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What does Penguin’s chairman see in the Random House merger? More ‘firepower’

John Makinson, chairman and chief executive officer of The Penguin Group, one of the world's leading trade book publishers, poses for a portrait in Toronto in 2008.

Deborah Baic/The Globe and Mail

Don't believe everything you've heard about the decline of book publishing, as most recently indicated by the planned merger of former proud competitors Random House and Penguin. The business is robust and growing, according Penguin chairman (and designated Random Penguin chairman) John Makinson.

"We are completely committed to this industry," Makinson said while visiting Penguin Canada in Toronto last week. "We're committed to it in Canada and we're committed to it everywhere."

Slurping coffee at a Bay Street deli in an elegant bespoke pinstripe suit, Makinson expressed indignation at the notion, as advanced by innumerable observers and more than a few experts, that the merger represents an inevitable rationalization in the face of diminishing opportunities.

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"The logic behind this is about extending the range of the publishing we do, not downsizing the publishing company," Makinson insisted. The merger is necessary because "rapid digital transition" has placed a premium on resources, he said. "And I don't just mean the financial resources, I mean the creative resources, the human resources to sustain a brave and risk-taking publishing program across a whole range of categories."

"Penguin on its own wouldn't necessarily have access to those kinds of resources," he added. "And I think in combination with Random House we would. We'd have the firepower as an organization, creatively and commercially, to invest."

A key to making the case for the merger with the federal government will be a commitment to maintain the same level of publishing activity in the combined firm, according to Makinson. "With Penguin Canada we publish 125 titles a year," he said. "I don't expect that will change and we would be happy, as Penguin, to make commitments around that."

Experts have estimated that the Random Penguin company, as outside observers clearly prefer it be called, would own about 25 per cent of the global market for books aimed at a general audience. In Canada, its likely market share would be more than 35 per cent, according to Rowland Lorimer of Simon Fraser University.

To succeed, the merger will need approval from both the federal competition bureau and also the Heritage ministry, which regulates foreign investment in publishing. But Makinson, a Briton, is not overly concerned.

The company also has to make filings in Botswana and Zimbabwe, he said. "Turkey we're still thinking about." But the most important tests will take place in Brussels and Washington.

"We did take some preliminary advice on all of this, as you could imagine, and we wouldn't have proceeded to make an announcement unless we felt confident we could satisfy the competition criteria in the various markets," Makinson said. "We do think that."

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The task of survival will require greater ingenuity, as publishers everywhere deal with the digital transition and the attendant decline of traditional book retailers. But book publishers have advantages over other media companies struggling against the same forces, according to Makinson. "The book publishing business is not downsizing in the way the newspaper business is," he pointed out.

And the book as an artifact retains a quality the music industry has lost: "It is a pleasure to have, to give, to hold, to display a book," Makinson said. "And we have to make sure as publishers we don't lose sight of that."

But continued prosperity will require more than that, he admitted. "If the relevance of a publishing economy is to be enhanced rather than diminished by what's happening out there, then we're going to have to learn new skills," he said.

Gaining those skills is the whole point of the merger, he added. It has nothing to do with trimming costs.

"I don't want to say there is this huge growth landscape out there," Makinson said. "But we are expecting to grow our business. We're not shrinking now, we continue to increase in size and we're going to carry on doing that."

"It is important that one or two publishers raise a big flag and say, 'We're in the book publishing business and we're going to stay in the book publishing business.'"

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Consider it done.

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