Could the Penguin-Random House Merger Actually Help Amazon?

The just-approved marriage between Penguin and Random House holds that beleaguered publishers will now be able to stand up to bookselling goliath Amazon. But a publishing consolidation might be exactly what Amazon wants.

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The just-approved marriage between Penguin and Random House should help beleaguered publishers stand up to bookselling goliath Amazon — right? That's been the typical narrative about the merger thus far. But a closer look at recent bookselling battles suggests that publishing consolidation might be exactly what Amazon wants.

Yesterday, the Department of Justice gave the go-ahead for Bertelsmann (the German corporate owners of Random House) to create the world's largest publisher by buying a 53 percent stake in Penguin, currently held by British education company Pearson. Antitrust regulators officially ended the the Big Six era by approving the merger "without conditions." The newly minted entity, Penguin Random House, is predicted to control 25 percent or more of all book sales. Most reports on the merger suggest that Penguin Random House represents the publishing world's challenge to Amazon, the retail giant that's been slashing physical and digital book prices much to the publishers' chagrin. Here's a sample of excerpts from articles on the DoJ approving the merger:

  • "Amazon's dominance in the online bookselling market has allowed it to set terms for publishers, who have had little recourse. Some think Penguin Random House might be large enough to shift the balance a little." —Carolyn Kellogg, Los Angeles Times
  • "The idea was that the combined entity would be better positioned in the digital market to combat companies like Amazon, whose aggressive pricing was putting pressure on big publishers." —Leslie Kaufman, The New York Times
  • "Britain's Pearson and Germany's Bertelsmann plan to merge their publishers Penguin and Random House, aiming to gain the upper hand in their relationship with Amazon and Apple, the leaders in the ebook revolution." —Kate Holton, Retuers

But what if all these reporters have it backwards? Dennis Johnson, co-founder of indie publisher Melville House, thinks they do. In his blog post from earlier today, Johnson writes that the "real story" behind the merger is Penguin's decision in December 2012 to settle with the DoJ over their e-book price-fixing case. That suit never directly involved Amazon, but the case against Apple and a handful of publishers for allegedly colluding to raise e-book prices always featured Amazon's bargain pricing as the elephant in the room. By settling, Penguin agreed to let retailers like Amazon continue selling their books at a discount, and Johnson believes that Random House (which has always complied with Amazon's slashed price-points) may have put them up to it. Johnson writes:

[Penguin's settlement] is good for Amazon. The company once again controls 90 percent of e-book sales, for example, while the death of agency seems to have killed its only real competitor, Barnes and Noble. And now, bingo, the merger has been given an amazingly fast approval by our government.

Other bloggers, like The List's Sophie Cooke, have also noted that it won't matter how big these consolidated publishers get if Amazon becomes the only retail game in town (Barnes & Noble, the only seller anywhere near Amazon's size, appears to be buckling). But even with all these signs that Penguin Random House isn't as big of a threat to Amazon as the media has made it out to be, Johnson's argument should be taken with a grain of salt. He and his fellow bloggers at Melville House willingly describe themselves as "avowed Amazon haters," and he even admits in this post that he may be a "conspiracist" when it comes to the DoJ's perceived coziness with Amazon. However, many publishing pros and book-world watchers think his argument is more insightful than paranoid:

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