A predictive model is only as good as its results. That means a reliable way to assess the value of a business strategy is to look at the projections made by people who employ that strategy. If their predictions based on a given model consistently pan out, it’s a good bet that their model corresponds to reality.
The newpub moment that hit the scene when Amazon introduced the Kindle offers a useful example of this dynamic. For more than a decade now, independent authors have evangelizing writers away from the old New York publishing houses with the promise of greener pastures on the indie side. Many of newpub’s key arguments rely on the prediction that oldpub’s decline would force a merger of the Big Five publishers into the Big Four.
Indie authors have anticipated the Big Five’s demise for years. A common newpub meme likened oldpub to lumbering dinosaurs obliviously grazing as the asteroid approached. Those dinosaurs proved more resilient than everybody thought. But this year, the asteroid finally hit.
And now, the long-prophesied event has come to pass.
ViacomCBS Inc. (NASDAQ: VIAC, VIACA) today announced it has entered into a definitive agreement to sell the publishing business Simon & Schuster (“Simon & Schuster”) to Penguin Random House LLC (“Penguin Random House”), a wholly owned subsidiary of Bertelsmann SE & Co. KGaA, for $2.175 billion in cash.
This divesture follows a strategic review of non-core assets ViacomCBS undertook early in 2020. Proceeds from the transaction will be used to invest in ViacomCBS’s strategic growth priorities, including in streaming, as well as to fund the dividend and pay down debt.
This transaction is the outcome of a highly competitive auction that attracted interest from buyers around the world, reflecting Simon & Schuster’s position as one of the world’s best known publishing brands. Simon & Schuster has more than 30 publishing units across adult, children, audio and international. Its portfolio of best-selling authors includes Stephen King, Doris Kearns Goodwin and Jason Reynolds, and it owns a rich backlist of perennial favorite titles such as Catch-22 and The 7 Habits of Highly Effective People.
The transaction is expected to close in 2021, subject to customary closing conditions, including regulatory approvals. Upon close, Simon & Schuster will continue to be managed as a separate publishing unit under the Penguin Random House umbrella, and Jonathan Karp, President & CEO of Simon & Schuster, and Dennis Eulau, COO and CFO, will continue at the helm of the publishing house.
Cutting through the Madison Avenue marketing gloss reveals that ViacomCBS sold Simon & Schuster because they’re deep in debt and their pet publisher isn’t growing. Since newpub now has a majority share of the book market, it’s no stretch to conclude that S&S has actually been contracting.
This press release also contains a nugget of information that the “Get woke, go broke” crowd missed all along. Pop Cult front companies don’t go under when fans walk away because their Death Cult parent companies serve as multibillion-dollar safety nets. When a woke publisher, movie studio, or record label spills too much red ink on one megacorp’s balance sheet, the parent company just swaps subsidiaries with another megacorp. It’s a fiscal juggling act that makes sure the poz keeps flowing.
It also ensures that the parent companies’ debts are never paid off. The enormous expense of keeping a dead business afloat does seem to put brakes on the megacorp gravy train. ViacomCBS is willing to lose a billion dollars shilling for Stephen King. But two billion? That’s stretching plausible deniability.
What’s significant about this deal is that ViacomCBS sold S&S to a fellow megacorp that already has its own publisher. In fact, that publisher is the result of a merger between two other publishing houses. That means the power players aren’t just moving rooks around the board anymore. Pieces are being removed. A decade ago, there were six. Now there are five. Next year, there’ll only be four.
That’s exactly what the newpub oracles predicted–if not exactly when. It’s easy to understand why their timetable was about five years off. Everybody thought of the Big Five as businesses out to make money, however ineptly. Nobody imagined back in 2014 that these companies are run by fanatical Death Cultists bent on destroying Christendom.
Simon & Schuster’s merger with Penguin Random House confirms a core tenet of newpub. We can now be sure that the indie publishing model more closely aligns with reality than the oldpub model. The next test for newpub will come soon, since their follow up prediction is that the number and rate of oldpub mergers will increase. So far, those forecasts are right on track.
For more expert insights into oldpub’s slow-motion collapse, see best seller Jon Del Arroz’s video:
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