Robert Fulford's column about the future of McClelland & Stewart

(The National Post, June 27, 2000)

The waves of globalization have been lapping at the shores of Canadian publishing for decades, and yesterday they began splashing down the halls of McClelland & Stewart, the home of cultural nationalism in the book business for more than half a century.

The change was dramatic, and totally unexpected: Random House of Canada, a wing of the gigantic Bertelsmann AG company of Germany, acquired ownership of a quarter of the company, becoming the first foreign publisher ever to put a foot inside M&S's door. The change was part of an unprecedented re-arrangement of equity involving a donation to the University of Toronto.

For many years, regulations maintained under Liberal and Conservative governments in Ottawa have made it legally impossible for a foreign firm to buy majority control of a Canadian-owned publishing company. Ottawa has worked on the theory that Canadian culture flourishes best in institutions owned by Canadians, and M&S has been the spectacular proof: Many foreign firms operate here, but not one of them has ever approached the contribution of M&S to Canadian literature.

The new arrangement does not violate the rules, but it uniquely allows Random House to play a part in the company's future. That opens the deal to criticism that it violates the spirit though not the letter of the regulations.

Avi Bennett, who has owned McClelland & Stewart for 14 years and run it with great distinction, explained yesterday that he organized this change of ownership in order to secure the future of the company. He sold a quarter of it to Random House and donated the remainder to the University of Toronto. The new firm's board of directors will have seven members -- five named by the university (including Bennett as chairman, initially) and two named by Random House. The M&S publishing staff will remain in place, with Douglas Gibson as president.

Random House will receive a quarter of the profits, and the university the rest, using them to create an endowment in support of Canadian culture. How much will the university's revenue stream amount to? Yesterday no one was willing to hazard even the vaguest guess.

"Hard to say," said Gibson, and John Neale, the head of Random House, was equally unable to provide an estimate. What makes this plan even more mysterious (and perhaps even a little dizzy) is that the word "profit" has seldom been mentioned in the same sentence with McClelland & Stewart. A privately held company, M&S has never disclosed its year-end results.

If this agreement had been put into effect on July 1, 1999, instead of July 1, 2000, as is now planned, how much money would have gone this year to Random House and the university? Neither Gibson nor Neale would answer that, either.

As Neale put it, "There has been absolutely no attempt to quantify it. There is no credible number I can give you, even going forward three or four years. We think we will be able to make a profit." So Avi Bennett, who is already much admired for his philanthropy, has now made to his alma mater a huge gift -- or, if things go awry, hardly any gift at all.

The agreement with Bennett says that the university will not be required to make good any losses the company produces. That leaves only one obvious source of support: If there are serious losses, if McClelland & Stewart has a few years resembling its calamitous 1970s, Random House will presumably be in a position to provide whatever funds are necessary, in return for a larger share of the ownership. Has Bennett, in his effort to provide a stable future for McClelland & Stewart, pointed it toward eventual absorption by Bertelsmann?

Even now, that's not a totally distant prospect. The press release yesterday said that "Random House ... has signed a contract to provide some services, including accounting, computer support and, ultimately, marketing and sales."

For many in the publishing business, that was an ominous line: Marketing departments are notorious for their determination to control publishing lists, and increasingly famous for their success in doing so. And yesterday, as Gibson and Neale separately sketched out the future of the relationship, they made slightly different sounds. Gibson spoke as if Random House were merely providing some specific and fairly narrow services, almost technical in nature. Neale's expectations sounded more cultural and professional; he spoke, for instance, of introducing Canadian writers to readers in other countries through the Random House and Bertelsmann networks.

On Canada Day, McClelland & Stewart will find itself intimately connected with the firm that, more than any other, symbolizes conglomerate publishing. Random House is now the world's largest English-language trade book publisher, and to chart its history over the last 40 years is to follow the two fundamental changes in publishing: the change from more or less private and personally directed firms to major corporations, and the change from national publishing, with each firm operating mainly in one country, to multinational corporations controlling clusters of diversely named publishing imprints around the world.

Bennett Cerf and Donald Klopfer founded Random House in the 1920s and made it into one of the most admired of American publishers. In 1960 they organized their first major acquisition, bringing the distinguished firm of Alfred A. Knopf into their company. A year later they added Pantheon Books. These were major events at the time, but nothing compared to what was to follow.

In 1965 Random House was itself acquired by a major media corporation, RCA. Soon it picked up Ballantine, a mass-market paperback house. In 1980 S.I. Newhouse bought Random House through his Advance Publications, Inc., and added many more companies, among them Fawcett Books in 1982, Times Books in 1984, and Crown Publishing in 1988. Two years ago, the empire of Random House was moved into another empire when Newhouse sold to Bertelsmann, the owner already of Doubleday and Bantam, among other firms.

Getting into bed with Random House is no ordinary corporate liaison.

Return to the List of Robert Fulford's Columns

Return to Robert Fulford's Home Page
typewriter image