Antitrust trial puts book publishing industry in the dock

NEW YORK (AP) – Justice Department efforts to block merger Penguin Random House and Simon & Schuster don’t just show a Biden administration’s tougher stance on corporate consolidationpublishing itself is a rare moment in the dock.

In the first week of a two- to three-week trial expected in U.S. District Court in Washington, top publishing executives from Penguin Random House, Simon & Schuster and elsewhere, as well as attorneys and authors such as Stephen King, Opinions were shared, disappointment was quelled, and financial figures they would have liked to discuss privately or give context to reporters were revealed.

“I apologize for the passionate language,” Penguin Random House CEO Markus Dohle testified, and the letters shown in court reflected tensions between him and other Penguin Random House executives relation. “These are private text messages sent to my company’s closest collaborators.”

The government is trying to show that the merger will reduce competition for best-selling authors, lower their progress and reduce the number of books. The Justice Department argues that top publishers including Hachette, HarperCollins Publishers and Macmillan have dominated the market for popular books and authors, making it virtually impossible for any smaller publisher to break through.

Penguin Random House and others argue that the market is dynamic and unpredictable, and that competitors from university presses to can become bestsellers.

Like any other self-sufficient community, book industry professionals speak in a shorthand way and follow their instinctive habits that sometimes outsiders don’t understand. Part of the trial was a translation project for U.S. District Judge Florence Y. Penn and attorneys for both parties.

It’s also an opportunity to hear some industry leaders take the oath of office.

Liate Stehlik, president and publisher of the William Morrow Group, revealed that she only buys Dean Koontz’s novels published in partnership with because his sales have been declining.

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

Brian Tart, president and publisher of Penguin Books, agreed with the judge’s suggestion that the profit and loss estimates for possible book purchases “are indeed false” and do not reflect actual costs. Tate also testified that he dropped a bid for Marie Kondo’s million-selling “Life-Changing Magic of Tidying Up” because he “didn’t know what to do.”

Simon & Schuster CEO Jonathan Karp acknowledges that a popular industry term, “middle writers”, has long been associated with a broad and brave community of non-commercial authors, a publishing middle class, essentially It’s fictional and a polite way of not labeling anyone a “low-level” writer.

When questioned by the judge, Karp also said that while publishers value all books they acquire, books acquired with over-advance payments — which the author is guaranteed regardless of how the book is sold — do require special attention.

“If you really like this book, you’ve got to jump in the hoops,” he said.

Sometimes, a glossary may be needed to follow some common industry terms:

–made money. This is when a book sells enough to recoup the prepaid money, and authors can start collecting royalties, although some books make a profit for the publisher even if they don’t make any money. (Execs admit that most new books don’t make money.)

– Backup list. This refers to used books, an invaluable resource for publishers who rely on them as a steady source of income.

-Beauty pageants. This is when two or more publishers offer similar upfront payments and non-financial terms (like marketing tricks or the appeal of working with a particular editor) to decide who wins.

— 10% topping. This is when an agency asks a publisher to not only match the highest competing offer, but increase it by 10%.

– All accessible books: By Dohle’s definition, these books are so cheap, like those offered by through its e-book subscription service Kindle Unlimited, that they damage the industry by driving down prices and inevitably causing authors to pay up front.

Witnesses from Dohle to Hachette Book Group CEO Michael Pietsch detail their love of the business and what they say is a higher mission to bring ideas and stories to the public. But publishing is a for-profit business, and even the most idealistic authors and executives are wary of the bottom line.

Through internal emails, testimonies, and live and video testimony, the trial revealed internal rules and tactics around book acquisition, as well as disappointments when wanted books went elsewhere.

At Simon & Schuster, editors must submit a “justification” report to senior management for approval on transactions valued at $200,000 to $250,000 or more. At the William Morrow Group, which is owned by HarperCollins, the figure is $350,000. Tart also asked to approve deals of $250,000 or more, while Dohle testified that he had to sign deals of $2 million or more.

Publishers love to share their favorite acquisition stories. Pietsch ranges from David Foster Wallace to Keith Richards. Karp includes the late Senator Edward Kennedy, a Massachusetts Democrat and Bruce Springsteen.

But the trial highlighted disappointment and missed opportunity — a source of “hanging humor,” as Tate put it. He taught not only Kondo’s book, but Delia Owens’ blockbuster “Crawdads Sing.” At Hachette, they maintain a list of deals that publishers bid $500,000 or more for and still fail.

Karp testified that Simon & Schuster was outbid by Hachette in a new book by prominent neurosurgeon and former President Donald Trump’s housing secretary, Ben Carson. At one point, the Justice Department, citing internal emails, noted that Simon and Schuster lost three bids to Penguin Random House in one week.

Karp also talked about a book he did get, a work expected by a spiritual leader with a huge following.

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


Associated Press business writer Marcy Gordon in Washington contributed to this report.

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