Strategy: The Big Merge

McCarthy sees one of the biggest challenges for the companies as they come together is a difference in culture. Random House, for instance, "is extremely decentralized" while "Penguin is very much a centralized command and control kind of environment."

During his time at Random House, says McCarthy, "it was pretty rare to have a meeting at which you find people from different divisions. Generally speaking, I'd go to a Crown meeting and then a Knopf meeting and so forth."

At Penguin, says McCarthy, "most of the strategic decisions are made centrally, but the culture is less corporate, more of a roll-up-our-sleeves culture. Leaner in general and much more scrappy." He adds, "Often forgotten is when Putnam and Penguin merged, it was Putnam's management that took over the company. Putnam was not the sort of white-heeled shop that Penguin was. There are two cultures down at Penguin. People look at merging Random House with Penguin, a white-heeled publisher of classics. But it's way more complicated than that. Six entities from the Random House side and two or three entities from the Penguin side."

While there are many risks inherent in a move of this size—from the perception of being seen as slow-footed and not innovative to lowered morale in back-office departments that are often targeted during consolidation—McCarthy says the biggest risk is talent.

"Suddenly your best people … are involved in merger activities, figuring out new partnerships, shifting their focus," he says. "It might not just be a year. It takes a lot of meetings to integrate two companies of this scale."

That said, McCarthy says he thinks the move makes perfect sense. "People are trying to read a lot into it … but I think any attempt to read this as an extreme change in the business is a misread. It's consolidation, just like the publishing industry has experienced every year I've been in it."