Paramount Global, the media conglomerate that owns Simon & Schuster, has finally found a buyer for the book publishing powerhouse. On Monday, Paramount announced that it has agreed to sell Simon & Schuster to private equity firm KKR for $1.62 billion in cash. The deal is expected to close by the end of the year, subject to regulatory approvals and customary closing conditions.
Paramount had been trying to sell Simon & Schuster since 2020, as part of its strategy to focus on its core businesses of film, TV, and streaming. In November 2022, Paramount reached a deal to sell Simon & Schuster to Penguin Random House, the largest book publisher in the world, for $2.2 billion. However, that deal was blocked by a federal judge in October 2023, after the US Department of Justice sued to stop the merger on antitrust grounds.
The DOJ argued that the combination of Simon & Schuster and Penguin Random House would reduce competition in the book market, resulting in lower royalties for authors and higher prices for consumers. The DOJ also claimed that the merged entity would have too much power over bestseller lists, distribution channels, and promotional opportunities. The judge agreed with the DOJ and ruled that the merger would harm the public interest.
Paramount decided not to appeal the ruling and instead accepted a $200 million termination fee from Penguin Random House. Paramount then resumed its search for a new buyer for Simon & Schuster, which is one of the “Big Five” of major US book publishers, along with Penguin Random House, HarperCollins, Hachette, and Macmillan.
KKR sees an opportunity to grow Simon & Schuster
KKR, a global investment firm with over $200 billion in assets under management, is no stranger to the media and entertainment industry. KKR has invested in companies such as Epic Games, ByteDance, Spotify, Warner Music Group, and Nielsen. KKR also owns RBmedia, a leading audiobook producer and distributor.
KKR said that it sees an opportunity to grow Simon & Schuster’s business by leveraging its expertise in digital transformation, content creation, and global expansion. KKR also said that it respects Simon & Schuster’s editorial independence and creative culture, and that it will support its management team and employees.
Simon & Schuster’s CEO and president Jonathan Karp said that he is excited to partner with KKR and that he believes that KKR shares Simon & Schuster’s vision for the future of publishing. He also thanked Paramount for its stewardship of Simon & Schuster over the past 23 years.
Simon & Schuster was founded in 1924 and has published some of the most influential authors in history, such as Ernest Hemingway, F. Scott Fitzgerald, Stephen King, Bob Woodward, Hillary Clinton, and Barack Obama. Simon & Schuster has more than 30 publishing units across adult, children’s, audio, and international divisions. In 2023, Simon & Schuster reported revenue of $814 million and operating income of $143 million.
The book publishing industry faces challenges and opportunities
The book publishing industry has been facing various challenges and opportunities in recent years, as digital platforms such as Amazon Kindle, Apple Books, Audible, and Spotify have disrupted the traditional business model of print books and physical retail. According to Statista1, e-books accounted for 18% of global book sales in 2020, up from 13% in 2015. Audiobooks also grew rapidly, reaching 8% of global book sales in 2020.
However, print books still remain popular among readers, especially during the Covid-19 pandemic, which boosted demand for books as a form of entertainment and education. According to Publishers Weekly2, print book sales in the US increased by 8.2% in 2020 compared to 2019. The genres that saw the most growth were juvenile fiction (11%), adult nonfiction (6%), and adult fiction (6%).
The book publishing industry is also undergoing consolidation as publishers seek to gain scale and bargaining power in a competitive market. In addition to the failed merger between Simon & Schuster and Penguin Random House, HarperCollins announced in March 2023 that it will acquire Houghton Mifflin Harcourt’s consumer publishing division for $349 million3. The deal will add popular titles such as The Lord of the Rings, The Hobbit, Animal Farm, and 1984 to HarperCollins’ portfolio.
The sale of Simon & Schuster to KKR marks another major change in the book publishing landscape. It remains to be seen how KKR will manage Simon & Schuster’s business and how it will compete with other publishers in the digital era.
