It’s a story that has the makings of a bestseller – a billion-dollar deal, a court battle, and endorsement from the King of Horror.
Penguin Random House, a publishing giant, is hoping to buy its competitor Simon & Schuster in a mega deal that would transform the publishing industry.
But the Biden administration has tried to intervene through the US courts, with the Department of Justice (DOJ) suing to prevent the merger.
Let us keep you up to date on the court case troubling the publishing industry.
What’s the matter?
In 2020, German media giant Bertelsmann announced its plan for its Penguin Random House division to buy fellow publisher Simon & Schuster from television and film company ViacomCBS for $2.17 billion.
The merger would reduce the so-called Big Five of publishing – which also includes HarperCollins, Hachette Book Group and Macmillan – to four.
The announcement was not well received and drew intense scrutiny from state regulators.
The US Department of Justice argues that the merger would harm authors and ultimately readers.
It says the deal would stifle competition and give Penguin Random House gargantuan influence over what books get published in the US and beyond, not just how much authors get paid, leaving consumers with fewer books to choose from.
If approved, the new company would be by far the largest book publisher in US history.
The Penguin Random House trial is widely seen as part of a growing trend by the Justice Department during the Biden administration to take a tougher stance on mergers to crack down on large corporate mergers.
Bertelsmann’s competitor News Corp, which owns HarperCollins, also closed the deal.
“This literary giant would take 70 percent of the US literature and general fiction market,” Robert Thomson, CEO of News Corp, said in a statement.
However, Penguin Random House has countered that the new entity would increase competition because the combined entity would be able to produce books more efficiently.
How is Stephen King involved?
Now the week-long trial in the US District Court in Washington, in which critically acclaimed author Stephen King is fighting for the government, has begun.
“I came because I think consolidation is bad for competition,” Mr King said during his testimony earlier this week.
Of the way the industry has evolved, he said, “it’s getting harder and harder for writers to find money to live on”.
The 74-year-old expressed skepticism about the commitment of the two publishers to continue to offer books separately and competitively after a merger.
“You might as well say that a man and a woman will bid against each other for the same house. It’s kind of ridiculous,” he said.
“It would be kind of very gentlemanly and kind of ‘after you’ and ‘after you’.”
Mr. King’s remarkable career has come amid waves of industry consolidation.
As he noted in his remarks, there were dozens of publishers in New York when his seminal novel Carrie came out in 1974, and he has seen many of them either taken over by larger corporations or put out of business.
Carrie’s publisher, Doubleday, is now part of Penguin Random House, as is another former King publisher, Viking Press.
There’s also an elephant in the room: Amazon
Markus Dohle, Penguin Random House CEO, admitted during the trial that while he had promised to allow the two merged companies to continue bidding against each other for author deals, the publisher’s German parent company, Bertelsmann, was not legally obliged to do so be obligation.
The biggest threat to the publishing industry doesn’t come from consolidation, but from the explosion of subscription-based or cheap content like e-books in recent years, Mr. Dohle said, calling it “all-access.”
In particular, he named Amazon, which has around 50 million book titles available, and Disney.
“I think it’s the biggest threat to the industry and especially to writers’ income,” he said.
“It will have a tectonic impact on the industry’s revenue stream.”
Mr. Dohle compared Penguin Random House to “angel” investors from Silicon Valley.
“We invest in thousands of ideas and dreams every year and only a few of them make it to the top… Every book is unique and there are many risks,” he said.
The process is expected to take two to three weeks and the next chapter in the publishing industry will soon be written.