Here we are, the 150th edition of SHuSH, the official newsletter of The Sutherland House Inc. Three years complete!
SHuSH was launched as an experiment back in May 2019, when newsletters and the Substack platform were relatively new. I had no idea how it would go. The safe bet was I’d get bored after a few months and drop it. That we’re still here is a victory of sorts.
Objectives were modest: to further my education in the publishing business, raise the profile of our new company, and fill a bit of the yawning gap in commentary on books and publishing in Canada. It was difficult to make further plans because who knew if anyone would read “Whyte’s Thursday-night musings on his new book publishing venture.” It was always going to be a niche market.
I still don’t know, week to week, whether to be embarrassed or proud of what we’ve accomplished
Embarrassed: this is by far the smallest audience I’ve written or edited for. The highest readership for an edition of SHuSH was just under 7,000. We average about 4,000 readers a week. We have 2,132 regular subscribers, and it costs nothing to subscribe.
Proud: 2,132 subscribers for an extremely niche product isn’t bad, at all. We don’t pay to promote or advertise SHuSH. It’s entirely word-of-mouth and the pace of acquisition has been remarkably steady (see below), with fifty or so new additions every month. We have a 60% open rate which is strong for a newsletter. Our audience, for size and quality, stands up well against any publication in the space.
All things considered, we’re okay. But if I go back and look at my notes from the end of year one, I aspired to have 2,500 subscribers and readership peaking at closer to 10,000 readers by now. I’m a bit short. That’s where you could help.
Please celebrate our third anniversary by using your own email list or social media platform or family/office network to suggest SHuSH to people who might appreciate it. I don’t know how many such people exist but it’s more than 2,132. As long as we’re here, might as well see how far we can push it.
Also, if you’re new here, please push this:
SHuSH readers know that back in November 2020, the fattest of the world’s five big publishing companies, Penguin Random House, outbid the second fattest, Rupert Murdoch’s HarperCollins, to acquire a listless third member of that group, Simon & Schuster.
Regulators in the UK, Canada, and the USA immediately began studying the $2.1-billion cash deal to determine if it would result in too much concentration of ownership and not enough competitiveness in the big leagues of book publishing. Last November, the US department of justice decided it would and sued to block it. A trial is expected this summer. Penguin Random House has until November to close the deal or it expires (with PRH owing S&S a dead-deal fee of $200-million).
For those of you who think in literary terms, the deal is Chekhov’s gun, and we’re coming in hard on the third act. Either S&S gets shot (acquired) or the play ends in an anticlimax (although whoever has been stewarding the deal at PRH may get shot by its parent company, Bertelsmann.)
If the deal fails, we’re in for a sequel because the current owner of S&S, Paramount (formerly ViacomCBS) won’t want it back. It is a motion picture/television company in the process of selling everything it owns not directly related to screen entertainment. It hopes to cement its status as a fourth-rate streaming service. S&S no longer fits, if it ever did.
Our view of the PRH-S&S deal is that the department of justice suit will fail to block the merger and S&S will be swallowed whole. It will be difficult to present the merger as the end of competition in the book industry when there are still four large publishers operating in the US, and a shitload of mid-size and smaller publishers. Combined, PRH&S&S may amount to less than a third of the American trade book market, and as little as 20 per cent, depending on how you do the math. That’s a long way from monopoly.
The DOJ, moreover, has chosen to fight its battle on low ground. It’s saying that the deal is bad for competition in books generally, but it is particularly concerned that the merger will result in less competition for the services of writers of anticipated top-selling books, loosely defined as authors commanding huge advances. You read that right: the DOJ is seeking justice for the .001% of the literary world. We argued all this at length, and destroyed the government’s case back in SHuSH 123.
The first of two interesting developments this month is that certain honchos of the prosecutorial variety agree with SHuSH that the DOJ is on thin ice.
Global Competition Review reports that Daniel McCuaig, a former trial attorney at the DOJ, told a recent American Bar Association meeting that the government needs to “more meaningfully” define the market for anticipated top-selling books. He says it is barely defined at all, and that even if the department’s lawyers learn enough during discovery to up their game at trial, its amorphous (he might have said invented) market for anticipated top-sellers represents the “highest risk” on the government side.
McCuaig knows the book business. He led the government’s investigation in the landmark antitrust suit against Apple and the largest US book publishers ten years ago.
