Simon & Schuster Bought by Penguin Random House

In case you missed the news last Wednesday, the Big Five will soon become the Big Four.

The largest book publisher in the world (Bertlesmann, parent company of Penguin Random House) has successfully bid to buy Simon & Schuster (S&S) publishing house from ViacomCBS. This will make Penguin Random House (PRH) more than twice the size of its nearest competitor, Harper Collins.

The price? $2.175 billion. Information from the press release gives an idea of the scope of this purchase. Simon & Schuster employs around 1,500 people worldwide and generated revenues of $814 million in 2019. They publish 2,000 new books a year and have a backlist catalog of 35,000 titles. They have over 30 different imprints (linked here). They publish well-known authors like Stephen King, David McCullough, Karen Kingsbury, Glen Beck, Hillary Clinton, Sean Hannity, William Kent Krueger, Richard Paul Evans, Duck Dynasty family, Janet Evanovich, and many more.

By comparison? Penguin Random House employs 10,000 people worldwide and publishes 15,000 new books a year across 320 separate imprints, selling more than 600,000,000 books a year.

The purchase will be a cash deal, paid from existing liquid funds. The press release quotes the CEO of Bertlesmann: “External borrowing is not necessary, thanks partly to the overall positive business development since the summer and the already completed sale of various businesses, investments and real-estate properties.” This means that PRH will not be leveraging the sale through borrowing. That is good news. Many of the industry’s bankruptcies can be traced to a heavy debt load (Family Christian Stores and Borders, to name two).

What Happens to Simon & Schuster?

As with all corporate mergers, the current operations and management will not change. Penguin Random House is known for managing multiple large imprints that run independently (from an editorial perspective) and often will bid against each other for a particular project.

First the sale has to pass any regulatory challenges. (See below.) Only then will organizational efficiencies be addressed. When Penguin and Random House merged in 2013 it took many years for their full integration to be accomplished. While Baker Publishing bought Bethany House in 2003, some of those efficiencies were still being addressed this year!

Efficiencies begin where there are duplications of tasks: warehousing, accounting/finances, IT departments, and upper management. Penguin Random House has done this before, so it may have methods and protocols in place to make those transitions smoothly.

Antitrust / Monopoly Challenges

There will likely be regulatory challenges to this sale. Claims of antitrust issues often accompany something like this. Robert Thomson, the CEO of News Corp (the owner of HarperCollins), said two weeks ago, “It will clearly be a serious antitrust issue if Bertelsmann acquires Simon & Schuster.” Then over the weekend he said in The Wall Street Journal that

the deal would harm distributors, retailers, authors and readers. “There is clearly no market logic to a bid of that size—only anti-market logic,” he said in a statement. “Bertelsmann is not just buying a book publisher, but buying market dominance as a book behemoth.” News Corp also owns The Wall Street Journal.

Regulatory challenge can have a chilling effect on corporate acquisitions. Earlier this year a planned merger between two education-oriented publishers, McGraw-Hill and Cenage, had to be terminated because of such concerns. (That process took 14 months!)

The Authors Guild posted their opposition to the sale within hours of the announcement last Wednesday. From their website:

The Authors Guild opposes the proposed sale of Simon & Schuster to Penguin Random House. It would mean that the combined publishing house would account for approximately 50% of all trade books published, creating a huge imbalance in the U.S. publishing industry. 

I remember when HarperCollins (which owns Zondervan) bought Thomas Nelson back in 2011. The Department of Justice, looking into possible regulatory issues, contacted a number of agents in the Christian industry, including us. They asked questions regarding the frequency of bidding between the two publishers and a series of questions regarding the Bible publishing divisions and their market dominance.

How Does This Affect the Christian Publishing Industry?

While this is huge news in the general market, it is unlikely to impact the Christian publishing industry directly.

Simon & Schuster has a Christian publishing imprint, Howard Books. It is most recently known for publishing novelist Karen Kingsbury and the first books by the family members featured in the Duck Dynasty television show. In 2017 its headquarters in Nashville was closed and operations were moved to New York City. It has already been a division of their Atria Publishing Group. Now it no longer has the direct acquisitions and oversight it once had when it was based in Nashville, meaning no acquisitions editors acquiring exclusively for the imprint. Howard Books still has new titles coming out. See this link for an Amazon search sorted by publication date. It may be that some of them were contracted long ago and are finally in the publication pipeline.

It will have an impact as part of a larger industry analysis. But to what extent? Questions remain. Will this merger have a negative effect on publishing in general? Will going from the Big Five to the Big Four hurt the industry? Will it be that much harder for PRH to contract debut authors? (See the quote from Richard Pine below.) Remember the scale of this industry and the profit motivation. Unless a book can generate enough revenue to justify its acquisition and production, it lacks commercial value.

In the above-cited Wall Street Journal article, Richard Pine, a literary agent and co-founder of Inkwell Management, said he is concerned the creation of such a large publishing house would “lead to an unhealthy obsession with publishing mega bestsellers. … It’s like baseball, you need the minor leagues. Authors need to be nurtured. If you have a system of one book and done when the magic didn’t happen, then those writers will be left behind.”

A Couple Interesting Things

If/when the sale goes through, the Big Four will be Penguin Random House (owned by Bertlesmann), HarperCollins (owned by News Corp), Hachette (owned by Lagardère), and MacMillan (owned by Holzbrink). For a rundown of who owns whom in Christian Publishing, see the article linked here for my analysis.

The sale of Simon & Schuster comes on the heels of the merger of CBS and Viacom in December 2019. CBS had been the owner of S&S since 2006 when CBS and Viacom split the first time. (Yes, they’ve had an on-again, off-again relationship for a long time; see the history here.) Evidently, the new company wants to focus on their media properties and the sale of the book division will generate some welcome capital.

In a letter to the industry from Johnathan Karp, the CEO of Simon & Schuster, he relayed some fascinating history:

From our company’s inception, there has been much cross-pollination between Simon & Schuster and Penguin Random House. In fact, the founder of Random House, Bennett Cerf, met Max Schuster when they were both students at Columbia Journalism School. (Richard Simon was an undergraduate at Columbia University at the time.) They all shared an entrepreneurial approach to book publishing and established their companies within one year of each other. I learned these details from my personal copy of Bennett Cerf’s memoir, At Random, which was given to me on my first day as a Random House employee. I spent 16 rewarding years at Random House, where I first came to know many of you, and I’m glad that Simon & Schuster will become part of this great culture of book publishing.

He also wrote:

In our 96-year history, Simon & Schuster has had seven owners. From these transformations we have adjusted to new management, welcomed other companies into our fold, and always emerged stronger, with an enduring commitment to excellence in book publishing. When we join Bertelsmann after closing, we can look forward to benefitting from exciting new relationships and opportunities that will enhance our ability to provide authors with the best possible publication they can receive.

14 Responses to Simon & Schuster Bought by Penguin Random House

  1. Avatar
    Roberta Sarver November 30, 2020 at 5:20 am #

    Steve, how do you think this will affect your agency? Will it be harder for first-time authors to be accepted? Thanks for your input.

  2. Avatar
    William Eugene McBride November 30, 2020 at 5:44 am #

    Thank you Steve for bringing this News to us.

    This timely information will be very useful to we writers, so Steve, my Hat’s Off To You. Sir, you are a Great Writer. You have informed us like a great journalist, but you have have provided us numerous citations and links such as would be found in a researched magazine article or a thesis by a college graduate student.

    I am honored to have access to your wisdom and the wisdom of your agency’s Literary Agents.

    Thank you, Live long and prosper. God’s riches blessings upon all associated with your great agency.

  3. Avatar
    DAMON J GRAY November 30, 2020 at 6:32 am #

    Steve, that was a fascinating read, and I am pleased that you gave us your analysis of the merger/buyout. Thank you for the time and energy you poured into this comprehensive look.

  4. Avatar
    Sheri Dean Parmelee, Ph.D. November 30, 2020 at 7:13 am #

    Thanks for the news and for your analysis of it. I really appreciate the information, Steve, and realize it took you a while to pull it all together. Thank you for your efforts on our behalf!

