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Penguin Random House Is Building the Perfect Publishing House

But does it matter in the age of Amazon?

LEON NEAL/AFP/Getty Images

When Penguin and Random House announced in the fall of 2012 that they intended to merge, Hurricane Sandy was barreling toward New York City, America’s publishing capital. It was an instant metaphor for headline writers: “As Sandy Loomed, the Publishing Industry Panicked.” People inside both companies worried about their jobs; people outside the companies worried about the market power of a new conglomerate comprised of the country’s two largest trade publishers. Agents and authors, meanwhile, worried that the consolidation would further drive down advances.

Random House’s top brass insisted that there was no need to panic. “The continuity will far outweigh the change,” Markus Dohle, the CEO of what would become Penguin Random House, told The New York Times when the merger was completed the following summer. “We have the luxury to take the time before we make any strategic decisions. There is no need to rush.”

This has been the story of Penguin Random House these past five years. Privately owned, the company has moved deliberately, while publicly traded competitors like HarperCollins (which is owned by News Corp) and Simon & Schuster (CBS) have had to fend off pressures from shareholders. It has not used its gargantuan size—it controls more than half of the traditional literary marketplace according to many estimates—to take back territory from Amazon. Instead, it has focused on building equity and ensuring that it publishes the next generation of bestsellers. In so doing, Penguin Random House has built what may be the perfect corporate publishing house. There’s just one problem: Thanks to Amazon, the age of the imperious corporate publishing house is coming to an end.

In July of this year, on the fifth anniversary of the merger, Dohle took a victory lap. Publishers Weekly touted Penguin Random House’s size ($3.4 billion in sales, 275 imprints, 700 million books sold a year, 14,000 new releases, 10,000 employees), prestige (60 Nobel laureates), and the seamlessness of the merger itself. Given the size of the two companies involved, it had the potential to be a logistical and cultural nightmare. But according to Dohle, it was an organic effort. “We literally designed and implemented the merger together as a team without all of the consultants and external advisers of usual mergers,” Dohle told Publishers Weekly. “Doing it our way meant that the new Penguin Random House became ‘our’ company. Designed and implemented by us.”

The point of a Penguin Random House is to create scale. It is larger than its four biggest rivals combined, and its sheer size gives it leverage to promote and sell books. “We are able to leverage scale in direct marketing to consumers and in our supply chain to support our retailers and to get our books into the hands of readers quickly,” Penguin Random House spokesperson Claire Von Schilling told me in an email. “We have the largest book sales force in the world, with unparalleled reach into every different kind of bookseller globally.”

Penguin Random House’s digital marketing and data efforts are the envy of the industry, which in many ways still publishes books way the same way that it did 50 years ago. Penguin Random House uses consumer data and information from Goodreads to help acquire prospective bestsellers, which then get the promotional benefits of Penguin Random House’s size and influence. Corporate publishing in the 21st century is driven by bestsellers—both the backlist (older books) and the midlist (non-bestsellers) have never had less impact, making it all the more important to score big hits.

When it comes to digital marketing, customer acquisition, and data analysis, little is being left to chance. That fastidiousness was also evident in the nearly imperceptible way that the merger was undertaken. There have been more layoffs than the media coverage would suggest, and redundant imprints have been shuttered. There is some concern, particularly after the company announced an early retirement buyout earlier this summer, that further layoffs are on the horizon. But Von Schilling told me there were “no layoffs and no plans for any.” And there have been no Black Fridays, no major disruptions to business.

This is where being privately owned has been a major boon for Penguin Random House, allowing for a slow, smooth transition. But calling what happened a merger has never quite been accurate—Random House all but acquired Penguin. While many of Penguin’s imprints have been preserved, multiple former Penguin employees and agents told me that the company’s unique corporate culture—a confederacy of personality-driven fiefdoms—no longer exists.

The editorial independence of various imprints was of great concern for agents, who worried that a single publisher controlling more than half of the market in some genres, including literary fiction, would drive advances down. It’s difficult to determine the precise impact of the merger on advances, but it’s clear that the worst-case scenarios haven’t occurred. Despite some changes, Penguin Random House’s imprints still compete against one another for books in a system that angers some executives, but ultimately serves to further the company’s ultimate goal of increasing its likelihood of acquiring bestsellers.

Amazon is the most important subject in the publishing industry in 2018, as it has been for the last fifteen years, but Penguin Random House has consistently downplayed the Amazon threat. Asked if additional size has benefited the publisher in its dealings with retailers, Von Schilling responded, “That was not a purpose of the merger.”

Even before the merger, Random House treated Amazon more conservatively than its rivals. While the other five, for instance, were sued for antitrust violations for joining forces with Apple to fight Amazon’s e-book dominance, Random House kept its hands clean (Penguin settled with the Department of Justice less than two months after the merger was announced). To many, this was a savvy play. Penguin Random House’s remit, after all, is to sell books, not to go to war with its retail partners.

But others have expressed frustration with Penguin Random House’s timidity. The point of market share, they argue, is to exert influence over retailers and there is little evidence that Penguin Random House has done this in a meaningful way (though it’s possible that it does receive slightly better terms than its rivals). Still, Amazon has spent the past several years accruing significant power in the industry. It has further cemented its hold over bookselling. It has feuded with other conglomerate publishers, notably Hachette, while building up its own disruptive publishing arms. These include the Kindle Unlimited e-book subscription service, which has taken over genre publishing, and Audible, which has a stranglehold on audiobooks, the industry’s most important growth sector. When it comes to publishing, Amazon has arguably never been more powerful.

It’s possible that some master plan is afoot in the inner sanctum of Penguin Random House to bend Amazon to its will. In the meantime, Penguin Random House has spent the last five years perfecting the corporate publishing house, shoring up its ability to publish bestsellers. The problem is that in the age of Amazon that may not be enough. In the long term, perhaps the wisest move isn’t to build an organism that blends seamlessly with an aggressive retailer, but one that fights against it.