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Antitrust lawsuit puts book publishing industry in the dock


NEW YORK — Justice Department Efforts to Block Merger of Penguin Random House and Simon & Schuster is not just a showcase of the Biden administration’s tougher approach to corporate consolidation, it’s a rare moment for the publishing industry itself to be placed on the dock.

In the first week of a scheduled two- to three-week trial in the U.S. District Court in Washington, Penguin Random House senior publishing executives Simon & Schuster and elsewhere, as well as agents and authors such as Stephen King, have shared opinions, relived disappointments and revealed financial figures they would otherwise have preferred to discuss privately or confide in reporters in the background.

“I apologize for the heated language,” Penguin Random House CEO Markus Dohle said of correspondence on display in court that reflected tensions between him and other Penguin Random House executives. “These are private text messages addressed to my closest collaborators in the company.”

The government is trying to demonstrate that the merger will lead to less competition for best-selling authors, a drop in their advances and a reduction in the number of books. The Department of Justice argues that major publishers, which also include Hachette, HarperCollins Publishers and Macmillan, already dominate the market for popular books and writers and have effectively made it nearly impossible for any small 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 producing bestsellers.

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

It is also an opportunity to hear some of the industry leaders under oath.

William Morrow Group president and publisher Liate Stehlik said she made only a limited effort to acquire fiction from Dean Koontz, who published with Amazon.com, because sales were down.

Award-winning author Andrew Solomon has explained that he chose to publish his famous ‘Noonday Demon’ with Scribner, a Simon & Schuster, in part because Scribner has the kind of sales and marketing resources that small businesses lack.

Penguin Books president and publisher Brian Tart agreed with the judge’s suggestion that profit and loss assessments for possible book acquisitions are “really wrong” and do not reflect true costs. Tart also testified that he quit bidding on Marie Kondo’s “Life-Changing Magic of Tidying Up” because he “didn’t know what to make of it.”

Simon & Schuster CEO Jonathan Karp acknowledged that a popular industry term, “mid-list writer”, long associated with a large and fearless body of non-commercial writers, a sort of middle class of l edition, is essentially fictional and a polite way of not calling anyone a “low-list” writer.

Questioned by the judge, Karp also said that while publishers appreciate all the books they acquire, books obtained with an excessive advance – money guaranteed to the author regardless of how the book sells – need attention. particular.

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

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

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

-Back to the list. These are older books, an invaluable resource for publishers, who rely on them as sources of stable revenue.

-Beauty pageant. It’s when two or more publishers offer similar advancements and non-monetary requirements such as marketing skills or the attractiveness of working with a particular publisher determine who wins.

—10% filling. This refers to when an agent asks the publisher to not only match the highest competing offer, but to add 10% more.

—All Access Books: By Dohle’s definition, these are books so inexpensive, such as those offered by Amazon.com through its Kindle Unlimited e-book subscription service, that they undermine the industry as a whole by lowering prices and, inevitably, advancing authors.

Witnesses from Dohle to Hachette Book Group CEO Michael Pietsch spoke at length about their love for the company and what they said was the highest mission of bringing ideas and stories to the public. But publishing is a for-profit business, and even the most idealistic writers and managers pay attention to results.

Through internal emails, depositions, and live and videotaped testimony, the trial laid bare internal rules and strategies regarding book acquisition and disappointments when a desired book goes elsewhere.

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

Editors love to share stories of favorite acquisitions. Pietsch’s range from David Foster Wallace to Keith Richards. The Karps include the late Sen. Edward Kennedy, D-Mass., and Bruce Springsteen.

But the trial highlighted disappointments and missed opportunities – a source of “gallows humor,” as Tart called it. He not only passed on Kondo’s book, but also Delia Owens’ blockbuster “Where the Crawdads Sing.” At Hachette, they keep a list of “Those Who Got Away,” deals where the publisher bid $500,000 or more but still lost.

Karp testified that Simon & Schuster has been outbid 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 Department of Justice cited internal emails to point out that Simon & Schuster had lost three bidding contests to Penguin Random House in a single week.

Karp also talked about a book he acquired, a planned work 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.

ABC News

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