House Of The Fatted Penguin


Today’s big book news is Apple’s loss in the Department of Justice antitrust action alleging that it colluded with five major trade book publishers to fix prices of e-books. (The publishers themselves settled out of court; Random House, which did not adopt Apple’s “agency model” of pricing for another year, was not named.) We now await the financial penalty and the inevitable appeals. But for my money, that’s not the biggest book news of the month. Neither is Barnes & Noble’s planned abdication of its e-book reader Nook, and the related resignation of its CEO, as part of the slow, sad decline of a mighty, even arrogant behemoth that once dictated how you got books to a mass market – if B&N didn’t like a cover, you frickin changed it – and rented out its front-of-store promotional space like the commodity this print-payola had become. These are titanic events which will affect most of you who like to read books for fun, and would lead the news in any other month. But not in July 2013. Not the month when Penguin Random House was born.

As of July 1, in the wink of an eye, there were no longer a Big Six of trade publishing, only a Big Five. Later this year, we may well hear of another proposed consolidation; my old compadres at News Corp‘s HarperCollins (who sniffed around Penguin as well, but too late) are rumored to be holding powwows with CBS’s Simon & Schuster. Hachette (used to be Warner) and Macmillan are the only other Bigs, and if a Harper/S&S merger took place, they’d probably have no choice but to get married themselves.


First, leverage. The power in the book business is shifting in favor of one mega-retailer, and this shift is happening at electronic speed, a pace to which traditional publishers are unaccustomed. That ogre is Amazon, so huge that it could afford to establish its Kindle as the dominant e-reading platform by pricing bestsellers at a loss. Take pricing power away from publishers and they get mad – and DoJ asserts that five of them got even. I’ve never understood why the Big Six didn’t just say OK, these e-books are great and all, but they’re cannibalizing our hardcover sales, so tell you what: no e-editions on new titles for the six months after laydown. After all, movie marketers “window” the crap out of their new releases: premieres in theaters, pay-per-view, home video, pay cable, streaming, etc., are all staggered to squeeze out every possible dime. But the e-market was jump-started instead by “loss-leader” pricing (which even bled over into a ludicrous price war on physical books between Amazon and Wal-Mart in late 2009, when for one brief shining moment you could buy Stephen King’s brand new thousand-page marathon UNDER THE DOME in hardcover for $9.00), after years of half-hearted, impotent, premium-priced effort within the industry. Toothpaste’s done been squz. So the only way to push back is to get bigger. Penguin Random House now controls about 25% of the U.S. trade book market – not enough to freak out antitrust regulators, but enough to stand its ground if it ever gets bullied, of which Amazon proved itself capable in January 2010 when it removed order buttons for all Macmillan books in a dispute over e-book pricing. The retailer later capitulated, but the point was made: we can take your books, and your books only, off our “shelves” in an instant if we feel like it.

Second, overhead. Whenever you consolidate, you create redundancies, because if two people do the same job at each company, one is no longer necessary unless there’s actually double the workload (sometimes not even then). And as the economies of scale continue to be threatened by emerging technology, it’s getting ever more expensive to publish a bestseller (and more inexpensive to self-publish, even in print). Hey hey, ho ho, some employees got to go. In the current wave of consolidation, babies are even being thrown out with the bathwater. There are tremendous editors and publicists out on the street today. One publisher didn’t just pare down its cover copy department, it eliminated it (now the editors have to write their own copy; they do this with with, um, let us say, varying degrees of skill, but this is not about better, only cheaper). The bottom line is the bottom line, and the older you are/more money you make, the bigger the target on your back.

Third, guarantees. If there are fewer players involved in a public auction, the winning price will almost surely be dampened. Math. I don’t know if other consolidated publishers work this way, but when I was at Bantam Doubleday Dell if there was intramural interest in the same project, we settled internally which publisher would enter a given auction; in other words, we did bid against each other, but in private. I won the right to enter the MYSTERY SCIENCE THEATER 3000 auction for Bantam because I had the most to spend on it. So the author and agent indeed dealt with the house’s biggest moneybag (if I could get it for less, attaboy Tom), but they only got one bidder, not three. BDD is now part of Random House, itself now part of Penguin Random House. They can’t possibly be consolidating all bids in an organization that huge – you’d have already heard about it from braying agents – but if they ever wanted to, they could.

