On the afternoon of August 10, at the E. Barrett Prettyman federal courthouse, the Justice Department’s lawsuit to stop Penguin Random House from acquiring Simon & Schuster had had a mid-week lull. The courtroom itself – as well as the overflow room, where reporters had access to the internet – was a few booksellers away. But the first defense witness, mega-agent Jennifer Rudolph Walsh, was intensely present and seemed excited to testify. (Penguin Random House was paying her a quarter of a million dollars.) In a flowing cream blouse and gold jewelry, her hair loose around her shoulders, Walsh painted a picture of publishing as a labor of love. Agents, she said, are in the realm of fairy-tale matches between author and publisher — mind-melds that span decades, shape careers and win awards. Walsh even had a magic wand, she added, given to her by novelist Sue Monk Kidd. When Judge Florence Y. Pan asked if agents had a fiduciary duty to secure their writers the highest possible advances, Walsh answered in the negative. “More isn’t always more,” she says. “We’re not always looking to squeeze every dollar out of a publisher’s pocket.”
The exchange exposed the central question of the day and every day in a lawsuit that has riveted the publishing industry since the start of proceedings on August 1: Is publishing a matter of art or of business ? The answer, of course, is “Both” – as with any creative endeavor – but watching each side wrestle with this ambiguity has been instructive. Penguin Random House, itself the result of a merger between Penguin and Random House in 2013, is the largest of publishing’s so-called Big Five. (The others are HarperCollins, Macmillan, Simon & Schuster and Hachette.) If the acquisition goes through, the new company will eclipse its closest rivals. It is one of the first high-profile antitrust lawsuits brought by President Biden’s Justice Department. This could, along with the recent nomination of Lina Khan as Chairman of the Federal Trade Commission, point to a new direction for the country’s regulatory climate. But, for people who care about books, what is most visibly judged is the publication itself. In the space of two weeks, an image of savvy, data-driven publishers rivaled a lovingly drawn (self-)portrait of gamers, guessers, and dreamers. Sometimes it seemed reasonable to ask whether the industry should be called an industry.
The show was oddly entertaining. Publishing executives had to introduce federal employees to a dialect of “backlists,” “advance copies,” and “BookTok influencers.” Audiences were treated to zesty performances, from the cheeky verve of Simon & Schuster’s Jonathan Karp to the solid C-suite of HarperCollins’ Brian Murray, who seemed to quietly deflate under a series of pointed questions. On Tuesday, horror maestro Stephen King appeared to testify that “consolidation is bad for competition” and that the disappearance of “idiosyncratic” imprints from the publishing landscape has made it “increasingly difficult for writers to find enough money to live on”. King, who wore sneakers and marketed himself as a “freelance writer”, wanted to champion his younger, less established peers – those for whom a book deal could be the difference between creating art and serving tables.
And yet, King’s defense of struggling artists seemed tangential to the specifics of the lawsuit.
Government lawyers have built the core of their case around a relatively narrow category – “expected best sellers” – where the threat of monopsony is greatest. Plaintiff defines them as the small fraction of books for which authors receive advances of two hundred and fifty thousand dollars or more. These are also the books that tend to fly off the shelves and the books with which publishers pay their bills. The Department of Justice says a Penguin Random House-Simon & Schuster merger would remove competition for top sellers, reduce advances, and ultimately reduce both the number and diversity of titles. The defense countered that “anticipated best seller” does not denote an actual market, but simply a “price segment”. You can’t “anticipate” a blockbuster, the lawyers suggested; the publishing gods are fickle, and whether a book will sell at all, let alone go supernova, is anybody’s guess. Additionally, Simon & Schuster authors would benefit from access to Penguin Random House’s superior distribution and sales teams. Other houses would have to compete even more to attract them.
