US files lawsuit to stop merger of publishing giants
November 2, 2021
US legal authorities have filed a suit to block the acquisition of Simon & Schuster by Penguin Random House. They said it would be a bad deal for readers and authors alike.
Penguin and Random House only themselves merged back in 2013Image: picture-alliance/dpa
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The US Justice Department on Tuesday said it was suing to block a buyout that could reshape the industry in a less competitive way.
German media giant Bertelsmann's Penguin Random House — already the largest US publisher — wanted to buy New York-based Simon & Schuster.
What did the Justice Department say?
US authorities on Tuesday filed an antitrust lawsuit to block the $2.2 billion (€1.9 billion) publishing deal that it said would have hurt writers and, in the end, readers.
Penguin Random House is seeking to buy the New York-based publisher Simon & Schuster — a move that would trim the so-called "big five" of American publishing to just four.
In the first major antitrust action by the Biden administration, the Department of Justice said the deal would let Penguin Random House "exert outsized influence over which books are published in the United States and how much authors are paid for their work."
"If the world's largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry," said Attorney General Merrick Garland in a statement.
Selling song rights: Blockbuster deals
Bob Dylan has hit the headlines again after deciding to sell recording rights to Sony after an earlier deal with Universal. Here's a look at other big music publishing deals.
Image: Angela Weiss/AFP/Getty Images
Justin Bieber joins the trend
Justin Bieber has sold his music publishing rights to Hipgnosis for a reported $200 million (€184 million), according to AFP. While music legends including Bob Dylan and Tina Turner have also cashed out on their catalogs, such deals are not as common with younger artists. But the 28-year-old Canadian pop star is among the best-selling artists ever, with hits including "Baby" and "Sorry."
Image: Angela Weiss/AFP/Getty Images
Bob Dylan's blockbuster deal
Bob Dylan created waves when he sold his publishing rights to Universal Music in 2020 for a reported $400 million. In January 2022, he then went on to sell his entire master recordings to Sony Music for an undisclosed amount. Billboard said the recordings are worth over $200 million and yield $16 million in annual revenues.
Image: picture-alliance/dpa/D. Castello
Neil Young also sells out
Rock star Neil Young soon followed in Dylan's footsteps, selling the publishing rights to 50% of his catalog to investment fund Hipgnosis. Young's move stunned the music world. The Canadian-American musician had always vehemently opposed the use of his songs in advertising, for example, and wanted to keep his rights to avoid such exploitation. Will Hipgnosis be a trustworthy partner?
Image: Amy Harris/AP Photo/picture-alliance
Shakira gets in on the act
Since the Hipgnosis publishing company was founded in 2018, it has snapped up song rights across the musical spectrum. In addition to Neil Young, Blondie's Debbie Harry and Fleetwood Mac's Stevie Nicks, Colombian pop singer Shakira has also sold 100% of her rights to Hipgnosis. The London-based company is already giving industry giants Universal and Co. a run for their money.
Image: Reuters/S. Mitchell
Red Hot Chili Peppers also sell entire catalog
The Red Hot Chili Peppers also sold their publishing rights to Hipgnosis, signing a deal for around $140 million in May 2021. This includes hits such as "Under The Bridge," "Californication" and "Snow (Hey Oh)." With the coronavirus pandemic restricting musicians' income from performances, rights sales seem to be a growing trend.
Image: Getty Images/G. Caballero
Michael Jackson cashed in ...
Michael Jackson famously brought the song rights business to the fore in 1985 when he purchased the rights to 251 Beatles songs for $47.5 million (€40 million) — to the chagrin of Paul McCartney. Ironically, McCartney first gave Jackson the idea. The ex-Beatle had already lost the rights to his music in 1968 and has not been able to buy them back to this day.
Image: imago/B. Mueller
... but lost a friend
McCartney met Michael Jackson in the 1970s and they became friends. The two also talked about music rights, which awakened Jackson's business acumen. He started buying up catalogs — including those of the Beatles. The friendship with McCartney disintegrated but Jackson's fortune multiplied: 10 years later, he sold the Beatles' rights for $95 million.