  5. Avatar
    Andrew Budek-Schmeisser November 30, 2020 at 7:27 am #

    The comings and the goings,
    Big Five become Big Four,
    new authors are not knowing
    if there waits an open door
    that might lead them to the hall
    where there’s a banquet table;
    though glad to stand against the wall,
    they’ll sit if they are able
    to match the ever-going game
    of musical chairs
    that leads to fortune and to fame
    if they stay alert, aware.
    Simon Schuster’s bought by Random Penguin;
    music stops, and then begins again.

  6. Avatar
    frank caudle November 30, 2020 at 8:13 am #

    Very informative.

  7. Avatar
    Cole Powell November 30, 2020 at 8:33 am #

    WOW! Reminiscent of Disney’s recent buyout of 20th Century Fox, although the effects of that merger still remain a mystery, as COVID has obliterated traditional film distribution. I’m curious to see what impact this acquisition will have on the publishing industry.

  8. Avatar
    Kristen Joy Wilks November 30, 2020 at 11:22 am #

    Fascinating and concerning as well. Thank you so much for setting this before us in such a logical fashion. The general market must be incredibly concerned. I know things like this have happened before, but 50% of the market is mindboggling. I’d hate to see what’s happening to movies occur in book publishing. Where the writers become hampered by experts who are trying to create a blockbuster hit and the creativity spirals into a downward death. Storytelling seems to be moving to the small screen with Netflix originals and whatnot as the constraints on big screen creativity grow with the cost. I really appreciate you keeping writers abreast of all this!

  9. Avatar
    Len Bailey November 30, 2020 at 3:29 pm #

    Just sold “Devil Dog”, a short story (ghost story, Kentucky coalmine circa 1945) to Mysterion. Ever heard of them? Pays .08 a word so about $450. Looking forward (foreword) to getting to know these folks . . .

  10. Avatar
    Chris Sauter Manion December 2, 2020 at 9:47 am #

    It will be interesting to follow how the DOJ evaluates the antitrust issue and what regulatory challenges arise. Is 50% market share acceptable? I appreciate you informing us of the 14 months it took for the regulatory challenge of McGraw-Hill and Cenage and the cancelled buyout as its result.

    If the merger goes through and places a greater weight on the publishing scale on the side of commercial value and mega bestsellers, perhaps we shall see a countermove as in a breakout era of self-publishing in greater proportion than we see now. When cities grew too dense and traffic to them too congested, people chose suburbia in their benefits vs. costs anaylsis of where to live and why. I can see a development of “indie suburbia,” as a balancing swing of the pendulum if this merger goes through.

    You made the PRH approach to buying other publishing houses sound like Warren Buffet’s approach to buying companies. He leaves them relatively intact and buys them because he understands and likes the way they’re run as well as their profit potential. Would you say that PRH has a similar approach, Steve?

Trackbacks/Pingbacks

  1. Who Owns Whom in Publishing? - - November 30, 2020

    […] In November 2020 it was announced that PRH won the bid to buy Simon & Schuster which was owned by ViacomCBS (the media conglomerate). Their Christian imprint is Howard Books which is a division of Atria. Other well known imprints include Pocket, Free Press, and Scribner. In 2017 the Nashville office of Howard Books was shuttered and operations moved to New York under more direct management by Atria. I wrote about this event at this link. […]

  2. Simon & Schuster Bought by Penguin Random House Discussion With Steve Laube - Christian Publishing Show - December 8, 2020

    […] Simon & Schuster Bought by Penguin Random Househttps://stevelaube.com/simon-schuster-bought-by-penguin-random-house/ […]

  3. Simon & Schuster Bought by Penguin Random House Discussion With Steve Laube - - December 8, 2020

    […] Simon & Schuster Bought by Penguin Random Househttps://stevelaube.com/simon-schuster-bought-by-penguin-random-house/ […]

  4. Simon & Schuster Bought by Penguin Random House Discussion With Steve Laube - December 8, 2020

    […] Simon & Schuster Bought by Penguin Random Househttps://stevelaube.com/simon-schuster-bought-by-penguin-random-house/ […]

Leave a Reply

Your email address will not be published. Required fields are marked *

Get New Posts by Email

Get New Posts by Email

Each article is packed with helpful info and encouragement for writers. You can unsubscribe at any time with one click. 

You have Successfully Subscribed!