Why a proposed deal between two American publishing giants matters to the Canadian books sector

February 12, 2021, The Globe and Mail

Why should anybody care when publishing house Penguin Random House swallows competitor Simon & Schuster?

Back last November when Penguin Random House (PRH) announced its successful bid to buy Simon & Schuster, there was a flurry of comment in the United States. The New York Times protested that the new, enlarged company would “profoundly reshape the industry, increasingly a winner-take-all business.” The Washington Post declared that the deal would be bad for readers: “As the number of publishers shrinks, authors find themselves with fewer potential buyers for their proposals and manuscripts. Bookstores are beholden to a smaller number of distributors. And readers face a shelf of titles further dominated by familiar bestsellers most likely to earn big payouts for massive corporations.”

There has been next to nothing in the press in Canada. Ken Whyte, publisher of independent press Sutherland House, opined in his newsletter that the lack of attention here was a general lack of insight into what it would mean for Canadians when these two giants of the industry combine.

Why should we care when one foreign-owned firm buys another for a reputed US$2-billion? Penguin Random House is owned by German conglomerate Bertlesmann, while Simon & Schuster is owned by U.S. entertainment multinational ViacomCBS. Penguin Books, formerly a British-owned publisher, became a wholly-owned subsidiary of Penguin Random House in early 2020 – and we let that pass. In 2011, Canada’s own McClelland & Stewart – publisher of literary legends Stephen Leacock, Leonard Cohen, Margaret Atwood, Mordecai Richler and Margaret Laurence, among others – was swallowed up by Random House.
Well, here is why it matters: the combined publisher would dominate the Canadian market in a way that has so far not been possible. Authors would have fewer options for publishing their books, jobs will be lost – and with those lost jobs, there will be less diversity of interest in subjects and literary tastes. With the mergers, some of the editors and publicists in each of the acquired firms will lose their jobs, and we will lose their selections of books that make it to the marketplace. As Bruce Walsh, publisher of Toronto independent press House of Anansi points out, the move would bring “the opposite [of] diversity” – and there is no question we are a stronger society when we hear a broader range of voices.

Any kind of competition with the new giant will be impossible. The merger would “create a behemoth in the global publishing industry and have a deleterious impact on the ability of Canadian-owned houses to compete in their own market,” said Kate Edwards, executive director of the Association of Canadian Publishers (ACP). The ACP also drew the government’s attention to the probability that the sale violates the federal Competition Act, as it would seriously diminish competition in the market. The Competition Bureau has a role in reviewing mergers and acquisitions, to “obtain the necessary evidence for careful analysis and consideration before reaching a conclusion as to whether a merger is likely to substantially lessen or prevent competition.”

By any measure of what is fair in a business environment, this deal should be blocked, which is precisely what the U.S. Authors’ Guild has demanded. One of the Guild’s proposals suggests that regulators should enforce “structural remedies,” such as forcing PRH to sell off some of its divisions or imprints.

They protested that the new behemoth would control about 30 per cent of the U.S. book market – that “the big five U.S. companies would now be the big four.” Since some American publishers are not active in Canada, there are now only three large companies here – the merger would reduce that to two, and higher than 40 per cent of the market in terms of trade book sales.

For the past 40 years, the Canada Book Fund has been the federal government’s main support mechanism for Canadian-owned book publishers. The fund’s stated objective has been “to ensure access to a diverse range of Canadian-authored books, nationally and internationally, by fostering a strong industry that publishes and markets Canadian-authored books.”

It could be fairly argued that the Canadian book market is already skewed in favor of multinationals, and that the government’s policies of keeping competition alive – and allow Canadian publishers to continue to publish books that are of some importance to Canadians – have failed. Canadians do not have control over their own marketplace. Canadian publishers are underfunded and their successes internationally remain tenuous because authors, once established, will gravitate towards higher advances. U.S. companies with easy access to capital are often able to acquire the rights to those authors’ books – a few recent examples of authors initially published by independent Toronto presses, but who went on to be snapped up by Penguin Random House include acclaimed Métis author Cherie Dimaline, originally published by Cormorant Books; and Anishinaabe writer and journalist Waubgeshig Rice, originally published by ECW Press.

Unlike France, Germany and Japan, who have vigorous book-publishing enterprises, we share a language and a border with the United States, the largest producer of entertainment product in the world. Fostering a strong Canadian industry requires more than lip service – it needs policies that help level the field.

In 1992, the federal government came up with a policy (updated most recently in 2017) on foreign investment in book publishing, retail and distribution, which requires the minister of Canadian Heritage to review all indirect foreign acquisitions to ensure they provide net benefits to Canada and the Canadian book sector. Obviously, this new deal between publishing giants is not of any kind of net benefit. If the U.S. government does not block it, Canada should not pass up the opportunity for a meaningful debate on what constitutes effective cultural policy in the publishing sector.