The antitrust trial puts book publishing in crisis

NEW YORK (AP) – The Department of Justice’s effort to block the merger by Penguin Random House and Simon & Schuster is not just a showcase for the Biden administration’s tougher approach to business consolidationit is rare for the publishing industry itself to be put in the dock.

During the first week of a planned two- to three-week trial at the United States District Court in Washington, the top editorial executives of Penguin Random House, Simon & Schuster and elsewhere, along with agents and authors such as Stephen King, they shared opinions, relived disappointments, and revealed financial data that they would otherwise have preferred to discuss privately or confide on the back with reporters.

“I apologize for the passionate language,” testified Markus Dohle, CEO of Penguin Random House, of the correspondence shown in court reflecting the tensions between him and the other Penguin Random House executives. “These are private text messages to my closest associates in the company.”

The government is trying to show that the merger will lead to less competition for bestselling authors by reducing their advances and reducing the number of books. The Justice Department claims that major publishers, which also include Hachette, HarperCollins Publishers, and Macmillan, already dominate the market for popular books and writers and have actually made it nearly impossible for any smaller publisher to break through.

Penguin Random House and others argue that the market is dynamic and unpredictable, with competitors from the university press to Amazon.com producing bestsellers.

Like any other autonomous community, book industry professionals speak in some kind of abbreviation and follow customs that are instinctive to them and, at times, unclear to outsiders. For US District Court Judge Florence Y. Pan and attorneys on both sides, the trial was partly a translation project.

It was also a chance to hear from some of the industry leaders under oath.

William Morrow Group president and editor Liate Stehlik confided that he has made only a limited effort to acquire fiction from Dean Koontz, which he posted with Amazon.com, because his sales are down.

Award-winning author Andrew Solomon explained that he chose to publish his acclaimed “Noonday Demon” with Scribner, a Simon & Schuster brand, in part because Scribner has the kind of sales and marketing resources that smaller companies lack.

Penguin Books president and editor Brian Tart agreed with the judge’s suggestion that the profit and loss estimates for possible book acquisitions are “truly false” and do not reflect actual costs. Tart also testified that he gave up bidding on Marie Kondo’s “Life Changing Magic Tidying Up” because he “didn’t know what to do with it.”

Simon & Schuster CEO Jonathan Karp acknowledged that a popular industry term, “mid-range writer,” long associated with a large and intrepid body of non-commercial authors, a kind of middle-class publishing, is essentially fictitious and a polite way of not labeling anyone a “low-key” writer.

When questioned by the judge, Karp also said that while publishers value all the books they buy, books obtained too much up front – money guaranteed to the author regardless of how the book sells – require special attention.

“If you really love the book, you have to jump through hoops,” he said.

At times, a glossary may have been needed to follow some common industry terms:

– Earn. This is when a book sells enough to recoup the advance paid and the author can begin collecting royalties, although some books may make a profit for the publisher even when they are not earning. (Most of the new books, executives acknowledged, don’t make money.)

– Backlog. This refers to older books, an invaluable resource for publishers, who rely on them as a constant source of income.

-Beauty contest. This is when two or more publishers offer similar advances and non-financial terms like marketing prowess or the charm of working with a particular publisher determine who wins.

– 10% overflow. This refers to when an agent asks the publisher not only to match the competition’s highest bid, but to add 10% more.

—All Access Books: As Dohle defines, these are such cheap books, such as those offered by Amazon.com through its Kindle Unlimited e-book subscription service, that they hurt the industry at large by forcing prices down. and, inevitably, the authors’ progress.

Witnesses from Dohle to Michael Pietsch, CEO of Hachette Book Group, spoke at length about their love of business and what they claimed was the highest mission of bringing ideas and stories to the public. But publishing is a for-profit business, and even the most idealistic authors and executives care about profits.

Through internal emails, depositions, and both live and videotaped testimonies, the trial unveiled internal rules and strategies about book acquisition and the disappointments when a desired book goes elsewhere.

At Simon & Schuster, publishers must submit “justification” reports to senior management to get approval for deals ranging from $ 200,000 to $ 250,000 or more. At the William Morrow Group, a division of HarperCollins, the number is $ 350,000. Tart also requires approval for deals of $ 250,000 and above, while Dohle testified that he has to sign deals of $ 2 million or above.

Publishers love sharing stories of favorite acquisitions. The Pietsch range from David Foster Wallace to Keith Richards. The Karps include the late Senator Edward Kennedy, D-Mass. and Bruce Springsteen.

But the trial exposed disappointments and missed opportunities, a source of “gallows humor,” as Tart called it. It not only aired Kondo’s book, but also Delia Owens’ blockbuster “Where the Crawdads Sing”. At Hachette, they keep a list of “Those Who Gone,” offers for which the publisher offered $ 500,000 or more but still lost.

Karp testified that Simon & Schuster was overtaken by Hachette for a new book by Ben Carson, the famed neurosurgeon who was former President Donald Trump’s housing secretary. At one point, the Justice Department cited internal emails to point out that Simon & Schuster had lost three bids to Penguin Random House in just one week.

Karp also talked about a book he acquired, a work planned by a spiritual leader with a substantial following.

“Unfortunately, his followers didn’t follow him to the bookstore,” Karp said.

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AP Business writer Marcy Gordon in Washington contributed to this report.

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