The second interesting development is what’s happening with Simon & Schuster in the interim.
In the decade before Paramount put the publisher up for sale, its revenues were $800 million, year after year after year. Nothing ever changed except that in the latter part of the decade, ownership squeezed costs at S&S to improve its profits, fattening it up for sale. At the time of the sale, S&S earnings were $145 million per annum.
As we noted in SHuSH 76, PRH agreed to pay $2.1 billion for S&S. That’s fifteen times those earnings of $145 million. Healthy companies in growing markets might sell for eight times earnings. A multiple of fifteen means PRH priced S&S as if it were the next Shopify (or, at least, the next Shopify-before-it-lost-80%-of-its-market-cap-in-the-last-six-months).
My guess is that PRH knew exactly what it was getting; not a high-flyer but a sluggish competitor. It was overpaying out of fear. Better to blow up the balance sheet than have S&S fall into the hands of Rupert Murdoch, owner of HarperCollins, who was the other serious bidder. If HarperCollins and S&S combined, PRH would no longer be the bully on the block. HCS&S and PRH would be roughly the same size. That would mean real competition. Who wants that?
But it’s funny what can change when you strike a deal that takes two years to close.
Paramount announced its first-quarter 2022 results earlier this month. S&S sales were $217 million, with profit of $50 million.
That’s up from first-quarter sales of $170 million and profit of $19 million two years ago when Penguin Random House was negotiating its deal with Simon & Schuster.
In the interim, the company that couldn’t grow increased its revenue by 25% and its profit 2.6 times.
That was no one-off quarter, either. S&S has been on a tear. Its full-year profit for 2021 was $213 million, almost 50% better than when the deal was inked. All the cost-cutting it did to make itself pretty for sale has kept its expenses low while the pandemic drove sales sharply higher, making for huge profits.
The upshot is that Penguin Random House, if it can close the deal, will now be paying for S&S a much more reasonable multiple of ten times earnings.
I would think PRH is delighted and eager as heck to close. The semi-ugly company it overpaid for to keep Rupert Murdoch/HarperCollins from bulking up now looks like a star. Its operating margins in this last quarter are 23%. Knopf Doubleday, the big-earning imprint at PRH, usually comes in at around 18%.
Paramount, relentlessly focused on streaming, probably wants to consummate the deal, too. It’s all about the streams. It wants S&S gone and might not even have noticed what’s going on there.
Rupert, meanwhile, is probably doing everything in his power to assist the DOJ with its case, hoping the deal falls apart. S&S is far more attractive than it was two years ago, and if the government says PRH can’t have it, Rupert is the leading candidate to take it off Paramount’s hands. He may have to pay more than he bid in 2019, now that S&S is ringing up profits, but, at the same time, the economy is slowing, no one is doing crazy deals, and his only competitor with deep pockets, PRH, would be out of the race courtesy of the DOJ.
Meanwhile in Canada…
The PRH-S&S deal looks quite different north of the border. Only three of the big five operate in Canada (Hachette and Macmillan have no real presence here). That means the merger will reduce us from a big three to a big two or, in fact, a really big one, PRHS&S, with an angry little HarperCollins sidekick. And unlike the US, we don’t have a bustling bunch of mid-size and smaller publishers to pick up the slack. Canadian independents comprise maybe 4 per cent of the market.
The deal should be blocked in Canada. Write your MP. Don’t hold your breath.
The House of Whatever
This week I looked up the derivation of the title of Edith Wharton’s famous novel, The House of Mirth (illustration from the 1905 first edition, above). I didn’t recognize it as Biblical, but there it was in the King James version, Ecclesiastes 7:4.
The heart of the wise is in the house of mourning; but the heart of fools is in the house of mirth.
I’ve read Ecclesiastes any number of times, always in the King James, yet failed to register that powerful verse.
It left me wondering how many readers get Edith’s title. Not every reader is as heedless as me, but Biblical references are a greater challenge in 2022 than in 1905. Fewer people warm pews today and those who do are likely holding a different Good Book.
