News Corp. May Bid for Penguin for Publishing Spinoff

The following is an excerpt from an article in:


The New York Times
Monday, October 29, 2012

News Corp. May Bid for Penguin for Publishing Spinoff

By AMY CHOZICK

Rupert Murdoch's News Corporation, the parent company of HarperCollins, is exploring a cash bid for Pearson PLC's Penguin book division, a step that could ignite a bidding war for Penguin as the publishing industry begins to move toward consolidation.

News Corporation's interest in Penguin, confirmed by a person briefed on the talks, came shortly after Pearson said it was exploring a deal with Random House's parent company, the German media conglomerate Bertelsmann, to combine Random House and Penguin into one giant publishing house.

The interest in Penguin underscores the urgency the publishing industry faces in combating the threat of technology companies like Amazon, Google and Apple, whose inexpensive e-books are rapidly transforming the traditional book business.

Analysts have said consolidation of the "big six" publishing houses is inevitable given the headwinds the industry faces as consumers turn to e-books and as brick-and-mortar stores continue to close. They likened it to the consolidation of record labels when the music industry evolved to deal with the challenge from iTunes and the downloading of songs.

"Publishers now face a single dominant book retailer, Barnes & Noble, and a single dominant online retailer, Amazon," said Mike Shatzkin, the founder and chief executive of the Idea Logical Company, a consultant to publishers.

Acquiring Penguin, whose revenues have been in a slide in recent years, would provide an opportunity for an existing publishing company to gain scale and cut costs by eliminating redundant imprints and combining operations like distribution and marketing. Additionally, a combined company would have the greater heft necessary to better negotiate with Amazon and other e-book retailers.

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