Penguin Random House is the world’s leading trade book publisher, comprised of nearly 250 imprints and brands and active in 23 countries on five continents with more than 15,000 new titles and over 700 million print, audio and e-books sold annually.

The company, which employs about 12,000 people globally, was formed on July 1, 2013 by Bertelsmann and Pearson, who own 53 percent and 47 percent, respectively. Bertelsmann is an international media company with divisions in broadcasting (RTL Group), book publishing (Penguin Random House), magazine publishing (Gruner + Jahr), outsourcing services (Arvato), and printing (Be Printers), operating in fifty countries.

Penguin Random House imprints include Doubleday, Viking and Knopf in the US; Ebury, Hamish Hamilton and Jonathan Cape in the UK; Plaza & Janés in Spain); and Sudamericana in Argentina.

Germany’s Verlagsgruppe Random House is not legally part of Penguin Random House, but is under the same corporate management and is part of the Penguin Random House operating division.

Gruner + Jahr is present in over 30 countries. 25,1% of Gruner + Jahr are owned by the Jahr publishing family in Hamburg. The Brown Printing Company, a G+J subsidiary, is one of the largest offset printers in the United States.

Analysis & Key Developments

Financial

Penguin Random House generated 2.66 billion EUR, 16.4% of Bertlesmann’s 16.36 billion EUR total in corporate earnings.

PRH earned 54.3% of its revenue in the US, 9.8% in Germany, 21.1% in other European countries, 0.4% in France and 15.3% in other countries. Revenue totals include full year earnings of Random House, Germany’s Verlagsgruppe Random House, and a half-year of the Penguin Group. Total sales were 23.9% above Random House’s previous year’s revenue of 2.14 billion EUR due to the merger with Penguin and the acquisition of the remaining shares in Random House Mondadori on January 1, 2013. Adjusted for currency and portfolio effects, revenues decreased compared with the 2012’s record numbers, which reflected the success of the “Fifty Shades” trilogy.

Operating EBIT fell 4,9%, partly due to depreciations in connection with the initial inclusion of intangible assets at Penguin – from 325 million EUR to 309 million EUR

Ownership, Mergers & Acquisition, Internal Organization

Bertelsmann CEO Thomas Rabe explains PRH’s future plans: “Together we can, and will, invest on a much more significant scale—in diverse content, in the development and support of authors, in the entire physical and digital spectrum of book acquisition, production, distribution and marketing as well as in rapidly growing emerging markets.”

The sale of the Czech-Slovakian book and publishing house Euromedia Group to the Czech investment firm Arraviet was completed in December 2013. The transaction included all Euromedia business in both countries, including book clubs, book trade, distribution and publishers. The sale is subject to the approval of the responsible antitrust authority in the Czech Republic.

Spanish media group Prisa agreed in March to sell Alfaguara, publisher of Nobel-prize-winning author Mario Vargas Llosa and several other editorial brands, to Penguin Random House for 72 million EUR.

International

The merger improved Bertlesmann’s position in key growth markets such as China, India and South America. Penguin invested in Brazilian publisher Companhia das Letras in 2011.

A solid business performance in Latin America and a strong portfolio of Spanish language bestsellers offset the impact of the difficult economy in Spain, where the publishing unit began operating under the name Penguin Random House Grupo Editorial in November.

Penguin Random House completed the purchase of their respective co-partners’ ownership stakes in India and South Africa.

Digital

In line with Bertelmann’s strategic priority of digital transformation, the merger enhanced its e-book inventory to more than 77,000 titles in German, English and Spanish, and sold over 100 million e-books globally in 2013.

E-book sales account for a double-digit percentage of Penguin Random House annual revenues worldwide, and also for the first time at the Verlagsgruppe Random House in Germany.

Bestselling Authors & Titles

Dan Brown’s Inferno sold almost six million copies in its English-language territories in seven months. Other bestselling titles include Lean In by Sheryl Sandberg, And The Mountains Echoed by Khaled Hosseini, The Fault In Our Stars by John Green and Sycamore Row by John Grisham. The Fifty Shades trilogy continued to be strong in English, German and Spanish language territories with more than seven million print, digital and audiobook copies sold in 2013.

