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Is It a Good Thing That Private Equity Is Now Buying Publishers?

KKR Buys Simon & Schuster

Inside a high-roofed, beautiful bookstore
Photo by Celine Ylmz on Unsplash

If you follow news of the publishing world, then you remember the failed attempt of Penguin-Random House to purchase Simon and Schuster last year. In November of 2022, the Justice Department ruled against the acquisition citing anti-trust concerns.

If Penguin-Random House had been allowed to purchase Simon & Schuster, there would have only been four big publishing houses instead of five, decreasing the diversity of offerings, causing layoffs of employees, and making it even more difficult for unknown authors to win contracts.

The acquisition was denied.

Regardless of the Justice Department's ruling, Paramount, Simon and Schuster's parent company, still wanted to sell its publishing company, and KKR, a private equity firm stepped in to make a deal.

Private Equity firms

I am a writer and English major focused on "artsy" things. I've never had much money, and my parents were down-to-earth people whose idea of savings was a Christmas Club account. They managed to put three daughters through college not because of high finance investing, but through the "scrimp, save, and sacrifice" method.

Our family just didn't know much about "big Money."

So when I heard that Simon & Schuster had been purchased by a private equity fund, I had to look up exactly what it is that private equity firms do. Basically, private equity firms have lots of capital (often pulled from pension funds and endowment funds) that they invest in private businesses. They hope that they will be able to increase the value of those businesses over a period of years and make more money either through raising the value of stocks and/or the value of the business upon resale.

KKR purchased Simon & Schuster in August of 2023 for 1.62 BILLION dollars.

Not a new idea

It's not a new idea. Big-money private equity firms have bought into the book world before.

In 2019, Elliott Investments Management purchased Barnes and Noble. The deal cost Elliott Investments $683 million dollars plus the debt that Barnes and Noble had amassed.

KRR is also a private equity company, and the Simon & Schuster deal is not their first foray into the book world. KRR purchased RB Media in 2018, the largest audiobook publisher in the nation. KRR also owns OverDrive which is the company that distributes audiobooks through library and school systems.

KRR's acquisition of RB Media exemplifies how a successful private entity firm works. It purchases a company, invests in it, makes it better, and then sells it for a profit. KRR doubled the size of RB Media's audiobook catalog, and last month sold it to another private investment firm for a "substantially higher price."

Is that the plan for Simon & Schuster?

Is it a good thing that private equity is now buying publishers?

High-finance firms and investment companies may not know about the book industry specifically, but they do know how to make companies profitable.

It's possible that the infusion of funds that private equity ownership brings will be a great thing for the publishing industry, offering new ideas and non-traditional approaches to an industry that has been set in its way for decades.

Interestingly, Barnes and Noble CEO, James Daunt, noted that in 2021, the retail chain reported double-digit sales growth in books and that overall, sales have risen 6% since Elliott Investments took over. One of Daunt's first moves was to give Barnes and Noble store managers more control over how and what their stores look like, making them each distinct instead of every location looking the same as the others.

What does this mean for you?

You may be wondering what this has to do with you.

You might not ever publish with one of the big house publishers, so you don't care who owns them. You may think that your paltry income from writing has nothing to do with the bigger operations of the publishing world. You might believe that self-publishing is the only distribution channel that will matter in the future.

But you might be missing something.

If you're a writer, shouldn't you know how the industry you plan to succeed in works?

Besides, what if some of the new ideas that private equity firms infuse into book world include investing in programs that incentivize previously unknown writers? What if investment companies develop more profitable ways to develop and deliver books while amply rewarding the people who are writing them?

Innovations like that would matter!

As writers, we can hope that private equity companies will inject new energy into the book industry and offer some measure of hope for writers who dream of being bestselling authors.



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