Penguin And Random House To Form Joint Venture Likely Leading To A New Company

The publishing industry is starting to consolidate with the announcement that Penguin and Random House will start a joint venture that may ultimately be spun off as an independent company after five years.  The news is in a Financial Times report (subscription required).  There was some talk that News Corp was interested in bidding for Penguin.  Capital gain taxes in the United States would have raised the price of a News Corp/Penguin deal beyond Rupert Murdoch’s appetite.

One of the more interesting items in the report was the notion that the venture would allow creating a web platform to sell books directly to consumers.  Another was the possibility that the combined company would consider creating its own tablet to compete with the Kindle.  Could this be one of those possible future market developments that Judge Cote cited as supporting her decision to approve the settlement between three publishers and the DOJ?  Penguin, by the way, is still fighting the DOJ’s allegations.  Random House is not a party to the litigation.

While we’re on the subject of the future, I’m going to speculate about another way an e-book publisher might innovate in dealing with consumers.  It involves the touchy subject of licensing terms granted to libraries for e-books.  I can imagine publishers having their “come to Cthulhu” moment when they realize they could easily cut libraries out of the lending equation by creating their own lending programs aimed directly at consumers.  They just need their own platform to make it work; that, and attractive terms. 

The publishers viewed Amazon’s Kindle lending option to Prime customers with disdain even though Amazon paid them as if a lend was a sale.  Why not offer a catalog subscription option for a monthly or yearly fee?  It took the music industry a while to warm up to streaming music services.  Now every major operating system and platform has one streaming option if not more.  I’ll predict that books will go the way of music and become a commodity.  A subscription service is the next logical step.  This development may be bad for libraries in some respects.  As any content owner, publishers love to control the distribution of their products.  What better way than by cutting out the middlemen. 

Other articles that describe the transaction are in the Guardian UK here and here.  They should be freely accessible.  [MG]