An outbreak of ethics in Big Publishing was a bit much to expect going into 2016. But lo and behold, it seems to have just happened… maybe. Penguin Random House has just sold Author Solutions to Phoeniz, AZ-based private equity investor Najafi Companies.
At the time of writing, there’s no sign of a formal statement from Penguin Random House, Pearson, or PRH parent Bertelsmann. The Author Solutions website has no press release or announcement more recent than October 2015, and still carries the logo declaring itself to be “A Penguin Random House Company,” so obviously the previous owners haven’t removed that badge of shame just yet. In default of a clear statement on the transaction, it’s hard to conclude how much Author Solutions fetched, and journalists have fallen back on that reporting staple “financial terms were not disclosed,” but the Financial Times quoted analysts speculating that “the price was likely to be a fraction of the $116m that Penguin paid for Author Solutions in 2012″—which suggests that Penguin Random House may have blackened its reputation for nothing.
That report headlines the news “Penguin Random exits self-publishing,” but I wouldn’t be so sure. The same Financial Times coverage also emphasizes that “publishers are struggling for growth—with sales of physical and digital books falling in the main markets,” and instances self-publishing via Amazon as one of the main competitive challenges. If Penguin Random House saw Author Solutions as one defensive play against the self-publishing threat, clearly it hasn’t worked. Other reports simply declare that Author Solutions has proved a poor fit with Penguin Random House and that both entities will be better off apart to focus on their own core strategies.
But what is Penguin Random House’s strategy going to be? Communications from PRH CEO Markus Dohle quoted in the various reports don’t make any mention of motives for selling off the affiliate, aside from mentioning “our commitment to connecting our authors and their works to readers everywhere.” There’s certainly no mention in any of the quoted statements from Penguin Random House or Author Solutions of the various class action suits and other black marks against the latter and its many subsidiary/camouflage brands. Still, now that the dust has settled on the desperate spin put around the Association of American Publishers market sales figures from mid-2015, it’s clear that the new pricing agreements with Amazon have damaged Big Publishing’s share of ebook sales, and given self-publishing even more of a comparative advantage. The Big Five are going to have to look even harder at how to come back against this challenge – if their corporate blinkers allow them to.
Najafi, meanwhile, has acquired businesses from Penguin Random House parent Bertelsmann before, picking up its direct-to-consumer business, Direct Group North America, in 2008, and the French equivalent, Direct Group France, in 2011. Najafi’s own materials state that the firm seeks “to create value through growth and superior performance.” That can only mean driving Author Solutions’ business even more strongly and aggressively. Najafi also claims to “hold ourselves to the highest standards of ethical behavior.” It’d be interesting to see how that claim holds up in the context of Author Solutions. In any case, it does underline the probability that poor ambitious would-be authors will continue to face the same or an even stronger barrage of overpriced offerings from Author Solutions affiliates in the years ahead.
Could Penguin Random House have managed to build a viable self-publishing unit with a cleaner, less compromised acquisition? Too late to find out now. Will it clean up its act from here on? Don’t hold your breath.