In November 2021, an anti-trust lawsuit was filed by the Justice Department to stop ViacomCBS‘ sale of Simon & Schuster to Penguin Random House. The Justice Department claims that the sale would give Penguin Random House too much power over the book business.
Announced in November 2020, the sale was for $2.18 billion between ViacomCBS and Bertelsmann, Penguin Random House’s parent company.
The trial begins this week with major ramifications on distribution and publishing. The Justice Department and Bertelsmann have called a who’s who of high-profile publishing executives as witnesses. They include Markus Dohle, the chief executive of Penguin Random House, and Jonathan Karp, the chief executive of Simon & Schuster. Also being called as witnesses during the trial are executives from other publishing houses, literary agents and a handful of authors.
Penguin Random House is the largest publisher in the United States. It has more than 90 imprints and releases about 2,000 books a year. If the merger happens, it will gain Simon & Schuster’s 30-plus imprints and its roughly 1,000 titles a year. The Justice Department argues the merger would give the new publisher too much of a market share and drive advances down as there’s fewer competition for the publisher. Bertelsmann argues the opposite saying it would create greater distribution and opportunity for Simon & Schuster authors and by being more efficient they’ll be able to pay authors more. More efficient usually means layoffs from redundancy. Rarely is that paid out beyond stockholders. Bertelsmann also said the two imprints would still bid against each other.
Attorney General Merrick Garland said at the time the lawsuit was filed:
Books have shaped American public life throughout our nation’s history, and authors are the lifeblood of book publishing in America. But just five publishers control the U.S. publishing industry. If the world’s largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry. American authors and consumers will pay the price of this anticompetitive merger – lower advances for authors and ultimately fewer books and less variety for consumers.
The lawsuit is also an attempt to send a signal across the book industry that has had issues with collusion in the past.
The Justice Department claimed that this would be a “monopsony,” a marketplace that has been squeezed due to consolidation in the buyers.
As we said during the initial announcement:
The deal has a ripple effect in the comic industry as well. Simon & Schuster is the exclusive distributor of BOOM! Studios, Oni Press, and Rebellion to bookstores. Penguin Random House is the exclusive distributor of DC Comics, Dark Horse, and IDW Publishing graphic novels to bookstores. The merger consolidates a distribution channel which has a potentially negative impact on negotiations between publishers and distributors but creates a more favorable position between the distributor and retailers.
Ironically, the comic industry has had concerns over distribution monopolies for years with Diamond Comic Distributors cornering the direct market to comic shops for years until 2020. DC Comics ended their exclusive deal with Diamond splitting distribution between UCS Comic Distributors and Lunar Distribution. DC ended its distribution through UCS creating a new “monopoly” through Lunar and creating a $500 minimum monthly order. Now, if this merger goes through, the bookstore distribution options will shrink narrowing choices though we’ll see if similar concerns are raised by the industry as have been raised in the past.
Since that announcement, the distribution space for comics have shifted even further with Marvel going exclusive with Penguin Random House. Heavy Metal, AHOY Comics, Source Point Press, Vault Comics, AWA Studios, Red 5 Comics, and Behemoth have also signed with Simon & Schuster regarding distribution as well.
There’s little doubt there’s a lot of negative and few positives for both writers and publishers who use these companies for distribution. Fewer choices means stricter contracts that are less beneficial for creators and also purchasers who will likely be squeezed balancing the bottom line for the publisher/distributor.
No matter what, this is a key case to watch and keep an eye on as the impact will be far reaching.