Fourth, and this is what has outsiders worried, who knows? With great power comes great responsibility, said either Winston Churchill or Spider-Man’s uncle. Book publishing and bookselling are intensely personal businesses, because every product is different and is consumed by individuals, one at a time. How far can you remove the big-shot gatekeeper from the independent who’s faithfully trying to hand-sell a first novel before people start to notice? It’s the shapeless fear which horror writers have long employed that bothers book professionals right now: we’re all consolidating because things are changing, but I don’t have a grip on it yet. A very senior book executive told me about three years ago that s/he woke up every workday wondering, is this the day I get downsized? (Heads of houses have gone on the chopping block too; it’s not just the minions. But this person is still there, thank goodness.)

Consolidation is nothing new in the book biz. Bantam, Doubleday, Dell, Knopf, Random House, William Morrow, Little Brown, FS&G, Pocket, NAL, Ballantine, Harper & Row, Scribner, Viking, Putnam, Harcourt, and dozens more – they all used to be independent publishing houses. Now they’re only imprints of larger corporations: some have separate staffs, sure, but that paycheck still reads the same at the top, and let’s face it, despite any soothing hands-off speeches, you serve at the conglomerate’s pleasure. There are still fine independent houses, like McSweeney’s. They’re just not part of the Big Five, and they’re likely not even in New York. Meanwhile, somebody (pssst: this time, why not hire some real design people?) better be working hard on a permanent logo, because for one thing, that penguin is looking away from the house — your humble observant former adman could infer maybe a little scorn if he were less generous.

Nor is disruption to the traditional business model something that’s never been seen before. Mass market editions, book clubs, superstores – they’ve all transformed the game and been decried as industry-killers. If you’re interested, here’s a quick sketch of the periodic upending of the book trade: most of it happened relatively recently. We’re a long way from Bennett Cerf and Alfred Knopf, who have more in common with MAD MEN than with Kindles.

Back when this merger was announced, I read somewhere that if you were a Penguin or Random author, you should be thrilled, but if you were published anywhere else, you should be worried. That’s the kind of smug pronouncement that sounds bold in a blog but just isn’t so because, again, who knows? If you, the customer, get more stuff to read that you like, then this will have been a good thing. But if the Big Five turn into what they’re increasingly coming to resemble, the movie “majors” – nothing but blockbusters, and indie artists can go fend for themselves – then mutually assured destruction is just around the corner. And the real creativity – the kind that builds those glorious books that throw lightning bolts – will again reside where it once did: in small, independent publishing houses.

7/20/14: A year later, here is the learned designers’ final solution. IMO they simply gave up, and threw away two of the most storied logo images in book publishing. (I hope they survive inside the actual books, but that Knopf Borzoi doggie is going extinct, pal.) Ah well, sometimes a merger produces a tepid porridge that satisfies nobody. Or am I just retro-imagining some kind of metaphor here?


10/20/16: I was wrong about further consolidation being imminent, but I think it’s still coming. Here’s how the big five publishers sort out today.

7 Responses to House Of The Fatted Penguin

  1. Josh Frank says:

    Bravo, Mr. D. An insightful, right-on-the-money overview of the current (sorry) state of the book publishing biz.


  2. J. R. Tomlin says:

    Wow! That rarity in the world, an article about publishing where the author actually knows what he is talking about! But I refuse to refer to the new entity as anything but Random Penguin.


  3. Reblogged this on The Wandering Barefoot Editor and commented:
    Woozers! Once again the publishing industry shifts; not for the last time I’m sure. Thanks Tom for keeping us in the loop!


  4. Steve Perry says:

    As I heard from an editor after the merger, they like to call it “Random Penguin.” Nice image …


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