Image: AFP/Getty Images
Taylor Swift's re-recorded albums
Taylor Swift was only 15 years old when she signed her first recording contract. She also signed away her publishing rights, with her Big Machine label holding the rights to her first six albums in their entirety. A contract clause stipulated that the singer may re-record the first five albums after November 2020, which Swift did to regain her publishing rights.
Pink Floyd emerged victorious in a dispute over their rights in 2010. They sued their record company EMI after it wanted to sell individual Pink Floyd songs on the internet. When the band signed their contract in 1999, online song sales did not exist. Digital rights could not yet have been the subject of the contract, they argued. The court agreed with them.
Image: picture-alliance/dpa/H. Boesl
Tina Turner secures her life's work
Selling catalogs of rights is a way for ageing stars to secure their estate. Tina Turner, who has received 12 Grammy Awards and has been inducted twice into the Rock 'n' Roll Hall Of Fame, has sold to BMG her share of her recordings' and writer's rights, as well as the rights related to her name, image and likeness. It's the music publishing company's "single largest artist acquisition ever."
Image: Aurore Marechal/abaca/picture alliance
The Boss makes a top record deal
Five decades of hits: Bruce Springsteen sold his entire catalog and music publishing rights to Sony Music in December 2021, in a deal estimated to be worth $500 million. But even after selling his rights, the Boss can further profit from his enduring popularity, as he remains one of the highest-earning musicians on tour.
Image: picture-alliance/dpa/T. Maury
David Bowie's estate also sells publishing rights
Six years after David Bowie's death, his estate is also following the trend and has sold the publishing rights to the late musician's entire body of work. Warner Music is now the caretaker of the influential glam rock pioneer's hundreds of songs. His catalog includes hits such as "Space Oddity," "Changes," "Life on Mars?" and "Heroes." The deal is estimated to be upwards of $250 million.
Image: picture-alliance/dpa/M. Gambarini
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"American authors and consumers will pay the price of this anti-competitive merger — lower advances for authors and ultimately fewer books and less variety for consumers."
Who are the corporate players?
Penguin Random House is already the largest American publisher. Notable among those who have had books published with the company are Barack and Michelle Obama and John Grisham.
The giant wants to buy New York-based Simon & Schuster, whose authors include Stephen King, Hillary Clinton, and John Irving, from the television and film company ViacomCBS.
Five big publishers dominate the US market, including Simon & Schuster. Its purchase by Penguin Random House would reduce that number to four.
The other three are HarperCollins, the Hachette Book Group, and Macmillan.
Daniel Petrocelli, a lawyer for Penguin Random House said the publisher would fight the lawsuit, arguing that blocking the deal would actually harm authors.
Both companies involved say they will maintain their publishing imprints even after the deal and will continue to compete against one another for authors and books.
Penguin Random House said it was not planning to reduce the number of books acquired or the amounts paid for the book deals.
Penguin and Random House themselves merged less than a decade ago, in 2013. The number of acquisitions in the industry has intensified in recent years as publishers seek a stronger bargaining position with Amazon.com., the leading bookseller in the United States.
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Authors and rivals slam deal
The Authors Guild, a writers' organization, has said it opposes the merger because there would be less competition for authors' manuscripts.
However, Mary Rasenberger, Guild CEO, expressed surprise at the lawsuit, saying that officials had been slow to intervene in the past.
"Today's decision by the DOJ was unexpected given that so many other major mergers and acquisitions in the publishing industry have gone through recently and over the last few decades with nary a raised eyebrow from DOJ,'' said Rasenberger.
Meanwhile, Rupert Murdoch's News Corp, which owns HarperCollins and which had reportedly also been interested in buying Simon & Schuster, also criticized the plan.
News Corp CEO Robert Thomson last year accused Bertelsmann of "buying market dominance as a book behemoth."
