The Penguin Random House–Simon & Schuster Merger Is About Amazon

Sarah Whitten, CNBC:

ViacomCBS announced Wednesday that it would sell publishing company Simon & Schuster to Penguin Random House, a subsidiary of Bertelsmann, in a deal worth nearly $2.18 billion

The transaction is expected to close in 2021.

Franklin Foer, the Atlantic:

But this merger is not the gravest danger to the publishing business. The deal is transpiring in a larger context — and that context is Amazon. The rise of Amazon accelerated the demise of Borders and the diminishment of Barnes & Noble. If it’s correct to worry about a merged company that publishes perhaps 33 percent of new books, then surely it’s correct to worry more about the fact that Amazon now sells 49 percent of them.

In the face of Amazon’s dominance, book publishers have huddled together in search of safety. Amazon’s size gives it terrifying leverage over the industry. Amazon, with its heavily visited home page, its emails to consumers, and its control of the search box on its site, has the power to make or break a title. To counter Amazon, publishers have sought to increase their bargaining power. They believe that they can match Amazon’s size only by growing their own.

When the government intervenes in a market, its actions are never neutral. One of the greatest mistakes of the Obama administration was the 2012 suit it brought against book publishers for working in concert to cut an e-book deal with Apple. The issue is not that the publishers were acting virtuously: They behaved like a cartel, which is illegal. It’s that the publishers were hardly the worst offenders. The government flogged the publishers for a technical violation of antitrust laws rather than constraining the most egregious monopolist, in spirit if not in letter.

Many of the American mergers and acquisitions completed under the Obama administration rank among the largest in history: Dow Chemical bought DuPont, Charter bought Time Warner Cable, Pfizer bought Wyteth, Verizon bought Vodafone, Heinz bought Kraft, and Comcast bought NBCUniversal. The scarcity of intervention in all of these mergers remains a stain on that administration’s legacy, as does its failure to act on Amazon’s control over the e-book market.

Several years and many more mammoth acquisitions in all market sectors later, the outgoing Trump administration and incoming Biden one have the opportunity to intercede in this clearly monopolistic play, as well as taking another look at Amazon’s business. I hope they do. The U.S. remains by far the world’s largest market for books and, so, has the unique responsibility of ensuring that the rest of the world is not subjected to its inaction.