Paramount scraps $2.2bn sale of Simon & Schuster publishing to Penguin
Penguin Random House, the world’s largest book publisher, and rival Simon & Schuster have scrapped a $2.2bn deal to merge, Penguin’s owner said in a statement on Monday.
Bertelsmann, a German media group which owns Penguin, initially said it would appeal a US judge’s decision that said its purchase of Simon & Schuster would be illegal because it would hit authors’ pay.
But Bertelsmann said in a statement on Monday that it “will advance the growth of its global book publishing business without the previously planned merger of Penguin Random House and Simon & Schuster”.
Reuters reported on Sunday that the German company was unable to convince Paramount Global, Simon & Schuster’s owner, to extend their deal agreement and appeal the judge’s decision.
Judge Florence Pan of the US district court for the District of Columbia ruled on 31 October that the justice department had shown the deal could substantially lessen competition “in the market for the US publishing rights to anticipated top-selling books”.
With the deal’s dissolution, Penguin will pay a $200m termination fee to Paramount.
Paramount said on Monday that Simon & Schuster was a “non-core asset” to Paramount. “It is not videobased and therefore does not fit strategically within Paramount’s broader portfolio,” the company said in a filing on the deal’s termination.
The justice department did not immediately respond to a request for comment.
Unlike most merger fights, which focus on what consumers pay, the Biden administration argued the deal should be stopped because it would lead to less competition for blockbuster books and lower advances for authors who earn $250,000 or more.
The decision comes as the Biden administration has made clear it intends to tackle what it sees as monopoly positions, blaming them, among other things, for rising meat prices and soaring concert ticket prices.
The book industry has gone through a series of consolidations in recent years and critics feared another big merger would reduce competition while making life harder for smaller publishers.
Penguin is by far the US’s largest publisher already. Its writers include the cookbook author Ina Garten and novelists Zadie Smith and Danielle Steel, while Simon & Schuster publishes Stephen King, Jennifer Weiner and Hillary Rodham Clinton, among others.
The US justice department filed a lawsuit aimed at stopping the deal in November 2021.
In hearings held in August, the government argued that the largest five publishers control 90% of the market, and a combined Penguin and Simon & Schuster would control nearly half of the market for publishing rights to blockbuster books, while its nearest competitors would be less than half its size.
King, author of bestsellers including The Stand and The Shining, was among the authors and agents who testified during the trial, arguing it would reduce competition.
“You might as well say you’re going to have a husband and wife bidding against each other for the same house. It’s kind of ridiculous,” King told the court. “Consolidation is bad for competition.”