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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Leader: Europe and the long shadow of war

Amid the rancour, it is easy to forget what drove European integration in the first place: the two great wars in the first half of the 20th century.

Amid all the claims and counterclaims about David Cameron’s so-called renegotiation of Britain’s membership of the European Union, it is often forgotten, or conveniently ignored, just how successful the European project has been in helping to create and maintain the post-Second World War peace order.

We support continued British membership of the EU but are sceptical of the imperial ambitions of the European elites. We opposed British membership of the single currency, a decision that the eurozone crisis has vindicated. It is obvious that the Schengen Agreement is unravelling and in all likelihood is unsustainable, as embattled nation states reimpose emergency border controls and the continent grapples with its worst refugee crisis since the end of the Second World War. Like the British government, we are opposed to further political and economic integration and to the creation of a federal or quasi-federal superstate.

However, at a time of profound instability in the world, we accept that it would be foolish for the United Kingdom to retreat from our various multilateral peace alliances – whether that be membership of the EU or, indeed, Nato (as some on the left would wish) – all of which involve some kind of surrender of sovereignty.

Amid the rancour, it is easy to forget what drove European integration in the first place. The two great wars in the first half of the 20th century racked the continent, with neighbouring armies slaughtering each other on a scale that still defies comprehension. As Alistair Horne writes on page 22, “the most atrocious battle in history” began a century ago next week in Verdun, France, on the Western Front. The German army hoped to lure the enemy into a trap and then “bleed the French army white” using its superior firepower. Yet the rivers of blood flowed both ways: in ten months, over 25 square miles, pounded by heavy artillery and poisoned with gas, 300,000 French and German soldiers died.

The lessons of the battle were not quickly learned – the carnage of the Second World War was still to come – yet ultimately they were. In 1963, France’s Charles de Gaulle, who was wounded at Verdun, signed a treaty with the then German chancellor, Konrad Adenauer, binding two countries that had engaged for centuries in tit-for-tat wars in an enduring nexus of co-operation. The aim, as David Reynolds notes in his article on page 28, was “to free the next generation from the vice of nationalism”.

Two decades later, President François Mitterrand, who fought near Verdun in 1940, and Chancellor Helmut Kohl, whose father served there in 1916, attended a commemoration ceremony at one of the battle sites. In what became an iconic image of reconciliation at the heart of Europe, Mitterrand impulsively gripped Kohl’s hand during their national anthems. The two men were later the architects of the Maastricht Treaty, which created the European Union under its current name.

These are troubling times for Europe. Confidence and optimism are low. The wars in the Middle East and the rise of Islamic State, Russian revanchism and financial and economic turbulence have dented the morale of even the most committed liberal Europhiles. In addition, the EU seems unable or unwilling to control or police its borders, just as it has been unable to bring an end to the crisis in the eurozone. Nor is it any closer to forging a common foreign policy, let alone forming a common European army that might be necessary in future years to patrol the outer edges of the continent.

“Unless the EU can find solutions to the problems Europe is facing that are acceptable to its members . . . the Union will be on a glide path to collapse,” wrote the historians Brendan Simms and Timothy Less in a recent issue of the New Statesman. And yet, for all its flaws and present difficulties, the EU remains a force for stability in the world. It embodies the liberal, rules-based order without which barbarism and war are never far away, as the centenary of the Battle of Verdun so poignantly reminds us. 

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