The Hand-over

by Elaine Dewar

  At some point, Gibson said vaguely, Avie Bennett went to John Neale, then head of Random House of Canada, formerly of M&S, and said he planned to hand the company to U of T, and he “would like you guys to be involved… He also went to the government to say here’s what [I’m] planning to do… He lined up his ducks and got U of T.”

  Do you think he wanted to sell part of the company to Random House to establish a value for the shares? I asked.

  Could be the reason, Gibson said, but also, he wanted publishing expertise on the new board.

  Now why would that be, I wondered, as I scribbled notes. Surely Bennett and Gibson had sufficient publishing expertise? They were both on the new board.

  How long did these negotiations go on and when did you hear about them? I asked.

  I became aware quite late, he said.

  Really? How late? I asked.

  I was busy bringing out books, he said. He seemed to be apologizing for something. But what? That Bennett hadn’t told him what he was planning to do until it was almost done?

  So, like you heard about it the day before? I found myself asking.

  A little in advance of it, he said. And there he stopped.

  Amazing, I thought. Gibson was the Publisher, and he was working in an office down the hall from the owner, and the owner had told the public that he’d worked on this deal for five years, but the owner seemed to have made these arrangements without telling Gibson until they were almost complete. Yet the arrangements had included Gibson becoming President of the new version of M&S.

  Can you explain to me why there would be no reference to the value of the shares, the size of the tax credit receipt issued, or even the final sale of the shares to Random House of Canada on University of Toronto’s website? I asked.

  He was silent. I waited a moment, then tried another tack.

  Okay then, tell me about the board of M&S, I said.

  He said that John Evans was on it and Rob Prichard. “At one point, I was on it too.” He listed other names he could remember: Avie, Arlene Perly Rae. Then he stopped. “I’m blanking,” he said.

  How long was Arlene Perly Rae on it? I asked. She’d always struck me as an odd choice.

  From the start, he said. She was an M&S author.

  There were lots of those, I pointed out. Why her?

  “She was Toronto based,” he said. “Ask Avie.”

  A short while later, he remembered the name of another board member, Trina McQueen, who had once worked at CBC. “And another was Felix Chee, he was a financial man from U of T, and John Neale and Brad Martin, at the same time.”

  Do you remember saying to the press at the time of the gift that the University had promised to hold its M&S shares for three years? I asked. Why three years? Isn’t that kind of short?

  Three years? He repeated. “That rings a faint bell…”

  We had arrived at the tricky part. I made the suggestion to him that the initial gift/sale might have been stage one of a salami strategy, the beginning of a slice-by-slice takeover of M&S by Random House whose eventual result had been envisioned from the beginning.

  “There was talk about a transfer,” he said. “I do know conspiracy theorists who think it was a conspiracy from the start. If so, I was not aware.”

  He sounded irritated, dismissive. So I thought I’d better get to the tricky part, the control issue, before he decided he’d had enough of my questions and hung up the phone.

  There is a theory that Random House was really in control of M&S from 2000 on, I said. Was that the case?

  “I was working hard to maintain M&S’s independence as a separate company,” he said. “We had our own sales conference at Hart House (at University of Toronto). After I left, it went inside Random House.”

  When was it that you stopped running the company?

  He explained that he’d been moved sideways out of the management of M&S in 2004. He had been allowed to stay on running his Douglas Gibson Books imprint through which he brought out up to ten books a year. But in 2009 he’d been retired from that too. When he was in the M&S President’s chair, he said, he’d been careful to keep a distance from Random House, but after that, the distance lessened and the separate sales force disappeared.

  I’ve been told that all M&S payments were made on Random House cheques from 2000 onwards. Is that the case?

  “It could be true,” he said. “They took on the central administrative role.”

  Now why can’t he answer that definitively? I wondered. He’d been the President of the company for the first four years: surely he had signed company cheques? You’d think he’d remember whether or not they were drawn on an M&S account. On the other hand, if they were Random House cheques, maybe someone directly employed by Random House signed, not him.

  Why did you leave the presidency? I asked.

  I was moved sideways, he said. The board wanted a change.

  Did the board change?

  He said he wasn’t sure.

  Well according to U of T’s records, I said, Douglas Pepper took your place on the board and was listed as Publisher and President of M&S.

  Pepper came from Crown, Gibson said, and then he fell silent again for a moment, as if to let that fact sink into my head, as if to say, without saying it, that Crown, being a subsidiary of Random House US, meant that Pepper had been an employee of Random House when he took Gibson’s job.

  Sounds like part two of a salami strategy, I said.

  “When I was moved sideways,” he continued, “and Pepper came in, there was alarm in the author and agent world.”

  Why?

  He replied that the fear was that there would be no more competing bids for projects from the various Random House entities. They said no, things would be as before, and they were for a while. “Then, suddenly, they were no longer going to compete… it became public very fast, it might be in 2006 or 2009. It became the policy and they acknowledged the policy.”

