For Publishers, A Quiet Start to 2014

In an unusual occurrence, last week five companies with significant trade publishing operations all reported results for the three months ended Mar. 31, 2104. Revenue fell at four of the five publishers, but the 13.8% year-over-year sales gain posted by HarperCollins was enough to lift total sales from the five by 2.2%. Excluding HC, total sales for the group fell by about 8%. While each of the four publishers had a different explanation for its loss, S&S CEO Carolyn Reidy seemed to grasp the underlying issue when she observed that there were few new books in the quarter that really excited customers.

The industry’s biggest seller in the quarter was the HarperCollins-published Divergent series, which the company said sold eight million units between January and March. The strong sales of Divergent, coupled with improved operating efficiencies, led to a stunning 82.8% increase in EBITDA for HC. The company also benefited from a 46% increase in e-book sales during the first three months of 2014. E-books accounted for 26% of total HC revenue ($92 million) in the quarter, up from 21% during the same period in 2013.

A 14% decline in e-book sales was one of the factors that led to a drop in revenue at S&S, but Reidy said that the sales slowdown was due to a weaker publishing schedule in the quarter, compared to the same period last year. The silver lining for S&S is that the sales drop led to lower marketing and royalty expenses, which contributed to higher earnings.

Houghton Mifflin Harcourt also cited fewer new bestselling titles in the quarter as a reason for the 20% sales decline at its trade division. Last year, the company benefited from film adaptations of The Life of Pi and The Hobbit. Harlequin parent company Torstar said the publisher’s first-quarter revenue was hurt by a soft North American market, where sales fell by C$7.1 million. In overseas markets, gains in digital sales were not enough to offset a decline in print revenue, leaving overseas sales down C$3 million. Digital sales constituted 25.1% of total Harlequin revenue in the first quarter of 2014, up from 23.4% in the same period last year.

The shutdown of book distributor HDA over the winter led to a drop in sales at Courier Corp.’s Creative Homeowner division. Courier said that its steeper operating loss in the period was due largely to the $825,000 write-down the company took to account for the closure. Sales at Courier’s Dover imprint also fell in the quarter, although revenue at its REA unit rose.

First-Quarter Results, 2013–2014

(in millions)

Source: Publishers Weekly