![]() As a result, Penguin Random House lost a huge chunk of market share, from 25 per cent to 21 per cent, according to a chart displayed by PRH lawyers. Dohle pointed out that while Penguin Random House was failing to grow after the merger, the rest of the book trade expanded handsomely-from $9 billion to $11 billion between 20. He showed that its failure was far more monumental than it appeared, at least to me. Along the way, he had some interesting things to say about the Penguin debacle. ![]() The new firm, said Markus Dohle, the same man who failed to find synergies between Penguin and Random House, would “create the future of books.”ĭohle was called to the witness stand last week to answer questions about his Simon & Schuster bid. Yet in 2020, Penguin Random House decided to repeat the whole process, striking a deal to buy Simon & Schuster, once again at a ridiculously high valuation, once again promising that magic would result from the increased scale, improved access to talent, innovation, etc. Most of the $3.5 billion purchase price was wasted. ![]() The point is that seven years down the road, Penguin Random House remained exactly the sum of its parts, minus 2000 workers. And the Obamas each knocked one out of the park. Also, e-books and audiobooks improved the profitability of all publishers. As far as I can tell, the improved profitability was achieved the old-fashioned way: the payroll shrunk from a high of 12,800 to 10,800. But they didn’t grow as a result of the combined firm’s increased scale, new competitive muscle, better talent, new markets, new products, or innovations. Profits are up, which might be considered a good sign. Revenues were about $4 billion, and that’s where they’ve been ever since (leaving aside a nice bump in 2019, the year of Michelle Obama). The first full year of a combined Penguin Random House was 2014. Over the next several years, Bertelsmann doubled down on its bet, scooping up the remaining 47 per cent of Penguin in two separate transactions to eventually own it outright. Penguin Random House would have to be far more than the sum of its parts to justify that price. Bertelsmann’s purchase price valued Penguin at $3.5 billion, or more than twenty times its annual profits of $171 million. Markus Dohle, CEO of Penguin Random House, is lucky to get a mid-level account manager on the phone at Amazon.īut the deal went ahead and expectations for the new Penguin Random House were sky high. Random House had its pick of talent, all the size it needed to negotiate with Barnes & Noble, and it would never be in the same league as Amazon. Together they would have the scale to stand up to bookselling chains like Barnes & Noble and the massive digital players, Amazon and Apple. It was said at the time that the two publishers, with combined revenues of $3.9 billion, would be able to share costs, attract better talent, take more risks, offer new products, develop new markets, and otherwise innovate. In 2012, it struck the richest deal in book publishing history, acquiring 53 per cent of Penguin Books, which it then merged with Random House to make the biggest publisher even bigger. It needs to be fixed or jettisoned.īertelsmann decided to fix Random House. When an asset at a public company does not contribute to growth it is dead weight. That is the whole game for public companies. People buy shares in publicly listed companies because they believe the entity will grow and produce larger profits in the future, making the share price rise and the investor happy. ![]() Growth matters, especially to Random House’s parent company, Bertelsmann SE, a public company. It was the biggest publishing company on the planet but it had ceased to grow. At the end of the aughts, it had revenues of 2.3 billion and a profit margin of 9 per cent. Week two has been relatively slow so I’m going to step back and look at the biggest story to emerge from the trial thus far: the revelation that Penguin Random House is a vampire corporation.Īt the beginning of the millennium, Random House (pre-Penguin) had revenues of $2.3 billion (all US figures) and a profit margin of 9 per cent. Our coverage of the trial’s first week is here. The Department of Justice (DOJ) is suing to block Penguin Random House’s acquisition of Simon & Schuster. ![]()
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