Books and the behemoth

A Random House-Penguin merger inaugurates a new business

Random House and Penguin Books have merged to create a global publishing behemoth with revenues of $4.2 billion, accounting for at least a quarter of the global English-reading market. It's the biggest book deal since the French group Lagardere's 2006 acquisition of Time Warner Books to create Hachette. This merger opens up a new front in the bitterly fought battle over who controls the world of books — publishers or online retail giants. Authors and readers, producers and consumers, have no say in this matter.

Conglomeration in publishing has been due ever since size began to matter in bookselling. Over a decade ago, online retailers like Amazon and Borders aggressively took away the initiative from publishers, the traditional gatekeepers of the world of books. A brick and mortar superstore can hold perhaps 1 lakh titles. An online store's capacity is theoretically unlimited, and actually unlimited in the category of ebooks. Led by Amazon, gigantic online sellers leaned on publishers to wrest the initiative on how books should be packaged, priced, discounted and sold. At some point in time, they may even want a say in what books should contain.

Long-suffering publishers began the fightback this year. In April, the US Department of Justice launched antitrust proceedings against five big publishers and Apple, alleging that they had colluded to hike the prices of bestsellers, and then tried to force Amazon to cut discounts and follow suit.

It is illegal to collude, but perfectly legal to gang up by merging. Quite by chance Pearson, which owns Penguin, faced a turning point this year. Its chief executive, Marjorie Scardino, steps down in December. As early as September, there was talk of Pearson selling Penguin, the world's best-known publishing brand. This was apparently contemplated to reduce its exposure to media (Pearson also owns the Financial Times), which is now a risky business in Western markets, and allow it to concentrate on education, a reliable boom sector. A merger with Random House offered a far better solution, allowing Pearson to retain the brand with reduced risk.

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