March 29, 2024

Penguin and Random House Merge, Saying Change Will Come Slowly

E-mails were sent to nervous employees assuring them that their health plans would not change.

And a new temporary logo — with a penguin in profile next to a tidy house — was released until a permanent one could be designed.

On Monday, the newly formed company of Penguin Random House began to take shape, only hours after a middle-of-the-night announcement that the long-planned merger had been completed.

Together, Penguin and Random House will make up the biggest and most dominant publisher in the business, one that has unmatched leverage against Amazon.com and the potential to inspire other mergers in the industry.

Markus Dohle, the chairman and chief executive of Random House, who will take on the role of chief executive of the new company, announced the completion of the merger in an e-mail to employees on Monday.

“Today, we are Penguin Random House,” he wrote. “You should be proud of what you’ve accomplished and what we are all now a part of: the first truly global trade book publishing company. Together, we are even better positioned to fulfill our core purpose: to bridge authors and readers by publishing the very best books.”

Bertelsmann, the owner of Random House, and Pearson, the owner of Penguin, disclosed the merger in October, saying that Bertelsmann would control 53 percent of the company and Pearson 47 percent. Since then, the merger has sailed through regulatory approvals in the United States and Europe, as well as China, Canada and other countries.

The combined companies will control more than 25 percent of the book business, with more than 10,000 employees, 250 independent publishing imprints and about $3.9 billion in annual revenues.

Mr. Dohle, in a telephone interview from London, where he was about to embark on a three-week tour around the globe to meet with employees, said that part of his message is simple: there will not be much change at first.

There are no immediate plans for laying off employees or closing imprints. Both Penguin and Random House have long leases on their buildings in Manhattan, so they will not work from the same building anytime soon — maybe not for at least a decade, Mr. Dohle said.

“The continuity will far outweigh the change,” said Mr. Dohle, who has a reputation for deliberate moves. “We have the luxury to take the time before we make any strategic decisions. There is no need to rush.”

One goal of the merger, he said, is to “crack the code of discoverability” — of how to put books in front of potential buyers — “in a world with fewer bookstores.”

Several important leadership changes for the new company were announced Monday. David Shanks, the chief executive of the Penguin Group USA, has stepped down and will be a senior adviser to Mr. Dohle and the executive team. John Makinson, the head of Penguin Group since 2002, will be the chairman of Penguin Random House.

Executives sought to reassure anxious employees, authors and agents that there was nothing to worry about. In a letter to authors, Mr. Dohle said that the new company would invest in distribution and marketing, maximizing potential readers. The authors’ relationship with their editors and publishing teams, he said, “will remain untouched.”

Executives at Penguin and Random House said the initial focus would be on unifying the infrastructure of the companies, including establishing pay scales, health benefits and new e-mail addresses.

But there will also be an effort to sort out redundancies, a process that typically involves a reduction in employee count. As physical book sales decrease, so does the need for gigantic warehouses to store and ship books; the newly combined company is likely to find ways to trim printing, distribution and storage costs.

“There’s positives and negatives,” said Elyse Cheney, a literary agent. “The positive is that I hope they will be able to have greater leverage with companies like Amazon. But more importantly, that they figure out new and innovative ways to reach consumers, now that the marketplace is changing so rapidly.”

Analysts said it was too early to predict the consumer impact of the merger. Mike Shatzkin, the founder and chief executive of Idea Logical, a consultant to publishers, speculated that Penguin Random House would eventually use its large list of books to create a digital subscription offer, much like a book-of-the-month club for e-books, or build minibookstores within retailers like clothing stores.

For authors, the suddenly larger presence of Penguin Random House will make it a more attractive prospect, Mr. Shatzkin said.

“If you’re a Penguin author or a Random House author, you should be pretty happy today,” he said. “If you’re another publisher or an author with another publisher, you should be watching this with a wary eye.”

But authors and agents also quietly voiced concern that there would be fewer major publishing houses competing for their work.

Harlan Coben, the best-selling novelist who is published by Dutton, an imprint of Penguin, said that “the one thing that worries every writer is that there is going to be fewer houses and less competition.”

But, he added, “this business so constantly changes that whatever we’re talking about now will be nonsense a few years from now.”

Article source: http://www.nytimes.com/2013/07/02/business/media/merger-of-penguin-and-random-house-is-completed.html?partner=rss&emc=rss

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