Dispatches from the Digital Revolution

Our hero?: Penguin Random House confirmed

This week I joined most of the publishing industry in the water cooler buzz about the recently-announced marriage of Random House and Penguin. (Also, of course, the blogosphere/social media/Internet buzz.) In brief, for those who missed the fallout: Random House and Penguin confirmed Monday that they will join forces to become a publishing megazord fit to do battle with the mighty Amazon, and of a stature that makes all proponents of the free market and the independent press quake in their boots.

Or, less dramatically, they have confirmed plans to embark on a joint venture, named Penguin Random House, which “will have a stronger platform and greater resources to invest in rich content, new digital publishing models and high-growth emerging markets,” according to a Monday article in The Hollywood Reporter. The change is planned to take effect in the second half of 2013, according to Publishers Weekly, assuming everything is signed off by the government.

And it will be interesting to watch how this government approval will play out—considering that many consider the U.S. government, specifically the Department of Justice, as the motivator for the merger in the first place. A recent blog post  by Dennis Johnson on MobyLives (sarcastically named “Your tax dollars at work”) calls out the Department of Justice for precipitating this megalith by standing behind Amazon in the recent agency pricing lawsuit:

The government has thrown its support behind a monopoly, and so businesses run by the bottom line, as the Big Six publishers are, have little choice: Merge and grow huger or die. As the Times report puts it most succinctly, although not succinctly enough, this is all about “Lower prices offered by retailers like Amazon…”

And while on the one hand it’s sort of like we collective Davids have now got our own Goliath that can fight on Amazon’s terms (some sources say PRH will control about 25% of the trade market post-merge—that’s huge), on the other hand, that amount of relative power in the marketplace should make anyone nervous.

Executives of Random House are preemptively acting on these foreseeable concerns; Publishers Weekly provides links to the full text of letters sent by RH CEO Markus Dohle to agents, authors, and booksellers—three of the constituencies who will be most affected by PRH. A recent New York Times Media Decoder post (written before the news broke that the merger was confirmed) discusses the problems agents could face:  “Agents should be terrified because it would give them even fewer people to play against each other,” the article reads, quoting analyst James McQuivey of Forrester Research.

Others, especially other publishers and the non-blockbuster author crowd, are concerned about diversity. As Johnson writes on MobyLives:

As the marketplace becomes even more completely dominated by companies that are not trying to provide consumers with what they want, but rather are more perfectly focused on their bottom line to the exclusion of all else, will those of us publishing—or selling, or writing, or reading—books guided by another imperative, have anyplace left to go?

All legitimate concerns. But, as McQuivey goes on to say in the Media Decoder article: “They’re [Random House, Penguin, and other publishers] facing a much bigger threat in Amazon than considering it might restrain competition.” And that’s certainly the case. For the short run, it may be that PRH is what the industry needs to wage war with the technology giants who have disrupted the market so that publishers can advocate for a pricing model that resonates with consumers and also allows publishers to operate profitably.

But when he is no longer needed, will this knight in shining armor ride off into the sunset… or will he settle in to stay?

About Leah Thompson

Writing and publishing professional in the Boston area.

2 comments on “Our hero?: Penguin Random House confirmed

  1. John F. Harnish
    October 31, 2012

    Indeed one could say, “The bigger they are the more of a mess they make when they crumble and fall.” Hopefully they won’t be considered “too big to fail” in order to get bailout money. As one poster referenced their success in rearranging the deck chairs on the Titanic!!!

    The high operating cost of maintaining the corporate senior management structure contributes to the inflated ebook prices. Outdated financial formulas for pbooks do not adapt well to ebooks. The deep channels of distribution have dwindled away in favor of a mighty river. The quality of the content created by the author is omnipotent, and the name of the publisher and delivery method matters not a bit to the consumer. Demands by content consuming consumers have expanded the marketplace far beyond the confines of walk-in bookstores. Authors are slowly benefiting from an increasingly level playing field where content rules.

    Enjoy often…John
    Author of the weather thriller, “Blasting the Hell Out of Tornados: Pandora vs. Supercell”

  2. Pingback: Penguin ebook lending program update « appazoogle

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