Is Simon marrying Hans? Or is Jack-of-all-trades settling simply for a good craddle? On Penguin Random House acquiring Simon and Schuster.
November 25, 2020 by ruediger

First and foremost, I have no clue what regulators will say about the purchase. This is not my turf. But I have a couple of observations on the underlying stories in the move of German Bertelsmann group, parent of Penguin Random House, picking up the 1924 founded book publishing jewel, Simon and Schuster, for $2.175 bn.

In terms of turnover, Simon and Schuster is relevant for Penguin Random House (PRH), but certainly not a game changer.  But the relevance lies underneath that surface perhaps.

mEUR mUS$
PRH  €          3.371  $          3.782
Simon  €             726  $             814
Combined  €          4.097  $          4.596
Source: Global 50 World Publishing Ranking 2020
(Data from company reports)
www.wischenbart.com/ranking

#1 An ironic tale

All the sales reports and revenue banked from John Bolton‘s “The Room Where It Happened“, Bob Woodward‘s ” Rage“, and Mary L. Trump‘s “Too Much and Never Enough” will be consolidated, together with earnings from Barack Obama‘s “A Promised Land” in 1745 Broadway, New York City, and then reported to Gütersloh (around 100,000 inhabitants), North Rhine-Westphalia, South-West of Teutoburg Forest, Germany, home of Bertelsmann.

Speaking symbolics, we may see here a reflection on the loss of American supremacy in the globalized cultural footprint.

This does not mean, of course, that some obscure people from German backwaters would direct what is fit to be printed in New York City, certainly not. Even without Simon and Schuster, German PRH revenue accounts for a mere 7% of PRH global, and editorial decisions are made in New York, not Gütersloh, already for many years. But no US power game may have an upper hand under such an umbrella, when already in 2020, well before the deal, any efforts failed in challenging Simon and Schuster’s controversial books on American politics.

So, ‘Simon’ is adopted by ‘Hans’ in a way, rather than married, but Hans and Simon have each a colorful, adult persona already, besides Hans’ clear German roots.

Much more relevant is the second point.

#2 A global strategic bet

Since German Bertelsmann acquired Random House, for $1.8bn in 1998 – back then, as much as today, the world’s largest consumer book publisher, and a strategic expansion that signaled “globalization” to the cozy, national emporiums of books and reading -, a lot of mergers and acquisitions and restructurings took place in the global book business. But the odd riddle of what is the path to success remains unsolved:

Is that consolidation about scale – having more books, more authors, more markets under one company’s clout – or is it about scope – controlling books plus movies plus games plus whatever other form or format for the best exploitation of (‘authors’, or ‘creators’) intelectual property?

Not long ago, the French media empire of Vivendi acquired the country’s second largest book publisher, Editis, in the clear ambition of reading these books first hand, for subsequent cross-media exploitation. Author platforms, from Chinese Tencent Literature to Canadian/global Wattpad launched ‘Studio’ divisions to do just this, turning stories into other formats. Netflix has developed multiple axes to lure (often book) authors to turn stories into TV formats.

Bertelsmann is clearly a multimedia behemoth, with a turnover of over 18 bnEUR coming from TV, books, magazines, music, education, services and print.

But PRH, under its current CEO Markus Dohle, has a 100 percent focus on – books. Fullstop. “A very happy Dohle told PW today was a ‘good day for books, book publishing, and reading.‘” (Publishers Weekly today)

Of course, Dohle includes under ‘books’ any format, print, ebook, audiobook, and distribution model (even as in the latter, he is more restrictive, when it comes to any all-in or digital lending offerings).

But strategically, not just in the actual acquisition of Simon and Schuster, but in a more long term view on consumers, Dohle’s is a bold bet.

Frankly, I like Dohle’s clear and bold stance (against my personal cross-media intuitions) – which is, by the way, mirrored by others throughout the industry internationally, which, by the way, is really under-reported.

Dohle argues that a book is a book and addresses a reader who is a reader (a clear cut target audience to adress – as opposed to any fluid other things). And, to give one example, by initiating right now a big initiative towards Latino reading audiences, in Spanish, Dohle turns this into a very inclusive – and not just exclusive white middle urban class strategy -, which is great!

I am more cautious though, and even deeply worried, how that bold stance of the global book market leader PRH can be translated into a viable formula, all the way down, to the lower levels in the global book and reading ecosystem. We need the many small and mid-sized independent ventures and platforms, beneath the corporations, and in the many small markets and the thematic niches, in order to maintain the diversity in what books – in whatever format – can offer to readers.

So perhaps the book as a “Jack of all trades” format, which can incorporate any story and any piece of knowledge to any audience anywhere, oddly needs at first a good craddle, to develop its many talents, and thereupon go beyond?

At this point, I have no ready made answer, but encourage thinking, and input, and initiatives on that fragile bottom of our industry.

For more details about Penguin Random House, Simon and Schuster and the onging consolidation in global publishing, see the Global 50 World Ranking, a 260+ page report with facts, figures, 50 extensive company profiles and analysis, for free download at www.wischenbart.com/ranking – and subscribe to our newsletter to be updated on new research.

Addendum:

Bertelsmann Annual Report 2019
Germany Other Countries Total Operating EBITDA EBITDA in % of revenue Turnover in % of total divisional
RTL 2138 4513 6651 1439 22% 36%
PRH 265 3371 3636 561 15% 20%
Gruner+Jahr 913 442 1355 157 12% 7%
BMG 46 554 600 138 23% 3%
Arvato 1697 2478 4175 549 13% 23%
Printing Group 948 620 1568 68 4% 9%
Education 2 331 333 84 25% 2%
Investments 0 13 13 -1 -8% 0%
Total divisional results 6009 12322 18331 2995 16% 100%
Control 6009 12322 18331 2995 16%
% of German vs int’l 33% 67%
PRH Germany in PRH 7%
PRH + Simon (converted 2019 turnover)  €          4.097

Source: Excerpt from Bertelsmann Annual Report, 2020, analysis by RWCC for this article.

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