A publishing powerhouse

Could a merger between Penguin and Random House stop Amazon in its tracks?

After the FT reported that talks had been held between two of the world’s “big six” publishers, Penguin and Random House, an official statement has finally been made. Pearson, the UK-listed education specialist (and the world’s single largest book publisher), who owns both Penguin and the FT, released the following announcement: “Pearson confirms that it is discussing with Bertelsmann a possible combination of Penguin and Random House. The two companies have no reached an agreement and there is no certainty that the discussion will lead to a transaction. A further announcement will be made if and when appropriate.”

Random House is owned by the German media conglomerate Bertelsmann, whose ill-fated merger with Sony (creating Sony-BMG) has left them anxious to take the lead on any potential deal. Thomas Rabe, Bertelsmann’s chief executive, commented on the “pitfalls of putting creative businesses together”, which mean that one side must take ultimate control. “We have the ambition to lead,” he said.

A merger between the two companies – whose brands, it should be noted, are distinct and unlikely to be hastily dissolved – would create a 25 per cent market share, large enough to come under scrutiny from the OFT and Competition Commission. A second factor which may hinder a potential merger is the ongoing allegations of price-fixing in the US, a suit which Penguin has repeatedly contested.

The elephant in the room, as ever, is Amazon. The internet retailer, whose UK business operates from the company’s base in Luxembourg, continues to plough millions into its ebook infrastructure despite huge losses. Described by Waterstones head James Daunt as a “ruthless, money-making devil” and of “using authors as a financial football” by Curtis Brown chairman Jonathan Lloyd, the company facilitates and encourages self-publishing, which perhaps signals the endgame of their repeated attempts to undermine present publishing models. “Penguin House” may just have the reputation, power and resources to stop the internet giant in its tracks.

Phil Jones, editor of the publishing trade magazine The Bookseller, said: “The merger of Penguin and Random house would create a powerhouse of a consumer publisher across books, ebooks and apps.” Analyst Lorna Tilbian from Numis Securities concurs: “Consolidation is the order of the day,” she said. “Technology and tablet computers have given it extra momentum. They [publishers] have got to gang together to have enough clout to take on the technology giants that have transformed the industry.”

Update: This morning the merger between Penguin and Random House was confirmed. Check out The Bookseller for more information.

Berthold Lubetkin's Penguin Pool at London Zoo (Photograph: Getty Images)

Philip Maughan is Assistant Editor at the New Statesman.

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"Samphire": a poem by Alison Brackenbury

"Yet how it waved, in coast’s late light. . . ."

My grandmother could cook it, for
she grew up by that dangerous shore
where the sea skulked without a wall

where I have seen it, tough as grass,
where silent men with rods trooped past
its salty ranks, without a glance.

Lear’s gatherer hangs perilously.
Why? So much is closed to me.
Did Shakespeare ever hear the sea?

Once, said my father, far inland,
from friend or stall, one clutch was found,
steamed, in my grandmother’s great pan.

Once, a smooth leaflet from a shop
claimed they could “source it”, but they stocked
bunched, peppered cress – Another gap.

Yet how it waved, in coast’s late light,
stalks I will never taste, could make
tenderly dark, my coast’s sly snake,
salt on my tongue, before I wake.

Alison Brackenbury is an award-winning poet. Her ninth collection, Skies, will be published by Carcanet in March

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle