Los Angeles Times

Stephen King takes the stand

The author testified against the merger of two major publishers in rare antitrust trial.

- By Dorany Pineda and Freddy Brewster Dorany Pineda reported from L.A. Freddy Brewster from Washington D.C.

The biggest antitrust trial to hit the publishing industry in recent memory kicked off this week, and on Tuesday the King of horror had his day in court.

On Monday, Penguin Random House, the largest publisher in the country, entered a federal courthouse in Washington to defend its deal to acquire Simon & Schuster, the fourth largest, against a Department of Justice emboldened under President Biden to enforce antitrust laws aggressive­ly.

If Judge Florence Y. Pan rules in the publisher’s favor, the merger would drasticall­y change the publishing world, whittling down the number of major publishing houses, known as the Big Five, to four. The question Pan is deciding is whether, as the DOJ argues, this will curtail competitio­n and suppress book advances for high-earning authors.

Testifying for the government on Tuesday was Stephen King, one of the most successful and prominent novelists in the world. Author of bestseller­s including “The Shining’’ and “The Stand,” King has been publicly critical of the deal and openly objected to the involvemen­t of his longtime publisher, Simon & Schuster.

How did it come to this pass? It all began in November 2020, when Paramount Global (formerly known as ViacomCBS) announced it had agreed to sell Simon & Schuster to Bertelsman­n’s Penguin Random House for $2.18 billion. Last fall, the Department of Justice sued to block the deal on the grounds that too much consolidat­ion was bad for authors and, ultimately, for readers.

Other witnesses in the trial, expected to last roughly three weeks and be decided in November, include Simon & Schuster’s Chief Executive Jonathan Karp, Penguin Random House Chief Executive Markus Dohle and other authors, agents and executives from other publishing houses.

Here’s what King said in court and what you need to know about publishing’s unpreceden­ted antitrust lawsuit.

What did Stephen King have to say?

“I came because I think that consolidat­ion is bad for competitio­n,” King said Tuesday in front of a full courtroom (and an overflow room nearby). “That’s my understand­ing of the book business. The more companies there are, the better it is.”

During 45 minutes of testimony, King laid out the changes he’s witnessed over a half-century career in collaborat­ion with a number of different publishers. He described independen­t publishers becoming increasing­ly “squeezed” by conglomera­tes. “The reason they’re being squeezed is because they don’t get the shelf space that they used to because the majors take a lot of that shelf space.”

He described his early years with indie publishers as the glory days, recalling his phone ringing nonstop during auctions as his agent fielded offers from smaller publishers. But he eventually migrated to what’s now become the Big Five because of their wider distributi­on networks and deeper pockets.

“I was able to pay the mortgage and I was able to put money away for the kids’ education,” said King. “I didn’t have to finance the car. As far as I was concerned, I was living the dream: I was writing full time. I enjoyed what I was doing. That was a big deal . ... There comes a point where if you’re very, very fortunate, you’re able to stop following your bank account and start following your heart. And that’s what I did. It was wonderful and it was great.”

But most writers today aren’t so fortunate. The average author only makes around $20,300, which is below the poverty line, said King, citing a 2018 Authors Guild survey.

“There were literally hundreds of imprints and some of them were run by people who had extremely idiosyncra­tic tastes,” he added. “Those businesses, one by one, were either subsumed by other publishers or they went out of business.”

The dynamics, he argued, have reversed; big business isn’t helping the next generation of Stephen Kings. “I think that it becomes tougher and tougher for writers to find enough money to live on.”

Why is the merger such a big deal?

The New York-based Simon & Schuster and Penguin Random House are among the largest publishing houses in the country, known in publishing as the Big Five. (The other three are Hachette, Harper-Collins and Macmillan).

Penguin Random House is the result of another megamerger, between Random House and Penguin, in 2013. Penguin’s roster of blockbuste­r authors, who generate enormous sales of “backlist” titles, includes John Grisham, Toni Morrison, Dan Brown and former White House occupants Bill Clinton and Barack Obama — all of whom have sold millions of copies worldwide.

If the merger goes through, the Big Five would shrink to the Big Four — one of them significan­tly larger than the rest.

Why is the Biden administra­tion fighting it?

The government argues that the merger would reduce market competitio­n and ultimately harm writers. If the deal goes through, the merged company would control nearly 50% of the bestseller market, which would ultimately result, the DOJ contends, in authors receiving smaller advances and worse contract deals.

Collective­ly, the Big Five make up 90% of the market for bestsellin­g books in the U.S., according to the government’s court filing.

“The proposed merger would further increase consolidat­ion in this concentrat­ed industry, make the biggest player even bigger, and likely increase coordinati­on in an industry with a history of coordinati­on among the major publishers,” the filing said.

The DOJ also argues that readers will inevitably be harmed. “[B]y reducing author compensati­on, the quantity and variety of books published will fall as well… reducing author compensati­on will likely reduce the output of books published and limit consumer choice by limiting what stories readers hear.”

How are the publishers defending the deal?

Penguin and Simon & Schuster say, to the contrary, that the merger would bolster competitio­n in the publishing industry and allow them to pay authors more. “[B]y making the combined entity a stronger booksellin­g competitor, the merger will incentiviz­e other publishers to compete even harder for consumer attention,” the publishers said in their pretrial briefing.

They also contend that a larger, more efficient company would reduce book prices, ultimately benefiting readers, bookseller­s and authors.

The publishers criticized the government’s focus on anticipate­d bestsellin­g books — the 1,200 or so books purchased every year for author advances of at least $250,000.

Moreover, the publishers say they will continue to operate independen­tly and be allowed to bid against each other for books, maintainin­g competitio­n among the imprints within the conglomera­te.

What’s at stake, according to a lawyer

Many market-watchers are looking at this trial as a test of the Biden administra­tion’s resolve against corporate consolidat­ion.

“There has been a lot of criticism over the years about the government being too willing to take settlement­s in merger cases and not stopping mergers fully,” said Harry First, a law professor at New York University.

The government’s focus here on the labor market rather than consumers is also an interestin­g one, he said — one that’s consistent with the Biden administra­tion’s emphasis on improving conditions for workers.

“[A]ntitrust enforcemen­t is one aspect of that,” said First.

So what’s at stake for the publishers? A lot of money. When the deal was announced in 2020, Simon & Schuster owner ViacomCBS told The Times that German conglomera­te Bertelsman­n, which owns Penguin, agreed to pay a terminatio­n fee if the deal was blocked, but wouldn’t disclose its size. If the merger doesn’t go through, Simon & Schuster will have to find an alternate buyer.

How unusual is the suit?

Although the publishing industry has steadily consolidat­ed over the years, the trend has accelerate­d in recent years. There was the Penguin-Random House merger in 2013, and just last year, two publishing houses made major acquisitio­ns: HarperColl­ins purchased Houghton Mifflin Harcourt’s trade book branch for $349 million, and Hachette Book Group bought Workman Publishing for $240 million, according to a court filing.

Previous major mergers have sailed past regulators with relatively little resistance. A change in the weather at the DOJ portends a landscape in which consolidat­ion may not always be a given.

 ?? Patrick Semansky Associated Press ?? AU T H O R Stephen King said writers would get hurt if Penguin Random House and Simon & Schuster merged.
Patrick Semansky Associated Press AU T H O R Stephen King said writers would get hurt if Penguin Random House and Simon & Schuster merged.

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