Proposed Penguin Random House, Simon & Schuster Megamerger Could Squeeze Libraries

The proposed merger between Penguin Random House and Simon & Schuster has attracted the attention of the Justice Department, which is concerned that the $2.2 billion deal will shrink opportunities for writers, and hurt consumers, by turning the Big Five publishers (once the Big Six, until Penguin and Random House completed their merger in 2013) into the Big Four. Its antitrust trial against the merger began in early August and ended Friday. A decision is expected in the fall.

Penguin Random House and Simon & Schuster logos stackedWhat will a merger between Penguin Random House (PRH) and Simon & Schuster (S&S), the two largest publishers in America, mean?

Depends on who you ask.

The merger has attracted the attention of the Justice Department, which is concerned that the $2.2 billion deal will shrink opportunities for writers, and hurt consumers, by turning the Big Five publishers (once the Big Six, until Penguin and Random House completed their merger in 2013) into the Big Four. Its antitrust trial against the merger began in early August and ended Friday. A decision is expected in the fall.

PRH and S&S counter that the pairing will “maximize the reach of our authors’ stories, so they can find the widest possible audience,” said PRH’s Claire von Schilling, executive vice president, director, corporate communications and social responsibility.

One motivating factor, as it was in the Penguin merger with Random House, is Amazon, more than ever the “World’s Largest Bookstore”as its original slogan had itwhich sells more than 50 percent of all books and up to three-quarters of ebooks.

But public librarians are particularly troubled by the impact the merger could have on pricing and licensing for libraries, especially for ebooks and digital materialsan ever-growing, and expensive, share of library budgets.

“We’re always trying to squeeze the most out of limited resources,” said Josh Berk, executive director of the Pennsylvania’s Bethlehem Area Public Library. “That’s where my first thought goes: Here comes another price hike.”

While some libraries have offered ebooks since there have been ebooks to offer, it’s only in the past decade that the majority of libraries have provided them, and of course the number of titles available has also grown significantly, most recently owing to pandemic-driven library closures spurring patrons to try digital formats.

But while libraries have shifted materials spending to meet that need, the price has sometimes been steep. A print volume might cost a library $20 or $30, and the library can circulate that book as long it keeps being checked out and is in good shape, and then sell it as a fundraiser. An ebook license can cost a dozen times that much and may only be good for a designated time period or specific number of readers.

Despite the roles libraries play in readership, Berk said, “sometimes it feels like we’re an afterthought. Publishers have a good partner in libraries. A little extra consideration would go a long way.”

As a member of ReadersFirst, an organization representing librarians’ and readers’ interests, Carmi Parker agrees.

Over the past few years, the Whatcom County, WA, Library System ILS administrator has seen how industry consolidation has meant price hikes and negotiating challenges. ReadersFirst has had some success in countering those movesa couple of years ago, the organization helped spearhead a boycott against Macmillan when the publisher added restrictions to its ebooksbut she’s not convinced things have changed.

Though some publishers were willing to work with libraries during the pandemicshe singles out PRH as being particularly helpful by adjusting pricingshe said that it appears libraries are not a priority for large publishers.

“There does not seem to be a willingness to experiment with how much digital books cost,” she said.

PRH’s statements indicated that the merger, if allowed to proceed, would neither help nor hurt library ebook terms. Said Von Schilling, “There are no plans to change licensing agreements with libraries after the merger is complete.” PRH and Simon & Schuster currently have similar core licensing terms. In 2018, PRH discontinued its perpetual license model and began making ebooks available for two-year terms under a one copy/one user model. S&S also adopted a two-year, one copy/one user model in 2019, and PRH introduced a one-year term at the outset of the COVID pandemic. (There are several exceptions; for example, PRH temporarily offered its catalog on a cost-per-circ basis for a few months during the pandemic. S&S also makes some titles available via cost-per-circ.) Nonetheless, many librarians have voiced the need for a variety of licensing models, and continue to be concerned about rising costs for time-limited licenses.

Regardless of the trial’s outcome, Parker believes that libraries can adjust with the times. Indie publishers have been more flexible with their ebook arrangements – one, she observed, sold their ebook for $20 with a lifetime licenseand if similar measures can be put in place with the large firms, it can benefit all sides.

“People love to read,” she said, noting that 50 to 60 percent of Americans have library cards. (The American Library Association puts the figure at 58 percent.) “But nobody can afford to buy everything they want to read.”

Still, she added, the big publishers have to bend a little. Over the last 18 months, she said, her library system’s costs jumped 30 percent while usage remained flat. Something will have to give.

“I believe at this point that libraries must begin to vote with their dollars,” she said.



Writers, too, have expressed concern about how the merger would impact their pay and ability to be traditionally published—something which, of course, would have pass-along impacts for library collections. At the beginning of the trial, Stephen Kinga PRH authordrew attention for his willingness to speak on behalf of the government against the merger.

“Consolidation is bad for competition,” he said.

When he began his career in the mid-1970s, he observed, he didn’t have an agent but was still able to get interest – and some small advances – for his work. That’s gotten increasingly more difficult, he said, as the number of publishers has declined.

Though the Big Five houses can trace their roots back a century or more, mergers and consolidation picked up speed in the 1960s. Random House took over Alfred A. Knopf and Pantheon and was itself acquired by RCA in 1965, Advance Publications in 1980, and Bertelsmann in 1998. Penguin was bought by Pearson in 1970 and purchased Viking and Putnam, among others. Simon & Schuster was acquired by Gulf & Western, the forerunner of current owner Paramount Communications, and obtained Scribner’s and The Free Press.

Macmillan was purchased by Holtzbrinck in 2001 and now owns Farrar, Straus & Giroux, Henry Holt, and St. Martin’s; HarperCollins, the former firms Harper & Row and William Collins, became part of News Corporation in 1987. Hachette took over Time Warner’s publishing operations (including Little, Brown) in 2006 and added Perseus’ imprints in 2016.



Mike Shatzkin, a longtime publishing industry veteran, notes that the mergers are the industry playing catch-up to changes in the retail and media environments, led by Amazon.

“Up to the early 2000s, most books were sold in bookstores, and there were 5,000 bookstores,” he said. “And the only way you could be a publisher was to put books in bookstores. You had to have a salesforce, you had to be able to handle returns…there were all sorts of requirements.”

But Amazon changed the game. As an online retailer, it needed far fewer salespeople than its brick and mortar rivals. It sold books in volume, which gave the company great power over publishers, and also had enough other businesses that books became just one of many products. And it drove the mainstream adoption of digital formats.

The U.S. now has just 1,700 bookstore companies running about 4,100 stores. And dollar sales in those stores dropped by about 40 percent between 2008 and 2018. While a recent trend towards new independent bookstores serving specific communities being founded and thriving is encouraging, it’s not going to turn those numbers around.

“Now you don’t even need to have inventory,” said Shatzkin. “[Distributor] Ingram doesn’t have to have the book in stock today to ship tomorrow. They just need an order. They can print it tonight. That took away the big advantage the publishers have.”

Shatzkin doesn’t think the PRH-S&S merger will stop the consolidation. He believes eventually the industry will be down to one major publisher. With the rise of self-publishing, author barriers to entry are much lower than they used to bea word processor and an internet connectionand social media can play the marketing role publishers traditionally have.

“The book business will continue to get bigger, but the portion of the book business that is commercial will continue to get smaller. We will be down to one publisher, probably by the end of this decade,” he said. “Publishers live on scarcity, and that genie ain’t going back in the bottle.”

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