Steinbeck buries the megafusion so dreaded by American publishing

I guess there are never enough bookssaid Steinbeck. For Judge Florence Pan, who published a long document in support of her own decision to prevent the takeover, this sentence has two meanings. The first concerns the power of works, in their ability to educate, enrich and explore possibilities. But with an American publishing market worth $11.5 billion in 2019, this sentence “also rings true, in an economic sense“, Continues the judge in the introduction.

Thus, in the face of commercial imperatives, the courts will therefore have acted well in opposing the editorial concentration represented by the PRH/S&S transaction, capable of upsetting the landscape.

Competition in cabbage

The sum committed by the parent company, Bertelsmann, for this purchase was $2.175 billion. However, if the agreement fails – and it seems badly started – the group will owe $200 million to Paramount, in compensation. Following the verdict, Bertelsmann immediately drew a press release announcing his willingness to appeal. And this, because the grouping would bepro-competitivefrom his point of view. A concept which was however the spearhead of the procedure initiated against PRH by the Department of Justice.

TO READ: “Vivendi would follow us for the acquisition of Simon & Schuster” (Lagardere)

In the memorandum unveiled on November 7 (see end of article), Judge Pan ruled in favor of all the arguments put forward by the Ministry of Justice. And to point out that bestsellers represent 70% of the advances that publishers pay to authors. “The post-merger concentration would call into question the relevance of the market: the resulting entity would obtain market shares of around 49%, i.e. more than double that of its nearest competitor“, she notes.

And to affirm that the defenders did not know how to effectively refute the elements opposed by the government as to competitive harm. According to her, Simon & Schuster would become a simple subsidiary of the group, and that the commitment of the CEO, Markus Dohle, to treat it as an entity in its own right in the auctions on the purchase of rights, “was inapplicable“.

Judge Florence Pan also insists on the fact that, if certain auctions do not go to the best economic bidder, they would only be marginal. “Although the choice of publisher is undoubtedly important, the agent generally submits the book to a pre-established list of selected structures. And he can therefore opt for the best offer among the competing companies.» The right publisher, a strict question of money? Not everyone would fit in

Therefore, a PRH-S&S megacorporation would automatically lead to fewer advances for authors. Moreover, it would not even be necessary to see them drastically reduced.for the authors to be harmed“. The merger would indeed have the other consequence of slowing the growth that the market has recorded in recent years. It would then be prey to a paradox where publishers would buy the books more expensive than today, but less than they would have obtained if the buyout had been validated.

And above all, best-sellers (and their agents) would have fewer counters to offer their novelties: “[I]They are therefore vulnerable to anti-competitive behavior.This was one of the major arguments of the DoJ: according to its analysis, the authors who obtain $250,000 in advance, or more, will be the first hit.

People want to read. And book publishers hold enormous power and responsibility to decide which books — and therefore, which ideas and stories — will be widely disseminated to the public.concludes Florence Pan. Coup de grace? Many commentators indeed see in this document the guillotine which falls definitively on Bertelsmann’s neck.

Remember the desibuk price and Apple…

Especially since Pan recalls, not without malice, that ten years earlier, a certain Apple was condemned for an agreement on the fixing of the price of digital books. And as such, all the American editorial groups — the Big Five — were implicated. They preferred to pay a less heavy fine than a conviction at the end of a tiring and costly trial. However, there wasstrong evidence of likely unilateral and coordinated actionwhich harmed customers.

If publishers were capable of such methods, she suggests, how could PRH not absorb S&S without further ado? This collusion with Apple led to a fine of $166 million imposed on the companies and $450 million for the Cupertino company. The Big Five demonstrated at the time that they were unreliable and engaged in tacit agreements, even unfair practices: PRH will not escape this grievance…

Moreover, there are already several signs of friction: recently, an agent was forced to restart an auction, because his first offer did not include the audiobook rights. In the middle, the instruction of the publishers would be: no audio rights, no purchase. And precisely, S&S had refused to submit an offer – as well as the other members of the Big Five.

It is telling that, in a market already prone to collusion, where behavior adopted collectively is already proving endemic, the acquisition of S&S by PRH would reinforce the oligopolistic structure of the market.Pan deduces. And the mass is said…

This opinion arises in the debates a week after the judge delivered its final verdict — the memorandum had been blocked so that the lawyers for the parties redacted the elements of confidential and overly sensitive information.

The memorandum is available below, for consultation and/or download:

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Steinbeck buries the megafusion so dreaded by American publishing