The Department of Justice’s case against Penguin Random House in its attempt to acquire Simon & Schuster resumed Wednesday with expert witness for the government, economist Dr. Nicholas Hill, returning to the stand, giving the defense one last chance to challenge his models used to determine the market share of anticipated topselling authors for PRH and S&S. When Hill brought up the concept of “editorial minutes,” meaning the notes from editorial meetings, the attorney for PRH/S&S commented that there are lots of data points to choose from in publishing. Hill said that his now-famous GUPPI (Gross Upward Pricing Pressure Index) models could show the winner of auctions for literary manuscripts, but that he had been able run data for just 13 out of PRH’s roughly 90 imprints. When the government asked “Was that hard work?” Hill responded, “It took a long time.”
Next up was literary agent Christy Fletcher, appearing in a video deposition as an adverse witness for the government. Fletcher, who owns and operates The Fletcher & Company Agency, stressed that current auction structures “really depend on variables at play,” including acquisition scenarios like “best bids.” The government asked whether her concern was that the merger would make it harder to acquire rights, and she responded that it would mean it would be harder to hold back rights, a common practice of agents.
Fletcher said her primary concern is with the bidding process. She told the government that there are positive effects to be gained from the merger, including the ability for “S&S to benefit from PRH marketing knowledge,” as well as “the ability of a combined entity to support the retail environment,” specifically independent bookstores.
During the defense’s cross examination, Fletcher said an author might accept a preempt bid rather than have a manuscript go to auction “if they felt it was the right fit.” PRH attorneys asked how agents choose editors to whom they submit, and Fletcher said her clients are “pretty creative people” who care less about dollar amounts of advances and more about professional objectives and achievement, although “money is also a factor.”
Following 20 minutes of sealed testimony, the government rested its case. The defense then took over the proceedings, calling to the stand Jennifer Rudolph Walsh, literary agent and a board member at William Morris Endeavor, who described her long career. Walsh was asked to describe the duties of a literary agent, some of which overlapped with Fletcher’s testimony, but her description ultimately came down to her statement that agents are “honor bound to act in the best interests of our clients.” Those interests include finding the “perfect match” between author and editor in an industry that Walsh says is all about relationships; since agents don’t focus on publishers, only on “editors and imprints,” the proposed merger will not affect her process, Walsh stated.
Judge Pan pressed Walsh on her statement that “We hope every book we work on will be a bestseller,” asking whether if there is a difference between hoping and expecting. Did Walsh mean to say she expects every book to be a bestseller? Walsh replied that she understands the distinction, although “you can never really be sure.” She did assert that, in her view, the proposed merger would not change competition in publishing. “If S&S were to disappear, there would still be people wanting to edit and publish great books.”
Next up was Jennifer Bergstrom, publisher of Gallery Books, who described her division has “perhaps the group with the greatest range” within S&S. The defense walked her through a decoder list (which looks at deals won and lost) of different authors published by Gallery in order to demonstrate the kinds of risk scenarios such a group takes. “It’s an art and it’s not a science,” said Bergstrom of publishing. “It’s so subjective.” Gallery Books might also be one of the rare groups in publishing that encourages editors to be “entrepreneurial,” says Bergstrom. “We love when editors think for themselves and come up with great ideas.” That means, she said, that auctions make up only 25% of Gallery’s overall business.
As the defense walked Bergstrom through more of the decoder scenarios, the court saw that every publisher experiences losses, and every publisher picks “focus titles.” Judge Pan asked whether some books get treated differently: “It just seems to me a matter of economics at this point. Don’t you favor the ones you expect to sell well?”
“It’s fickle,” Bergstrom replied. In a cross-examination by the government, discussion focused on some of the decoder sheet’s bigger deals, especially those Gallery Books lost. Bergstrom said that one case involved a political figure whose book “Mr. Karp would not have liked to acquire. The political conservative space is a place a lot of people don’t want to enter.” (Earlier in the trial, Karp noted that Simon & Schuster bid on a book, in the seven-figure range, by prominent conservative pundit Ben Shapiro, but lost it to Harper at auction.)
The day concluded with video testimony from John Glusman, v-p and editor-in-chief of W.W. Norton & Co., the nation’s largest independent/employee-owned publisher. Asked why a long and storied history like Norton’s is important, Glusman said, “We are not beholden to any corporate interest,” which enables them to keep an author like Michael Lewis because “he has an extremely close relationship with his editor and others at Norton.” Glusman added that in his opinion a merger would increase, not decrease, advances.