  Again, he was saying something without saying it. He was suggesting that Random House began to treat M&S as just another imprint of the company long before the University’s shares were actually handed over. He was also waving a red flag about an emerging publishing monopsony—actually the more precise term would be oligopsony. Random House, which controlled so many imprints, was by far the largest and certainly the highest price buyer of fiction and non-fiction publishing rights in the Canadian market, and if its imprints stopped competing against each other for projects, that would drive down advances.

  On the other hand, Gibson said, as if to remove the sting from his own remarks, Booknet had a dampening effect on advances too, because publishers were able to look up and see exactly how many copies of an author’s previous books had sold, and agents couldn’t use smoke and mirrors to drive up prices anymore. (Booknet is a non-profit organization that gathers and shares information on book sales for subscribers, both publishers and booksellers. Its creation was instigated by the federal government. Subscribers get accurate weekly data about book sales from Indigo and other large sellers, but not from independents, Amazon, Apple, or ebooks, so its reports cover less than 75% of total market transactions.)

  But surely the market share is more important, and what about the fact that two people drive decision making in a company with so many imprints? I said. Back in 2000, you and John Neale said Random House’s market share with M&S included was way less than 30%. Don’t they have a much bigger share now?

  “I thought I was right then,” he said. “Bigger companies have got much bigger in the interim.”

  I was tired of hints and red flags. I wanted the former President of M&S to answer on the record about who had effective control of M&S, and from what point in time.

  “When did control actually pass from the University of Toronto to Random House?” I asked. “Was it in 2004?”

  “I was
off back in my Douglas Gibson Books corner and not involved in corporate strategy.”

  I asked again. “Is that when control transfers? 2004?” I asked.

  “I think so,” he said. “The replacement of Douglas Gibson with Douglas Pepper, a long-time Random House employee, speaks for itself.”

  “Does that mean that any government grants and tax credits M&S received, as a Canadian-owned and controlled company, were invalid after 2004?” I asked.

  I expected him to say something like don’t be ridiculous.

  “It’s an issue worth raising,” he said, to my shock.

  Why did no one protest at the time? I asked. Why did no one say anything?

  “Yeah,” he said. “No one says anything.”

  I can tell you that the University of Toronto says it transferred its shares to Random House in 2011 for essentially nothing, I said. Apparently, there was a huge debt.

  There was another silence at his end of the phone. Was he thinking about what the backlist should have been worth? Who would know that better than Douglas Gibson?

  “I can’t understand it,” he said.

  Was a dividend ever paid to the University of Toronto by M&S?

  “Not that I’m aware of,” he said.

  What was in it for U of T? I asked.

  No answer.

  Do you know whether there was a debt problem when you were moved sideways?

  “The first year was a very good year. Some years were better than others. But [we were] breaking even.”

  That didn’t answer my question. He seemed to be saying there was no big debt in the years when he was President and reading the financial statements. At least that’s what he seemed to be saying. Try again, I thought.

  In the years after you left the M&S board, I asked, could M&S have accumulated a debt so huge that it wiped out all of the value in the backlist?

  “You’re asking very interesting questions,” he said. “The key to this is Avie Bennett.”

  Avie Bennett, he went on to say, was an exemplary owner of the publishing company who never said no to a book that Doug wanted to do and who provided financial stability to the company for years. “He deserves all kinds of credit for that,” he said.

  Bennett was in his late 80s, but Gibson said he still went to his office every day. He said I should call him there. He gave me the number.

  I didn’t expect Avie Bennett to take my call. We weren’t friends. If we’d ever met, that moment was no longer stored in memory. When I left my message, I expected his people to call back, if any call came at all. After all, Avie Bennett is a very important person with an illustrious career who has advanced to the highest level of the Order of Canada for his services to the community.197 In this country, in these times, it is routine for important people to find it inconvenient to talk to journalists. We are asked to email our questions. We are expected to print whatever is emailed back, usually a statement conveying few answers, yet positioning that person, or his/her organization, in a manner satisfactory to a public relations expert. These missives are usually as interesting as watching paint dry.

  Bennett called me back the next morning.

  Long time since we last spoke, he said.

  I racked my brains. When was the last time? Had we ever spoken? As I tried to remember, and nothing came up, I told him Douglas Gibson had recommended that I speak with him. I said I wanted to come to his office and ask him a lot of questions about his gift of M&S to U of T.

  “Are you gonna be friendly?” he asked.

  Only one other person has ever asked me that question when I called to request an interview: it was Patrick Gossage, former Press Secretary to Prime Minister Pierre Trudeau. He was then the Minister of Public Affairs (a nice title for the chief press guy) at the Canadian Embassy in Washington, D.C., when I asked him if I could meet with the Gotliebs—Allan and Sondra—for a magazine article. Allan Gotlieb was then the Canadian Ambassador to the United States, and a very unorthodox one. He was stalking the halls of the US Congress, buttonholing the elected officials about the evils of protectionism as practised by the US against Canada, and giving public speeches pumping the virtues of trade with the Good Neighbour to the North. His wife Sondra organized dinner parties for the power brokers who she then wrote about in a droll column for the Washington Post. Quiet Diplomacy had been replaced by this Public Diplomacy, which was very controversial, especially when Sondra slapped her social secretary in view of the press at a dinner for Prime Minister Mulroney.198

  Of course I’m friendly, I said to Bennett. (I meant it: all journalists are friendly or we can’t get a foot in your door.) But I knew that was not what he meant. He was asking: will you listen to my story with a sympathetic ear, or are you on a mission to trap me in my own words?

