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Yipes! Will there soon be Random Penguin? Or Penguin House?

October 25, 2012|By Carolyn Kellogg
  • Will Random House and Penguin join forces?
Will Random House and Penguin join forces? (Random House and Penguin )

On Thursday news came from Europe that Random House parent Bertlesmann is in talks with Pearson to acquire its publisher Penguin. Random House is already the largest of the big six major publishers, and in fact, is the largest publisher in the world.

But it could soon get bigger, increasing by about the size of Penguin.

"Pearson confirms that it is discussing with Bertelsmann a possible combination of Penguin and Random House," the company said in a statement. "The two companies have not reached agreement and there is no certainty that the discussions will lead to a transaction. A further announcement will be made if and when appropriate."

There was a flurry of responses from publishing watchers on Twitter to news of the not-yet-deal:

Paul Bogaards, executive director of publicity at Knopf, one of the star imprints at Random House, tweeted, "Ah. Time for a new avatar," and switched the image on his Twitter feed to a guy in a penguin suit.

Small Beer Press sarcastically declared that it would change its name to Small Penguin House.

Young adult author Maureen Johnson tweeted, "They could add an adjective up front like Giant Random Penguin or Drunk Random Penguin or Rabid Random Penguin. I am here to help."

From England, e-book publisher Michael Bhaskar wrote, "Random Penguin would be publishing's answer to Universal Music, which has specifically beefed up to take on Apple."

Bloomberg reported that the combined revenues of Random House and Penguin would be in the neighborhood of $3 billion. In the first half of 2012, Penguin saw a sales decline of 3.5%, while Random House's revenues were up 20%.

The rise in e-books had an affect on Random House's bottom line: A significant 25% of its revenues came from e-books. It's fair to note that its e-books sales were propelled by the major international erotic blockbuster "50 Shades of Grey" and its two sequels.

Trying to figure out exactly what the possible purchase-slash-merger might mean for business may not be easily accomplished immediately. A London analyst, Ian Whittaker of Liberum Capital, seemed to be saying it was both wise and unwise, depending on your point of view. "If you’re Bertelsmann, would you want to invest in such a slow-growth business?" he told the New York Times. Meanwhile, Bloomsberg quotes him as saying, "Strategically it makes sense for Pearson as there are synergies to be gained from the merger."

Some agents see that those synergies might work against the interests of their clients. As one anonymous agent put it, "Fewer publishers to submit to, lower advances."

That agent was talking to Publishers Weekly, which also talked to booksellers. Roxanne Coady, owner of R.J. Julia in Madison, Conn., broke down her concerns. "I always worry about too much consolidation in any industry. And since Random House and Penguin together are 30% of our sales, that is cause for concern," Coady, said. "When I was an accountant, it was always a worry if any one person was 15% of your sales, because it tips the scales of the relationship. I can imagine how many conversations publishers have with an account like Amazon and the amount of business that they represent. The same would translate here. Random House is already the gorilla going through my checkbook. Together they would be the elephant."

If there is an elephant on the way, some in publishing may be worried about getting stomped. Publishers Marketplace saw a note that Penguin Group Chief Executive John Makinson sent to employees after the news broke. In the note, Publishers Marketplace reported, Makinson acknowledged the "unsettling" nature of the news and "apologized for being unable to say more, telling employees that they were 'thinking about the best and long-term interests of the company.' "

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