Antitrust lawsuit puts publishing industry in the dock – Winnipeg Free Press

NEW YORK (AP) — The Justice Department’s effort to block the merger of Penguin Random House and Simon & Schuster isn’t just a showcase for the Biden administration’s tougher approach to corporate consolidation, it’s a rare moment for the publishing industry itself be placed on the dock

During the first week of an expected two- to three-week trial in US District Court in Washington, top publishing executives from Penguin Random House, Simon & Schuster and elsewhere, along with agents and authors including Stephen King They have shared opinions, relived disappointments and revealed financial figures that they would otherwise have preferred to discuss in private or confide their background to journalists.

“I apologize for the passionate language,” Penguin Random House CEO Markus Dohle testified about correspondence displayed in court that reflected tensions between him and other Penguin Random House executives. “These are private text messages for my closest collaborators in the company.”

FILE – Author Stephen King arrives in federal court before testifying for the Justice Department in its bid to block the proposed merger of two of the world’s largest publishers, Penguin Random House and Simon & Schuster, on August 2, 2019. 2022 in Washington. During the first week of the trial, top publishing executives at Penguin Random House, Simon & Schuster and elsewhere, along with agents and authors like Stephen King, have shared opinions, relived disappointments and revealed numbers they might otherwise have preferred to discuss in private. or trust them. background with reporters. (AP Photo/Patrick Semansky, File)

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

Penguin Random House and others argue that the market is dynamic and unpredictable, with competitors ranging from university presses to Amazon.com capable of churning out bestsellers.

Like any other autonomous community, professionals in the book industry speak in a kind of shorthand and follow customs that are instinctive to them and sometimes unclear to outsiders. For Federal District Court Judge Florence Y. Pan and attorneys on both sides, the trial has been in part a translation project.

It has also been an opportunity to hear from some of the industry leaders under oath.

William Morrow Group president and publisher Liate Stehlik confided that she made only a limited effort to acquire Dean Koontz fiction, which she has published on Amazon.com, because her sales have slowed.

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

Penguin Books president and publisher Brian Tart agreed with the judge’s suggestion that profit and loss assessments for potential book acquisitions are “really bogus” and do not reflect actual costs. Tart also testified that he turned down Marie Kondo’s “Life-Changing Life Sorting Magic” offer because he “didn’t know what to do with it.”

Simon & Schuster CEO Jonathan Karp acknowledged that a popular industry term, “middle-list writer,” long associated with a large and intrepid body of noncommercial authors, a kind of publishing middle class, is essentially fictional and a polite way not to label anyone. a “low list” writer.

Questioned by the judge, Karp also said that while publishers value every book they acquire, books obtained by excessive advance (money guaranteed to the author no matter how the book is sold) require special attention.

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

Sometimes a glossary might have been necessary to follow some common industry terms:

-Earn money. This is when a book sells enough to recoup the advance paid and the author can start collecting royalties, although some books can make a profit for the publisher even when they don’t make a profit. (Most new books, executives acknowledged, don’t win.)

—Background list. This refers to older books, an invaluable resource for publishers, who rely on them as constant sources of income.

-Beauty contest. This is when two or more publishers offer similar advances and non-financial terms, such as marketing skills or the appeal of working with a particular publisher, determine who wins.

—10% coverage. This refers to when an agent asks the publisher to not only match the competitor’s highest bid, but add 10% more.

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

Witnesses from Dohle to Hachette Book Group CEO Michael Pietsch spoke at length about their love of the business and what they said was the higher mission of bringing ideas and stories to the public. But publishing is a lucrative business, and even the most idealistic authors and executives are keeping an eye on the bottom line.

Through internal emails, depositions, and live and videotaped testimony, the trial has revealed internal rules and strategies around book acquisitions and disappointments when a desired book goes elsewhere.

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

Editors love to share stories of their favorite acquisitions. Pietsch’s range from David Foster Wallace to Keith Richards. Karp’s include the late Senator Edward Kennedy, D-Massachusetts, and Bruce Springsteen.

But the trial has highlighted disappointments and missed opportunities, a source of “dark humor,” as Tart called it. He not only turned down Kondo’s book, but also Delia Owens’ blockbuster “Where the Crabs Sing.” At Hachette, they keep a list of “The Ones That Got Away,” deals for which the publisher offered $500,000 or more, but still lost.

Karp testified that Simon & Schuster was outdone by Hachette on 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 say that Simon & Schuster had lost three bids to Penguin Random House in a single week.

Karp also spoke of a book he purchased, an early work by a spiritual leader with a large following.

“Unfortunately, his followers did not follow him to the bookstore,” Karp said.

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

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