Book publisher Penguin is embracing self-publishing with its acquisition of Author Solutions, Inc. (ASI). This morning, Penguin parent company Pearson announced that it has purchased the company from Bertram Capital for $116 million.

Author Solutions, based in Bloomington, Ind., had revenues of $100 million in 2011 and has published 190,000 books by 150,000 authors since its founding in 2007. It “will be integrated into Penguin’s back office and technology infrastructure but will continue to be run as a separate business.”

Penguin already offers some self-publishing services through Book Country, its community writing platform, but the acquisition of Author Solutions reflects a new focus on the area. “This acquisition will allow Penguin 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,” said Penguin CEO John Makinson in a statement.

Author Solutions CEO Kevin Weiss said, “We are thrilled to be a part of its vibrant culture, and look forward to accelerating the pace  of change the industry is experiencing. As part of Penguin, we will be on the front-end of that change and have the broadest set of offerings of any publisher today. That means more opportunity for authors and more choice for readers.”

“Curated self-publishing”

Penguin’s Makinson said that Penguin’s partnership with ASI “will fall somewhere between self-publishing as presently defined, and Penguin publishing as presently defined.” He mentioned “curated self-publishing” and imprints drawing on self-published content. Weiss noted that ASI already provides white-label self-publishing solutions to publishers like Hay House and Thomas Nelson. He says that ASI will call certain titles to Penguin’s attention for traditional publication. “Within our imprints, there will be several authors that Penguin will want to take a look at,” he said. “There’s no commitment that they will [publish them], but when we see something that has promise, we’ll share that with them.”

Makinson said that an increasing number of bestselling books either are self-published or started out that way. The two most well-known examples are 50 Shades of Grey and Amanda Hocking’s ”Trylle” trilogy. And Penguin recently  acquired the rights to two bestselling self-published titles, On the Island by Tracey Garvis-Graves and Bared to You by Sylvia Day Bella Andre.

Publishers Marketplace’s Michael Cader pointed out that those titles were actually self-published electronically, through free platforms like Amazon’s KDP, and not through higher-end platforms like Author Solutions. “We’ve been competing with free options for a long time,” Weiss said. “We have not felt any pressure thus far from the free publishing market.” And Makinson claimed there is “growing category of professional authors who are going to gravitate to the ASI model rather than to the free model.”

Weiss said the acquisition provides legitimacy to self-publishing. Recalling a previous job at IBM, he said, “When IBM gave its stamp of approval to the PC industry, what happened next was nothing short of remarkable. This feels very much like what happened with the PC industry back in the early eighties.”

The move — Trafford is a brick-and-mortar publisher — illustrates how online self-publishers are using the internet to form a niche in the traditional publishing world, and are starting to gain market share on their traditional rivals. Many traditional publishers are faced with heavy printing costs from the large number of books they have to distribute that never actually sell. Online self-publishing companies, on the other hand, can manage a much larger number of authors and only print books when they are sold through their online store or other web-based distribution points. As a result, they do more releases that are smaller in scale, creating greater potential for profitable runs.

Author Solutions bought rival online self-publisher Xlibris in January 2009; the purchase of Trafford raises the question of how a traditional publisher will be incorporated into a web-based company. Most likely, Trafford will continue to focus on a smaller stable of professional authors but use Author Solutions’ distribution technology to print books on-demand. Kevin Weiss, chief executive of Author Solutions, says the company will earn about $100 million in revenue in 2009.