Pearson, owner of Penguin and the Financial Times, is buying Author Solutions, a leading provider of self-publishing services, in the most significant move by a traditional book publisher into the fast-growing world of author-published books and ebooks.
Analysts said the move marked a significant moment for self-publishers which, with their recent successes through titles such as Fifty Shades of Grey, have begun to lose their reputation as "vanity" publishers to emerge as powerful forces in book sales.
Under the self-publishing model, authors tend to pay for printing and distribution costs upfront and, unlike traditional publishers, there are no editors who decide whether or not to publish a book.
Pearson is purchasing Author Solutions from Bertram Capital for $116m in cash. Author Solutions said it had revenues of approximately $100m in 2011, but did not disclose its profits. Since its inception in 2007, the company has published more than 190,000 books from 150,000 authors in print and electronic formats.
According to Bowker, an information provider on books, 211,000 titles were self-published globally last year either in print or digital form, a near 60 per cent increase on 2010.
Based on initial data from US publishers, it is projecting that traditional book output there grew 6 per cent in 2011, driven almost entirely by the self-publishing market.
Analysts said the growing importance of self-publishers had in part been due to Amazon, the dominant online retailer of print and ebooks, which has been heavily pushing this publishing method. They added that self-publishing served as a low cost test-bed for new authors.
"This is not so much about making a small profit on each of the many self-published books, it's more about rebalancing the bargaining power with a very concentrated distribution channel" like Amazon, said Giasone Salati, analyst at Espirito Santo.
John Makinson, Penguin chief executive, said the acquisition would enable it "to participate fully in perhaps the fastest-growing area of the publishing economy and gain skills in customer acquisition and data analytics that will be vital to our future".
He said Author Solutions had significant expertise in areas such as search engine optimisation, lead generation, marketing and social media that Penguin would look to leverage. Penguin said it would also look to publish books of some of Author Solutions' leading writers in a bid to retain some of the more successful self-published authors who sometimes move on to traditional book publishers.
Author Solutions will be integrated into Penguin's back office and technology infrastructure but will continue to be run as a separate business. The publishing brands will be also kept separate, partly because the Penguin brand is associated closely with editorial selection, unlike self-publishers who welcome all comers. Both companies said they would review how the two brands interacted over time.
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