IMHO: Win or Lose, the DOJ Suit against Penguin Random House Won’t Change Authors’ Fortunes

I’m seeing a lot of high fives and back-patting right now among authors (and agents and authors organizations) regarding what promises to be a big spectacle: The Department of Justice is suing to block Penguin Random House’s acquisition of Simon & Schuster on antitrust grounds. For those blissfully unaware of this deal, check out our November 2020 issue for background.

Acquisitions and mergers between large publishers reliably result in Sturm und Drang in the author community. Most reflexively believe that consolidation within publishing is harmful to authors and the literary arts. So when the acquisition—which would create a US publishing house more than double the size of HarperCollins, its nearest competitor—was announced last year, just about everyone sounded the alarm and declared that it must be stopped. (Never mind that this is just one red, flashy caboose at the end of a decades-long train of publishing acquisitions and mergers.)

Last week, the DOJ granted authors a fairytale wish: The government’s entire case centers on the critical role of authors in the publishing ecosystem and their fair treatment. The complaint states, “Authors are the lifeblood of book publishing. Without authors, there would be no stories; no poetry; no biographies; no written discourse on history, arts, culture, society, or politics. … Penguin Random House’s proposed acquisition of Simon & Schuster would result in substantial harm to authors.” Look for authors to be quoting such lines for the next thousand years as evidence they are mistreated. (Horace would have applauded; a poet during the time of Augustus, he considered authors and their books the hard-working but humiliated prostitutes of the Roman publishing industry, with the financial reward for their hard work going to others.)

As an industry wonk, I am of course sitting in front of my monitor with my popcorn to see where this goes next. As an author, though, this case has nothing to do with me—and probably nothing to do with you. It’s rather about top-selling authors; the DOJ filing plainly says it is most concerned with bestsellers. The filing offers anonymized book deal examples and advance figures (which has resulted in public guessing games like this one) in an effort to prove that author advances for top-selling authors would decline should PRH buy Simon & Schuster.

But do you care if Stephen King gets millions instead of zillions for his next contract? I’m sure his agent cares, and maybe the people who benefit from his largesse care. But does it change the game for anyone else? The DOJ itself writes that, post-merger, “hundreds” of authors would have “fewer alternatives and less leverage.” Hundreds. Publisher Ken Whyte offered his take on this news with the headline Justice for the .001%, and that’s a good summary of how I see it.

Unsurprisingly, the Authors Guild argues that consolidation affects all traditionally published authors, especially the long-suffering midlist author (sometimes you wonder if they even exist anymore, their death has been proclaimed for so long). The Guild states, “Consolidation doesn’t just stifle competition, it also makes acquisition editors less willing to take risks on emerging or midlist authors. … Yet it is only by pushing those limits that literature and society advance. Fewer publishers also mean less diversity, as the remaining players chase megasellers and celebrity books with seven-figure advances at the expense of funding smaller, riskier books.”

The DOJ suit itself argues the contrary; it says Big Five publishers treat smaller and independent presses as “farm teams,” plucking out the most successful authors for themselves. Just as important, sales-wise: according to NPD BookScan, publishers outside the Big Five have been gaining in market share during the last decade. More titles are released each year than ever before, and there is simply no evidence that mergers have led to decreased diversity in publishing and less opportunity for authors. I fail to see how the acquisition of a Big Five company owned by ViacomCBS, which paid Hillary Clinton $14 million for her memoir and Amy Schumer $9 million for an essay collection, will at all change who and what gets published or how.

When this acquisition was first announced in 2020, Peter Osnos of the independent publishing house PublicAffairs said, “It’s natural, understandable, predictable that people will want to look at the downside. And it turns out there may not be quite the downside they think. That’s my slightly contrarian view.” He thought it might be a good thing, in fact, for Simon & Schuster to be run by a corporate parent that’s primarily focused on book publishing (that’s Bertelsmann), rather than a media company focused on streaming video. And you don’t even have to be contrarian to believe that as the Big Five or Big Four become narrowly focused on producing hits, that leaves more room for small publishers and innovators. Recently, some small, independent European publishers even said that independent and corporate publishers are complementary.

