And So, The Sun Begins To Set On A Great British Publisher...

[AgentPete]

Today’s news that troubled Pearson may sell its 46% stake in recently-merged mega-publisher Penguin Random House is bleak. In my view, the most likely scenario is for German multinational Bertelsmann, who already own the majority stake in PRH, to consume it entirely.

We’ve seen this sort of situation before, but not quite on such a vast scale. A larger publisher buys a smaller one... and the latter is rapidly consigned to little more than an imprint for a year or two, and then fades forever.

The Penguin brand name is still very strong in the marketplace, so we’re not going to see it extinguished overnight. Nevertheless, the writing is on the wall. Penguin staff were told a while back that they would have to leave their central London premises, actually an integral part of the Pearson head office, and decamp to Vauxhall Bridge Road, home to Random House. It feels like a takeover, in all but name.

I’m partly sad, of course. But my medium-term view remains the same: book publishing is not necessarily an activity that multinational companies have ever done particularly well.

If this creates room in the market for younger, smaller and more adaptable companies to occupy, then so be it.

 

[Emurelda]

I love these sort of posts it really is insightful knowing opinions on movers and shakers from a market perspective. I used to work in the financial sector as a trainee actuary for over 3 years and always interested in reading how people interpret financial data and how they draw conclusions. It's fascinating to read this as I am now a layperson with a 'bit' of finance background.

Thank you for sharing your expert insight @AgentPete. Valuable.

 

[AgentPete]

You're welcome!

I've actually decided to share a lot more stuff like this. Publishing is incredibly gossipy, but there has always been strong reluctance to talk about these things openly.

My views on this omerta are changing - whatever is in the authors' interests I'll discuss here with other Litopians.

p.

 

[Marc Joan]

You know that lumpy thing at the bottom of your bed? Horse's head.
But seriously, it's interesting and seems to reflect situation in other industries. Scale economies vs speed / flexibility. Innovation will win.

 

[Chase Gamwell]

Thanks for the share, @AgentPete. So often, the writing industry feels like such a nebulous subject to someone like me (on the outside looking in). Even though I'm sending manuscripts to agents and read as much as I can about the industry, I don't ever feel like I'll have a grasp on what all is going on until I actually make it through the door. It feels like standing in line at a night club - "I'm sure it's cool inside. And I'll find out when I eventually get in. Sooner or later..."

Again, thanks. We all appreciate the info.

 

[Robinne Weiss]

Yes, thank you for these insights.

 

[Peggy Lou]

Thanks, even though the news seems bleak. Cannot imagine a literary world with Penguin.

 

[AgentPete]

I was fortunate enough to recently have lunch (yes, it’s still an important part of publishing, even in these straightened times) with someone who has changed the face of the industry in a way that only a few people have done in the past century or so. This person – no guesses as to who, please – is resolutely upbeat about things. They believe that inside every setback there is an opportunity (maybe for someone else to discover). And I agree with them. The landscape is changing, certainly. We’ve moved from stasis to flux. Not necessarily a bad thing.

 

[Emurelda]

Thanks, even though the news seems bleak. Cannot imagine a literary world with Penguin.

I agree. Penguin is one of the evergreen brands that is so embedded in the public psyche it would not be in the interest of the merging/acquiring conglomerate to wipe it out. The publisher company name itself is merely a shell that has changed hands over the years anyway. The brands (puffin, penguin, ladybird) are not going anywhere imo. This is something quite different. Evergreen brands like Barbie, Pokemon, are based on basic supply and demand economics. As long as that holds strong Penguin is not going anywhere. And if it does then the publishing industry will have more to worry about than the demise of a strong brand because the weaker cards will topple first. Making way for an opportunity as mentioned.

There may be a case for the 'shell' i.e. the company itself to change hands and be renamed but the Penguin brand itself (an asset) will continue on. I remember when Royal Mail/Post Office was being rebranded to Consignia - the public outrage was so great they just couldn't ignore it and kept the name. This shows how strong an established brand has.

Some brands, like Penguin, are powerful beasts that are too embedded in our psyche to be tampered with. Of course, corporations may try and if Bertelsmann does take it over then technically it's merely handing it from one group of managers onto another. Although it doesn't look too bad since they already own over 50% of the corporation. I can't see any sense for the German company to change the name from a business perspective alone it wouldn't make any sense.

A cursory bit of reading shows that Pearson took over Penguin back in 1970 and the brand stayed with us. The opportunity for Bertelsmann to hold 100% holding is no different. I'm not familiar with the company so will look into their history to identify whether there is any danger of the brand itself to whittle away.

As I said I find this discussion fascinating.

 

[Emurelda]

It is curious to wonder that when Pearson took over Penguin in 1970 - the company continued for another 47+ years. Wonder why Bertelsmann taking their 53% ownership to 100% would be any different?

 

[AgentPete]

Penguin has very much been the jewel in Pearson' crown for a long time, which is why the merger and now disposal has been quite a bitter pill to swallow. And in any "merger", there is usually only one real winner.

I wholeheartedly agree it hardly makes business sense to acquire and then shrivel a prize asset such as Penguin. And yet, I've seen it happen before!

 

[Emurelda]

Penguin has very much been the jewel in Pearson' crown for a long time, which is why the merger and now disposal has been quite a bitter pill to swallow. And in any "merger", there is usually only one real winner.

I wholeheartedly agree it hardly makes business sense to acquire and then shrivel a prize asset such as Penguin. And yet, I've seen it happen before!

Yes, larger companies swallow up smaller ones in general. In 1999 I was employed by William M Mercer which at the time was merging with Sedgwick Noble Downes. It resulted in the largest pension consultancy firm; Mercer HR. Our offices moved from East Croydon to St. James Park and then again to Tower Hill. By then I had chosen to move into the Education sector. But for a while, I enjoyed writing in one of Her Majesty's beautiful parks musing amongst the flower beds and enjoying the bird sanctuary as I pondered a different career .

 

[Emurelda]

Penguin has very much been the jewel in Pearson' crown for a long time, which is why the merger and now disposal has been quite a bitter pill to swallow. And in any "merger", there is usually only one real winner.

I wholeheartedly agree it hardly makes business sense to acquire and then shrivel a prize asset such as Penguin. And yet, I've seen it happen before!

I'm very curious if there is an example of an asset that has been acquired and then shrivelled to nothing that you are able to share with us? It's one of those that beggars belief. Almost criminal. I suppose my inner actuary is screaming against the intentional jeopardy to cause an imbalance of assets against liabilities. Why would a company decrease their asset base? Why?

 

[AgentPete]

Lawks, yes. It's very common, in fact. Look back over the past twenty years, pick a publisher pre-acquisition, and then see what happened to them in the 24 months following. The process of integration usually involves taking an organically-functioning company and turning it into a mere imprint. Happened to the very first publisher I was published by, in fact. Strongly-indie company with a very good grasp of a niche market and excellent non-bookshop distribution (I love publishers who can sell books outside of bookshops). Just checked their (redirected) entry on Wikipedia... One word - "defunct". Very sad.