Penguin Random House defends proposed merger with Simon & Schuster; Cuomo ordered to repay profits on COVID memoir

Surprising absolutely no one, Penguin Random House has gone public with opposition to the U.S. Department of Justice suit aimed at preventing a merger with Simon & Schuster. The DoJ filed suit last month, objecting to the merger of two multinationals from the so-called Big Five U.S. publishers on the basis that the proposed agreement would “exert outsized influence over which books are published in the United States and how much authors are paid for their work.”

The PRH response focuses on the DoJ’s contention that the merger would force the bestselling authors from both houses to accept lower advances for their books, an admittedly strange idea given the many other manifestly troublesome implications of the deal.

The industry magazine Publishers Weekly provides a précis of PRH’s position:

The PRH reply argued that the failure by the DOJ to identify the range of the size of the market it is talking about is “critical,” arguing, “The only potentially legitimate market in this context is the market for rights in all proposed books. And as to that market, DOJ barely makes any allegations at all. Most important, DOJ alleges no cognizable competitive harm – it does not even suggest that the merger will cause a market-wide decline in royalty advances or in overall author compensation.”

The PRH reply further states that the government is wrong in its claim that only the Big Five are able to publish top-selling authors, noting that, “in each of the past three years, three of the top ten highest selling authors according to BookScan have been published by publishers other than the so-called Big Five.”

The New York Times quotes PRH’s defence attorney who is spearheading the legal push to preserve the deal:

“The government wants to block the merger under the misguided theory that it will diminish compensation to just the highest-paid authors,” said Daniel Petrocelli, a lawyer representing Penguin Random House and its parent company, Bertelsmann, in an interview on Monday. “That is legally, economically and factually wrong, and it ignores the vast majority of authors who will indisputably benefit from the transaction.”

What is strange about this latest interchange is that Petrocelli is most likely correct, at least in part. There is no doubt that PRH and S&S together publish some of the most recognizable literary names working today, among them Stephen King, John Grisham, Janet Evanovich, Bob Woodward, Margaret Atwood, and Jodi Picoult. But it seems passing strange that the U.S. government would be overly concerned about the financial well-being of this particular cohort.

Much more likely to be adversely affected by the merger are midlist or debut authors who don’t have similar name recognition and who would be subject to smaller advances and miniscule marketing budgets to begin with. With fewer players in the game, these authors will find it even more difficult to break into the market, or to break through the noise once they have been signed.

The other problem with two behemoths merging has nothing to do with pay scale and everything to do with the range of material the new entity would be willing to publish. The Big Five publishers are publicly traded companies beholden to shareholders; as such they are notoriously risk-averse. The larger the company, the less likely they will be to take a chance on controversial, uncomfortable, or innovative books.

Add to this the fact that S&S’s backlist – which includes F. Scott Fitzgerald, Ernest Hemingway, Ray Bradbury, and other canonical authors – is especially lucrative and will enhance the combined publishers’ market clout, allowing them to suck even more oxygen out of the system for smaller and independent houses, and the deal looks even more troubling.

In other PRH news, one of its U.S. imprints, Crown, continues to be awash in blowback from one of its recent titles. Yesterday, New York’s Joint Commission on Public Ethics ordered former governor Andrew Cuomo to pay back all profits he made on his 2020 memoir American Crisis: Leadership Lessons from the COVID-19 Pandemic.

Cuomo had been granted permission to write the memoir on the understanding that no government resources – including staff – would be used in the project. The commission voted in November to revoke their approval after they determined that “state property resources and personnel including staff volunteers were used in connection with the preparation, writing, editing, and publication of the book.” Without the prior approval intact, the commission voted 12–1 that Cuomo was on the hook to return any profits he had recouped from the writing and publication of the memoir.

According to The New York Times:

The order, which is sure to set up a protracted legal fight, could be further complicated by the fact that Mr. Cuomo already donated $500,000 of the book’s proceeds to a charity, United Way of New York State, for its statewide Covid-19 efforts. He also placed $1 million in a trust for his three daughters.

The book’s publisher, Crown, had paid Mr. Cuomo the bulk of the money, $3.12 million, last year, of which he netted $1.5 million after taxes and expenses. According to the contract, Crown was expected to pay the remaining $2 million in instalments over the next two years, but it remains unclear if Crown will do so after it suspended its promotion of the book following Mr. Cuomo’s legal troubles related to nursing home data.

CNN quotes members of the Cuomo camp as saying that the JCOPE decision is without merit and wrong on its face:

Rich Azzopardi, a spokesman for Cuomo, denied that state resources were used for the book in a statement to CNN on Tuesday.

“This is political hypocrisy and duplicity at its worst,” Azzopardi said. “Governor Cuomo received a JCOPE opinion and advice of counsel stating that government resources could not be used — and they weren’t — and any staffer who assisted in this project did so on their own time, which was reflected on their timesheets.”

Jim McGuire, an attorney for Cuomo, called the action “unconstitutional” and said the commission was exceeding “its own authority.”

Penguin Random House defends proposed merger with Simon & Schuster; Cuomo ordered to repay profits on COVID memoir