Mergers and Acquisitions
11.28.12 12:27 AM ET
The Victims of the Penguin & Random House Merger: Literary Agents
Literary agents are the middlemen between writers and publishing houses. Manuscripts go to agencies, akin to actors sending off a portfolio. Agents sift hundreds of submissions and pitch them to publishers, negotiating a price for the ones accepted while taking a cut of the advance and royalties. They’ve been a vital link in the chain, but the recently announced merger between two giant publishers, the Penguin Group and Random House, may affect literary agents in dramatic ways.
One single publishing house usually contains multiple imprints with distinct identities and tastes. Agents typically pitch one book to one imprint at one house, although the exact rules differ from publisher to publisher. The rule at Penguin is that agents cannot pitch to multiple imprints within the group; imprints cannot bid against each other for the same manuscript. At Random House, imprints can bid against each other as long as they are not in the same immediate group. After the Penguin Random House merger, agents could see pitching options abruptly diminished if Penguin's rules are retained in the new conglomerate. Markus Dohle, who will serve as the new CEO of Penguin Random House if the deal is approved, sent out a letter in late October in an attempt to reassure agents that editorial diversity would be maintained. “In this new partnership with Penguin, we will be retaining the distinct identities of both companies’ imprints,” Dohle promised. “You and your clients will benefit from an extraordinary breadth of publishing choices, and editorial talents and experience.”
There’s no word yet on whether the imprints housed within the new conglomerate will be able to bid against each other. (Penguin and Random House both declined to comment.) But Georges Borchardt, who cofounded the agency bearing his name, is skeptical of Dohle’s promise. “Publishers' releases in the past have always said that nothing significant would change, and that all imprints would continue working independently as before. But what happened to Atheneum? It merged into what was then called Macmillan, and disappeared, as did the imprint it merged into. What happened to Anchor? Its name still exists, but it merged into Vintage and obviously cannot work independently from it. What happened to Doubleday? It merged into Knopf, and obviously cannot work independently from it. What happened to Lippincott? It merged into Harper and disappeared. What happened to Harcourt Brace and Houghton Mifflin? They merged and then filed for bankruptcy. What happened to The Free Press? It was acquired by Simon & Schuster, and disappeared last month.”
Despite Dohle’s promise to retain talent, during the most recent recession Random House laid off a number of employees, shut down imprints, and made a number of structural changes that “didn’t make sense” and “seemed paranoid,” according to a source who did not wish to be named. Deborah Schnieder of Gelfman Schneider said she believes the merger is likely to result in cost-cutting at both houses. “There are sure to be redundancies within the house imprints and layoffs as a result, further reducing the number of editors and imprints to submit to,” she said, meaning less desirable advances for authors, and making placing books doubly challenging.
Whilst publishing houses often merge or are acquired by larger houses, the Penguin Random House move is unprecedented simply because of the size of the players involved. “It will be like a tsunami in the industry forcing many publishers to either merge or lock alliances in order to compete,” said Robert Gottlieb, chairman of the Trident Media Group (not to be confused with the former editor of The New Yorker, Simon & Schuster, and Alfred A. Knopf.) “That impacts diversity in the marketplace. The mega-publisher will not need all the imprints it is acquiring and will offer the public fewer choices as a result of the merger.”
The merger comes at a time when houses have become ever more wary of taking on projects that require substantial time in revision or seem unlikely to sell. Challenging writing that requires editorial investment or lacks bestseller appeal will become even more difficult for agents to place after the Penguin Random House merger. “At all the large-getting-larger corporate houses, there will be a diminishing degree of risk-taking and fewer risk-taking editors,” said Michael Reynolds, editor-in-chief at Europa Editions. “There will be increasingly limited options at the big houses for agents seeking to place riskier books.”
But Reynolds is also hopeful that agents may turn to independent publishers, which could get a boost from the deal. “This will bring about growth in the number, quality, and financial solvency of indies, meaning more genuine bibliodiversity in the near future than now,” he said.
Some suggest the merger might shore up the industry, as the conglomerate might have enough clout to address threats like Amazon’s monopoly on book pricing. Andrew Wylie of the Wylie Agency felt positive about the deal. “It delivers to the industry a thoughtful leadership,” he said, and would “combat the corrosive and negative influence of the retail sector.” Wylie added that without the merger, the industry would be in peril. However, another source is skeptical of this argument. “The conglomerate won’t be a retailer, so I don’t see how they can stand up to Amazon’s pricing and buy buttons.”
A few agents saw the future as simply too uncertain to predict. “It would be naive to doubt that this merger, and whatever other mergers and changes to the industry follow in its wake, will have significant impact on business practices,” said Simon Lipskar, president of Writers House. “But to get more specific than that would be precipitous; I’m not a fan of crying wolf.”
One forecast seems safe to make; the merger will not be the last of its kind. According to Wylie, the future structure of the publishing industry will comprise of very big buyers and small independent players, with fewer houses in the middle. “I would expect mergers to involve, in the English language, HarperCollins, Simon & Schuster, and Hachette,” Wylie predicted. “And there will be further consolidation in other languages.” The Penguin/Random House merger could be viewed as a very large move in the series of painful contortions undergone by the publishing industry in recent years.
While placing books will likely get more challenging, Georges Borchardt urged publishers to pay attention to what truly matters. “Ultimately—whether publishers realize this or not—what counts is the author and what the author writes,” Borchardt said. “It may be the death of publishing, but it's not the death of writing,” novelist Sam Lipsyte said. “Whatever happens, whether we have one giant publisher—GoogleZon, say—or countless small Internet publishers, or both, it doesn't matter. Real writers will always be screwed. But they keep on writing good and great prose and poetry anyway.” Author Gary Shteyngart was even congratulatory: “Mazel Tov, Random Penguin!”