  We set a date. Bennett was concerned that he might have to change it for a medical appointment. I said my schedule was flexible, no worries.

  I hung up the phone thinking come on, you must have talked to him at one time or another, or he wouldn’t have said that. But when?199

  The next day, I got a call from a person on Bennett’s staff. Could I please telephone Avie Bennett’s daughter? She had some concerns about the interview.

  I was given the phone number and I called.

  Bennett had health problems, his daughter said. It would be appreciated if I would postpone the interview until his long-time assistant, who had just left on vacation, returned. So I rearranged the date with Bennett’s associate. I was told Bennett would be informed.

  But the next week, just minutes after the time set for the original appointment, Bennett called me.

  Where are you? He said.

  He sounded annoyed.

  I’m not supposed to be there today, I said, the appointment was changed. We rescheduled so your assistant can be there. Isn’t that okay?

  No one told him, he said. He sounded hurt as well as angry. He made it clear that he was not pleased about waiting, that he had wanted to get it over with.

  I’m so sorry, I said. But then I thought: why would he want to get it over with? Was he anxious about it?

  I had to wait more than a month to find out.

  6

  Monopsony/Oligopsony Revisited

  On the last Saturday in June, 2015, I sat down at the kitchen table and opened my Globe and Mail. Usually I read the front section—News—first. Yet I opened the Arts section first, and promptly forgot the News entirely.

  Everybody who writes, edits, designs, publishes, or sells books, and who read the newspaper that morning, probably did the same thing.

  Mark Medley, the Globe and Mail’s books editor, had written a feature story about Penguin Random House Canada. It sprawled across three full pages. The story made it clear that, just as I had been saying for years, just as Doug Gibson had confirmed, Canadian book publishing, not just bookselling, had become a monopsony—okay, okay, an oligopsony—although Medley did not use either word. He used the word monopoly. “It is a near monopoly, able to dictate financial terms to writers who now face fewer places to publish their work,” he wrote. He also used the word control: he suggested to Brad Martin, CEO of Penguin Random House Canada, that his company controls “the domestic market.”200

  The piece started with this line: “The most powerful man in Canadian publishing is leading me on a tour of his new cubicle.” For reasons unknown, Brad Martin had decided to give Medley (and Globe readers) a tour of the merged entity’s new offices down on Toronto’s Front Street. Martin made it clear that he and one other person, his second in command, President Kristin Cochrane, make the important publishing decisions for the whole entity, leaving a question mark for some about editorial autonomy and competition among imprints, “despite pledges.” Medley did not reference in the Globe where those pledges had been made, but maybe he was referring to a story he had written for the National Post
in June 2012, six months after U of T’s shares of M&S ended up in Random House’s hands. That story had been based on a press release issued by Random House that declared that McClelland & Stewart and Doubleday had been put together in one publishing group under the leadership of Kristin Cochrane. The claim made then was that “editorial identities of the imprints will remain distinct,” though in the same story, Medley quoted Brad Martin saying “there will only be one bid coming out of the group. There will not be competing bids.” This was the admission of non-competition that Doug Gibson had referred to.201

  In this article for the Globe, Medley focused at first on the fact that the largest trade publisher in the country had moved its merged self to an open plan office. The pictures that ran with the story showed a space indistinguishable from the back offices of a bank except for the occasional feature wall displaying books. The work spaces of the editors of Penguin Random House’s 18 different imprints were tiny cubicles behind waist high walls. Even Brad Martin, the commander of this 229-person empire, now including Knopf, Doubleday, Random House, Penguin, McClelland & Stewart, Tundra, Douglas Gibson Books, Signal, Allen Lane, Vintage, Anchor, Emblem, Hamish Hamilton, Appetite, etc., had been reduced from book-lined, private office grandeur to a cubicle. While there were meeting rooms and booths scattered throughout, personal offices were no more.

  How to work in this new environment seemed to bewilder most of the PRHC editors who spoke to Medley. A leading Publisher on the Random House side of the merger had formerly enjoyed a private room big enough for a couch, table and chairs, as well as a decent-sized desk. While Penguin’s old space had been cramped, its offices at least had walls. Open plan ignores the basic nature of book creation in favour of reducing square footage costs. Book making requires editors to have long, quiet, careful conversations with sensitive authors, or long, quiet, careful conversations about sensitive material. Neither can be done well in a big room crowded with people trying to do their own work. So the office design conveyed an interesting message. It said Bertelsmann, like other publishing conglomerates, takes an industrial approach to the business.