A Profitable Six Months for Most Publishers

Although the growth of e-book sales has slowed in the first six months of 2013, there were still enough gains to largely mitigate the decline in print sales. As a result, profits improved at all but one of the six major trade publishers that reported results for the period.

There were other factors besides the increase in e-book sales that helped boost profits. At the Houghton Mifflin Harcourt trade group, print sales increased faster than digital, due mainly to HMH’s purchase of John Wiley’s cookbook line. Cookbooks are one category where e-book sales are relatively small, compared to fiction genres such as romance and sci-fi. Digital books represented 16% of HMH’s first-half sales in 2013, down from 18% in 2012, but profits at the house more than doubled.

Print book sales also rose at Penguin in the six-month period, up 13.4%, while digital sales increased 28.6%. Penguin’s overall results were helped by favorable currency changes. At Penguin Group USA, digital sales made up 33% of revenue in the first six months of the year, up from 31% in 2012, while for the entire Penguin Group, digital accounted for 21% of worldwide revenue in the first half of 2013, compared to 19% in the same period last year.

At Random House, worldwide sales of both print and digital content fell in the first six months of 2013, leading to a 3.4% decline overall. Operating EBIT (earnings before interest and taxes), however, rose 3.5%. The decline in sales was expected, due to strong sales of the Fifty Shades trilogy in Random’s North American markets beginning last April. The Fifty Shades impact was felt most acutely in e-book results and was the major factor in the decline of digital revenue to about 20% of worldwide revenue at Random in the first half of this year, from 22% in the comparable period in 2012.

Print sales fell slightly in Lagardere Publishing’s worldwide operation in the first half, but digital sales rose 36.8% over the same period in 2012, resulting in a 1.3% gain in total sales and a 24.6% jump in EBIT. At its French subsidiary, sales benefitted from release of the second and third volumes of Fifty Shades, plus Dan Brown’s Inferno, while trade sales were also up in Lagardere’s U.K. and U.S. operations. At Hachette Book Group, sales rose 7% in the first six months of 2013, driven by bestsellers from such well-known authors as James Patterson, David Baldacci, Nicholas Sparks, and David Sedaris. E-book sales continued to grow at HBG and made up 34% of adult trade sales in the first half of the year, compared to 27% in the first six months of 2012. Digital sales accounted for 11.3% of sales for all of Lagardere Publishing in the first half of 2013, up from 8.4% in the same period last year.

Profits doubled at Simon & Schuster, helped in part by the absence of costs tied to the e-book price-fixing cases that depressed earnings in the first part of 2012. The jump in earnings came despite a slight decline in sales, as a drop in print sales offset gains in digital.

Harlequin was the only one of the six reporting companies to post a decline in profits in the first six months of the year, and its sales fell during the period as well. The declines were attributed to currency fluctuations, continued weakness in Harlequin’s North American book club business, and a deeper-than-expected drop in overseas sales. Print sales fell by about 14%, but print retail sales in North America were relatively stable. Digital sales increased a total of 27.7% in the six months and accounted for 23.9% of revenue, up from 20.4% during the same period in 2012.

Operating Performance January–June 2012, 2013 (in millions)