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WHY THE TWO BECAME ONE

Two of the world’s largest publishing houses — Random House and Penguin — have announced a merger to become a joint imprint that is expected to be effective in 2013. Why have they decided to merge and what does it mean for the common reader who have so far been served by both the publishers?

Does it mean that both the publishers — who had earlier served the top brass of the market — will now be reduced to producing books for mass-market entertainment that generate instant sales and profits? Or has it been done to maintain high short-term earnings in order to avoid the risk of a takeover bid by the electronic media?

All mergers or takeovers happen because of a number of reasons and only the top management is privy to these information. But what can be easily figured out is how the mergers that have taken place over the past few decades will affect the market.

There are some basic rules of the game. The fusion of two or more companies is the quickest way to expand the business by getting into areas that had hitherto been closed to these companies. Mergers can take place in different ways. But the latest merger is a special case where both the companies wish to come together, and to do so on roughly equal terms, as opposed to a takeover, which mostly occurs against the wishes of one company. In the Random House-Penguin merger, both the companies wanted to join hands to form a solid block and ward off bids by media giants like Rupert Murdoch. But what happens to the individual identities of the two companies and where do the readers and the authors fit into this new arrangement? If the past is anything to go by, three steps will follow once the legal formalities are completed.

First, the two companies will merge to form a new identity, and all assets and liabilities will accrue to the joint company, including authors’ royalties. All the future book contracts will be issued by the new company. Second, there will be a process of “rationalization”, which is a euphemism for trimming the workforce and the warehousing costs to manageable proportions. Third, all future publishing programmes will also be rationalized on the basis of an electronic analysis of books that have sold and those which have not. Many books will then be removed from the publishers’ lists.

In the highly competitive world of book publishing, mergers may be the fastest way to grow and beat the visual media, but it is a cruel method that leaves many out in the cold.