Here, from Biblehub.com, is Ecclesiastes 7:4 rendered in contemporary English:
McClelland & Circus
I love a good shit-disturber and Canadian literature has never had a more amusing, dogged, and perspicacious one than John Metcalf, whose latest, Temerity & Gall, is now out from Biblioasis. I just picked it up and we’re off to a rip-roaring start:
I’ve thought for many years now that the reputations of McClelland & Stewart and of Jack McClelland himself are vastly overblown, an inflation that was central in the creation of that nationalist CanLit myth. McClelland & Stward never was a Boni & Liveright, a Knopf, a Farrar, Straus & Giroux, a Faber & Faber, or a Scribner’s. McClelland himself was less Maxwell Perkins, more Barnum & Bailey.
About last week
In discussing publishing houses and real estate in SHuSH 149, I cited the late Macfarlane, Walter & Ross’s plush digs in Yorkdale (artist’s conception above) as an example of the firm’s go-big-or-go-home attitude. One of the founders, the legendary Jan Walter, writes to say that she and her partners, John Macfarlane and Gary Ross, are happy to accept the go-big-or-go-home tag but object to the notion that they “splurged” on plush digs. They were sharing office space “with a landlord who became a friend and patron. For two ground-floor rooms and a one-basement storage area, we paid $500 a month plus GST.” Have to admit that was a good rate, even thirty years ago.
It got me thinking about MW&R, which was founded in 1988 with backing from Jack Stoddart and the General Publishing conglomerate. I find much to admire in the company. It was bold and ambitious and it published a lot of quality non-fiction: well-written, well-edited, nicely packaged, often important books. Some of its titles were enormous bestsellers, including Boom Bust & Echo by David Foot and Daniel Stoffman, and Stevie Cameron’s On the Take: Crime, Corruption and Greed in the Mulroney Years. Stoffman sold 300,000 copies. Cameron’s book might have been the last political book in Canada that everybody owned.
Yet despite all that—smart people; access to capital rare for Canadian independent publishing; plush offices and huge hits—MW&R had a bafflingly short runway. Not counting the last few lean years under the auspices of McClelland & Stewart, to whom Stoddart sold MW&R for $1 million, the party ended in just over a decade (which suggests that Sutherland House, another Canadian publisher concentrating on non-fiction, is almost half cooked).
Sandra Martin did some solid reporting in the Globe on MW&R’s demise. She attributed it in part to the difficulty of publishing books in Canada, also to the founders’ rocky relationship with Jack Stoddart, and finally to their publishing choices (an unwillingness to compromise on the range of books produced, and a tendency to always swing for the fences).
I’d like to know more and can’t find a definitive chronicle of the company. Would the MW&R gang join us for an issue of SHuSH to rehash the journey?
Also, some of you were asking for the source of last week’s Iris Murdoch rebuttal to the Canada Council’s aggressive political program:
I certainly do not believe that it is the artist’s task to serve society… A citizen has a duty to society, and a writer might sometimes feel he ought to write persuasive newspaper articles or pamphlets, but this would be a different activity. The artists’s duty is to art, to truth-telling in his own medium. The writer’s duty is to produce the best literary work of which he is capable, and he must find out how this can be done.
It’s from an article by Maria Luisa Ribeiro Ferreira in Iris Murdoch: Philospher Meets Novelist, Cambridge Scholars Publishing, 2011, p. 35.
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Anne Trubek’s Notes from a Small Press: like SHuSH, but different
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Kate McKean’s Agents & Books: an interesting angle on the literary world
Rebecca Eckler’s Re:Book: unpretentious recommendations
Anna Sproul Latimer’s How to Glow in the Dark: interesting advice
John Biggs Great Reads: strong recommendations
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I subscribed after Colby Cosh at the Post referred to your essays a couple of times. I had enjoyed the Sack of Detroit so much I made notes, but didn’t immediately make the connection. However you will be happy to know that you have partially converted this insatiable reader from the library (shout-out to Ottawa’s tremendous Carlingwood branch) to purchased e-books. I have always had trouble seeing how libraries benefit authors; so thank you for clearing that up. Now that I understand your business a little better, I also go out of my way to support the small presses. Keep up the good work, Mr Whyte, and I’ll take time from my books to read your essays and browse your catalog. Thank you!
I found your section on 'The House of Mirth' interesting. I teach the history of religion and used to refer to Agatha Christie's 'The Pale Horse' as evidence of past generations getting Biblical allusions. I don't anymore as only a tiny minority of students are Christian now (most are non-religious or members of other religions - I don't mean atheist, I mean they simply do not think about religion except as outsiders.