On the second day of his testimony in the trial to determine whether Penguin Random House will be successful in its bid to acquire Simon & Schuster, S&S CEO Jonathan Karp, in a cross-examination by the defense, made his case for the proposed merger as a net good for S&S authors.
"The culture of the company is quite analogous to what S&S is about," Karp said, noting PRH's reputation for being "wholeheartedly committed" to "treating its authors well." They are, he added, "a good corporate citizen. And they’re part of a larger company, Bertelsmann, that has a long commitment to books." The implication was clear: at Paramount (formerly ViacomCBS), S&S was an afterthought. At PRH, it would be part of the main event.
Throughout his testimony, Karp attempted to put distance between himself and the 2020 email, sent to John Irving and employed as evidence by the government, that stated: "I'm pretty sure the Department of Justice wouldn't allow Penguin Random House to buy us, but that's assuming we still have a Department of Justice." The remark, Karp said, was "taken out of context," adding that it was intended to be a humorous response to the "irony" of the possibility that the company at which he cut his teeth (Karp began his career in publishing at what was then, simply, Random House) might once again become his employer. He also confirmed that he stood by a comment, in another email to Irving, that he was "delighted" that S&S might be acquired by PRH.
The government, for its part, picked apart that delight by pointing out that Karp would receive a bonus from S&S should PRH acquire it. Karp confirmed this, calling it a standard provision of the contract he signed with S&S and saying it had no impact on his testimony. "I didn't ask for it," he said.
All the while, attorneys for PRH continued to work Karp in order to make its case: that non–Big Five publishers did, in fact, engage in regular, robust competition with the Big Five over books that would go on to receive advances of $250,000 or more. He pointed to Norton as a major example, saying that such authors as Michael Lewis and Mary Roach stayed with the publisher despite plenty of interest from other houses, including his.
Karp also continued to backtrack on a statement in his deposition that said Amazon was not a competitor for titles, after noting on Tuesday that S&S and Amazon Publishing had engaged in a bidding war for a book just three weeks ago: “I think Amazon as a publisher of books is underestimated," Karp said. Later, the government attempted to impeach his testimony several times, as it had successfully done the day before—but in neither case did Judge Florence Pan allow it.
Which is not to say that the judge did not continue to grill Karp over his assertion to the judge, the day before, that marketing budgets are not determined by advance size. He noted that many authors of bestselling books bolster publishers' marketing and publicity budgets with their own resources. He cited, as one example, Colleen Hoover, noting that her books don't require a large portion of S&S's resources to support them because "she's the queen of TikTok." He added: “Literary agents frequently ask us to guarantee marketing dollars, and we don’t do it. We don’t want to be locked into a plan.”
Still, Judge Pan asked, “if you know it’s going to be a hot auction with more interest, do you spend more time developing a marketing plan?” Karp conceded that S&S did. In response, the defense asked if S&S ever did marketing plans for books below the government's $250,000 threshold for its proposed submarket. The answer there, too, was yes: “if you really love the book, you have to jump through hoops.”
Despite arguing that such publishers as Abrams, Bloomsbury, and Norton were "all paying massive advances for certain authors," Karp conceded that they were fewer competitors at auction for the biggest books. And depositions from Liate Stehlik, president and publisher of the Morrow Group, and Michael Jacobs, president and CEO of Abrams, both testifying in the afternoon, confirmed Karp's concession.
Stehlik said it was “hard to conjecture” whether a merger of PRH and S&S would affect author advances, but added that, “usually,” Morrow’s only real bidding rivals are PRH and S&S, although “sometimes” it’s Hachette and Macmillan. When asked by the government how often she lost a book at auction to publishers that are not in the Big Five for a book the would go on to receive an advance of $250K or higher, she replied: "very rarely."
After discussing the overwhelming success of the books by Jeff Kinney that Abrams has published, Jacobs said he does not know whether the proposed merger would change how much Abrams bids for books. Asked if Abrams was "shut out" of auctions, he replied, "Well, we didn't get sent...Barack and Michelle Obama's books." Did Abrams ever want to purchase those books, the government asked? Jacobs replied: "Well, I don't know. We weren't asked!"
But, Jacobs continued, getting involved in high-stakes bidding isn't in Abrams' strategic plans, because Abrams is "not used to paying those kinds of advances." Later, Jacobs added: “We get outbid all the time by publishers” bigger than Abrams. “It’s just the reality of things.”
Further testimonies during the day were given by DOJ statistician Adriana Porro, who ran through a redacted list of 27 titles won at auction by either PRH or S&S. The defense noted that the 27 titles, published over a span of three years, that Porro looked at represented a narrow sliver of the number of new books released each year, which it estimated at 55,000 or so. (It is worth noting that journalists covering the trial are not being provided any access to the exhibits admitted as evidence, even redacted, and will not receive such access until after the trial.)
After a debate over whether the deposition of literary agent Christy Fletcher could be submitted as testimony, the judge ultimately allowed it. Fletcher's testimony will likely be presented today, following the much-anticipated testimony of Penguin Random House CEO Markus Dohle, scheduled for first thing this morning.