One by one, soberly dressed executives took to the stage to present publishing as a game of chance – a “business of passion,” in the words of outgoing Macmillan CEO Don Weisberg. “Everything is random in publishing,” Penguin Random House CEO Markus Dohle said on Aug. 4. “Success is random. Bestsellers are random. That’s why we are the Random House! Acquiring books, Brian Tart, the president of Viking, testified on August 3, “is as much an art as it is a science.” To illustrate his point, he described the transmission of “The Magic of Tidying Up That Changes Life” by Marie Kondo and the current number 1 in New York. Time bestseller, “Where the Crawdads Sing”, by Delia Owens. Judge Pan observed that the profit and loss statements “are really wrong”. Pie enthusiastically agreed. On August 2, Karp, CEO of Simon & Schuster, testified that rejoicing over a bestseller is like “taking credit for the weather,” and wryly recalled the eagerness with which he had promoted a manuscript by a prominent spiritual guru. “Unfortunately,” he said, “his followers didn’t follow him to the bookstore.”
The gallery of rogue industry figures provided a stark contrast to the government’s expert witness, economist Nicholas Hill. Soft-spoken and physically imposing, with broad shoulders, thick silver hair and a square chin, he was there to reinforce the idea of an “expected best sellers” market. Writers behave differently around the two hundred and fifty thousand dollar threshold, Hill claimed. They “make different choices”. His most memorable contribution, however, was a series of Gross Upward Pricing Pressure Index (GUPPI) models, which he had developed to theorize how much market share a Penguin Random House-Simon & Schuster joint might capture.
The GUPPIs proved a tense point of dispute. If Hill embodied the academic approach of the Justice Department, Mark Oppenheimer, a defense attorney, seemed determined to make him the Casaubon of economic consultants. Winding cross-examination elicited feelings of mystifying esotericism, as Oppenheimer’s attempt to refute Hill’s methodology devolved into ritualistic hypnosis, a ceremony to stun the courtroom. The lawyer, soft-spoken and avuncular, dramatized his own inability to keep “monopoly” and “monopsony” straight; he paused to skim his notes, asked repetitive questions, and referred Hill to destinations such as the “last column, fifth row” of a chart – or was it the “sixth row”? On several occasions, Judge Pan challenged Oppenheimer’s line of inquiry and at one point pleaded with him to move on. When the court retired, a group of ashen reporters staggered out of the overflow room. “Guppies” The weekly publishers editor John Maher, who had valiantly live-tweeted the trial, whispered. “All I see are guppies.”
Aside from the entertainment value of Hill’s models, its larger case was compelling. Big Five publishers possess advantages that make them particularly attractive to literary stars: reputation, breadth of distribution, breadth of marketing and, perhaps most importantly, extensive backlists that generate enough revenue to offset potential losses. New companies, such as bantling publisher Zando, “cannot grow to mitigate the anti-competitive effects of the merger,” Hill said, because they lack such listings, which grow over decades like oak trees. Yes, publishing is a risky business; yes, the elusiveness of a good formula for success means that small presses and self-published authors all have a chance of producing a bestseller. But, year after year, the Big Five produce the vast majority of profitable books, and this is precisely due to their ability to manage risk. Success in the publishing industry is not being able to publish a single hit; it’s being able to publish many hits over a long period of time. Here, the big publishers eat the lunch of their competitors.
Yet one thought tormented me as I watched Hill’s testimony: you are a data scientist. Those who work in publishing have answered the ineffable and low-paying call to cultivate literature. Maybe their goal – luck, passion, the wind, the stars – is the right one. Maybe money doesn’t always rule the day. On Thursday, agent Elyse Cheney testified that many authors prefer a publisher who can coax the “richest, most robust project” to one who thrives on the biggest breakthrough. If nothing else, the lawsuit laid bare the prodigious work, on the part of agents, publishers and booksellers, that it takes to bring a book to life. Commercial publishers are “angel investors in our authors and their dreams, their stories,” said Dohle, managing director of Penguin Random House. “That’s what I call my editors and editors: angels.” This devotion is not always rewarded. In September 2021, Dohle promised not to close any footprints if the deal went through, but the merger is likely to have a negative effect on employees. In 2013, when Penguin merged with Random House, a wave of publishers, marketers and publicists lost their jobs and midlist contracts shrunk. It is naive to hope that the sale of Simon & Schuster, whether to Penguin Random House or another buyer, will bring a different outcome.