Dohle defends bidding policy at trial and brands subscriptions 'biggest threat' to publishing

Penguin Random House chief executive Markus Dohle has defended his company’s bidding policy during a trial over the firm’s $2.2bn merger with Simon & Schuster and described subscription services as the real threat to publishing.

Dohle testified at Judge Florence Pan’s court in Washington in defence of the Department of Justice’s claims that PRH parent company Bertelsmann should not be allowed to complete its proposed $2.2bn deal for Simon & Schuster (S&S).

PRH has previously said that should the merger go ahead, S&S imprints would be treated as an external bidder in auctions — a claim novelist Stephen King called "a little bit ridiculous" earlier in the trial.

Lead DoJ attorney John Read questioned Dohle on how the policy would be applicable in situations such as an author wanting to move from one house to the other. Dohle replied: “We’re going to keep that external, too; that’s my understanding," Publishers Lunch reported. 

Asked what the course of action would be regarding direct negotiations, including when an author thinks their offer is too low, Dohle said “Our publishers and editors see their colleagues as some of their fiercest competitors." He added: "We want to keep those external and independent.”

The judge asked  if the policy of keeping bidding and direct negotiation external could be revoked in the future, if a new c.e.o. was appointed. Dohle said "unfortunately" the company couldn’t find a "legally binding way" of implementing it irreversibly.

PRH paid out just over $1bn globally in advances and royalties in 2021, Dohle said, with approximately 67% of that paid by PRH US. Advances are traditionally higher in the US market than the UK, and Dohle added that in 2021, PRH US pledged an “all-time high” of roughly $650m in author advances.

Dohle, who has traditionally been against subscription services appeared to cast them as the real problem facing the industry rather than consolidation. He said such models will have a "tectonic influence" on the industry’s collective revenue. If all access subscriptions were rolled out, Dohle warned physical retail "will be gone in two to three years”, leaving publishers "dependent on a few Silicon Valley or Swedish companies". 

"Today, the biggest threat is all-access models for books," he added. 

He later referred to publishers as "angel investors" for authors "in their ideas and their dreams". He said: "That’s how I call my editors and publishers - angels.”

Dohle’s testimony follows earlier statements from S&S c.e.o. Jonathan Karp and novelist Stephen King. The ongoing trial is scheduled to last for up to three weeks.