November 2020. Suffice to say, a lot was happening then. But one of the many headlines from that time period was that Penguin Random House, the largest book publisher in the US, wanted to buy rival Simon & Schuster from ViacomCBS (now Paramount Global). Likely due to the change of leadership, the US government sued a year ago to stop the merger. The US was arguing that by having the Big Five publishers go down to the Big Four — with one being nicknamed by analysts as the first “megapublisher” — wages for authors would decrease. In other words, this would create a monopsony, the opposite of a monopoly.
Well, a judge in federal court heard the case in August 2022, and now two years after the original announcement, we have a verdict. The Penguin Random House-Simon & Schuster merger has been permanently blocked.
The Case
Despite the use of the word “permanent”, of course, this does not mean the permanent end of the saga. Penguin Random House has announced their intent to appeal, so there is still a chance the acquisition will happen.
However, at least for the foreseeable future, Penguin Random House and its parent company, Bertelsmann, cannot buy Simon & Schuster. The court’s full written ruling has not been released yet due to confidentiality concerns.
As Vox stated, “Some antitrust experts have been thinking of this trial as a kind of test balloon”, and they linked to a great analysis here.
In short, there haven’t been a lot of monopsony-related cases, but this ruling along with President Biden’s stated goals have many believing this issue will be getting more attention now. Antitrust concerns have historically looked at how a deal like this would negatively affect consumers, but rarely has an antitrust case been brought forth on the argument it would negatively affect workers. Now this helps set more precedents and can be used as a tool for the Biden and future administrations “to challenge corporate consolidation”.
The Writer’s Guild of America celebrated the ruling, and famed author Stephen King served as a witness for the government.
Simon & Schuster & the Future
So what happens now to Simon & Schuster?
The original deal between Penguin Random House and Simon & Schuster is set to expire at the end of this month. As indicated in this Publishers Weekly article, Penguin Random House’s CEO did not seem to be worried about roadblocks from the government, and the purchase was expected to close in 2021. Of course, it’s not even going to close in 2022, and the companies would not confirm to The New York Times whether they have extended their contract amidst the prospect of a drawn-out appeal with the deadline looming.
HarperCollins, another member of the Big Five, was the second-place bidder in the auction for Simon & Schuster. HarperCollins is well behind Penguin Random House in sales and still would be even if they bought Simon & Schuster, but there are doubts as to whether that deal — or any merger among the Big Five — would be possible now.
It is unlikely Paramount Global would want to retain Simon & Schuster considering they wanted to sell in the first place, and they seem to be concentrating on TV and movie productions. Plus, as Indie Wire put it, “Even with some favorable adjustments, Paramount Global’s earnings basically halved from the comparable quarter last year.
If it weren’t for the drop right near the start of the pandemic in March 2020 and its associated slow recovery, Paramount’s stocks would currently be at its lowest in five years. Cash seems more important to enhance their streaming prospects rather than a book publisher.
So perhaps a much smaller company can afford to take Simon & Schuster off of Paramount’s hands. Or maybe the media conglomerate will spin off Simon & Schuster into its own independent company. Or maybe the judge’s ruling will be overturned and Bertelsmann can create their megapublisher after all — one that, among many other books, will handle distributing the vast majority of manga in the US. We’ll just have to wait and see. I’m sure a lot of people in the book business and beyond would agree with Penguin Random House’s CEO’s publicly stated position of taking on Amazon, but we should all probably breathe a sigh of relief considering his actual goal was, in fact, the opposite.