) as one of the channels available in order to reach their readers in new ways, many of which yet to be invented.


Il blog di Antonio Tombolini

Antonio Tombolini

Get in touch