So the DOJ may in fact be entirely wrong about what happens to author earnings as a result of the Simon & Schuster purchase. In his newsletter, Whyte claims that advances for big-time writers did nothing but skyrocket when Penguin and Random House merged a decade ago. (And that deal was met with the same objections, just not a DOJ suit.) But let’s say advances did decline. Is it possible an acquisition could lead to other outcomes that offer a net positive, like better marketing and promotion? What if lowered advances made it possible for small presses to compete for great authors? Or what if the acquisition led publishers to pay better royalties?

I know, it’s crazy to think authors might have more leverage or options in a Big Four situation. But consider the pace of technological progress and changing socioeconomic conditions. Maybe some authors would boycott a Big Four. Maybe authors would look for different kinds of deals from smaller publishers who pay higher royalties and offer more control. Maybe there are new types of publishers and media companies (see: Webtoon, Radish, Wattpad) and a future creator economy that gives writers more power and freedom to step away from bad deals. There are all kinds of potential outcomes, and the consolidation of legacy publishers represents the late stage of a prevailing—possibly declining—business model. In the long history of the written word, authors have found a way to adapt to new conditions and continue in their work. The greatest are forever remembered. In comparison, publishers are ephemeral and largely forgotten.

Little is likely to change in commercial publishing in the short term. The big dogs remain the big dogs. Mega advances will still be paid, and it will remain challenging to make a living if you’re the average author (as it has been throughout history if you depend on book sales alone). This is about protecting the status quo, not making progress—although I would argue that, even if the deal moves ahead, you still get the status quo. Either way, Simon & Schuster likely gets sold to one of the Big Five; the underbidder against PRH was HarperCollins.

I also take an especially dark view of the DOJ’s judgment given their last suit against the Big Five. The ebook price-fixing case, whatever you thought of its merits, only helped Amazon become stronger in the US book market. Consider what Europe does to meaningfully protect its book market and author earnings, and you’ll see a wide gulf: Book retail prices are fixed across much of the continent, and book-pricing battles are banned; France will soon prevent Amazon from shipping cheaply as a sneaky way of discounting; some countries pay authors for library lending. Notably, in its first response to the news of the DOJ’s filing, the Authors Guild said, “Unless the Biden Administration and Congress address antitrust reform in relation to Amazon’s practices, preventing the PRH/S&S merger will do little to reduce harm to authors and the publishing industry as a whole and may injure mid-list authors short term.” And also: “We look forward to working with the Biden Administration on antitrust reform that gets to the root of the problems in the industry, whereas the proposed merger was just a symptom.” Indeed.

Finally, I don’t think PRH’s intent in acquiring Simon & Schuster is to pay authors less, although I realize that’s not a good argument against the deal. But at least let’s be curious: What’s the benefit? One reason often cited is greater efficiencies in back office: distribution, fulfillment, printing, and so on. Some think it’s about creating an entity that’s big enough to mess with Amazon (although the DOJ takes issue with that). My guess is that it’s mainly about owning as much intellectual property as possible. Look at how valuable IP is to every single media company today, including online literature sites like Webtoon and China Literature. It’s an arms race to own profitable properties that can be milked for every possible licensing, subscription, and adaptation deal for decades and decades hence. With an enormous backlist comes money-making opportunities.

PRH and Simon & Schuster plan to fight the lawsuit; Simon & Schuster CEO Jonathan Karp says it’s notable that the DOJ has not alleged that the deal would harm competition in the sale of books, which seems to be their beacon of hope. In his newsletter, Whyte mentions that the DOJ and FTC manage to kill only 10 percent of the horizontal mergers they challenge. “I found that statistic startling until I spent some time with this complaint,” he writes, indicating the potential weakness of the government’s case.

Bottom line: In a 2011 article about the Penguin merger with Random House, Planet Money’s Adam Davidson wrote, “It’s difficult to imagine how, in the digital world, publishers could ever monopolize the sale of written material. Even if there were only one house left, it would compete with every blogger and self-published ebook author. Eventually, it’s likely that book publishing will embody both conflicting visions of digital-age commerce—lots of small businesses and a few massive ones that handle big-ticket items.”