In the US 261 titles landed on the New York Times bestseller lists between July and December 2013, with 27 at number one.

During the same period, PRH UK placed 14 number one titles on the bestseller lists of the Sunday Times.

In other markets, My Life by Li Na—the life story of an athlete, published by Penguin Books China was a bestseller in China. In Latin America, Paulo Coelho and Isabel Allende sold very well. In Germany, Verlagsgruppe Random House’ biggest selling title was Die Analphabetin, die rechnen konnte by Jonas Jonasson

Earlier Developments

Financial

Bertelsmann closed 2012 with a solid stimulus from Random House. While the group result amounted at 16.07 billion EUR, Random House contributed 2.14 billion EUR (13.4% of corporate revenue) and Gruner + Jahr 2.22 billion EUR (13.9%). Due to the huge success of E.L. James’s bestselling “Fifty Shades” trilogy, earnings of the trade book publishing group have nearly doubled from 185 million EUR in 2011 to 325 million EUR in 2012.

Ownership, Mergers & Acquisition, Internal Organization

Bertelsmann AG changed to Bertelsmann SE & Co. KGaA, a partnership limited by shares (KGaA), on August 20, 2012. KGaA is a proven legal form for businesses owned by families or foundations. The conditions of ownership and the structure of the group will remain unchanged.

The Penguin merger and full acquisition of Random House Mondadori was expected to offer new options for Random House to expand into the Latin American book market.

“The planned merger will offer authors an unparalleled variety of publishing options and will foster even more effective publication of book content – in traditional as well as digital formats. These are the best preconditions for the future of these two great publishers—and for strengthening one of our core businesses: the book,” according to Chairman and CEO Thomas Rabe. With the consent of the Chinese trade ministry in early June 2013, Random House and Penguin have a green light for their merger. The fusion is expected to be finished at the end of July 2013.

In 2012, Random House launched Random House Author Portals in the United States and Canada. The platform provides information about sales, royalties, and rights deals for newly published and backlist books to authors and their agents. More than 2,300 authors signed on as Portal users by the end of the year.

Random House started a strategic partnership with Bertelsmann sister company Fremantle Media to develop scripted television programming based on fiction and nonfiction books published by Random House’s imprints worldwide. An arrangement through Random House Television in the United States will provide the authors with greater opportunities.

Bertelsmann announced plans at the company's annual results conference in Berlin to develop an education business division with the long-term potential to generate 1 billion EUR in sales.

International

During Bertelsmann’s China conference in late October 2012, Random House CEO Dohle stated that "China is an important market to us, and it also offers a great learning experience for us….We'll not be in a rush, but will seek partners, learn about readers' tastes and establish a more solid foundation here.” Bertelsmann CEO Rabe noted that the group will strengthen its investments in the education and digital media worldwide, “and likewise in China.”

Gruner & Jahr entered the Indian market in 2008 and has gained momentum there and in China. The group is active in three different segments in Asia: magazine publishing, corporate publishing, and digital marketing. With Gruner & Jahr’s marketing company Ligatus established in Germany, Austria, the Netherlands, France, Spain, Sweden, and Belgium, they continued to internationalize by entering the Italian and Turkish markets in 2012.

While Bertelsmann’s core markets are Europe and the United States, the group is focusing on emerging markets in Brazil, India, and China. The Brazilian operations established a new Corporate Center in São Paulo.

Last year, Bertelsmann opened a Corporate Center in India and invested 3 million EUR in the India-based online learning platform WizIQ.

Digital

Digital now accounts for more than 22% of Random House Group UK net sales according to RH UK CEO Gail Rebuck. The same is true for worldwide group income, according to Dohle.

By the end of 2012, the company produced 47,000 e-book titles (against 40,000 titles in the previous year) in German, English, and Spanish. Bertelsmann’s publishing imprints generate 20% of their global revenues from digital business. In the U.S., this figure is above 25%.

Gruner + Jahr’s Internet portal Chefkoch.de has evolved into the largest food community platform in Europe with more than 200,000 recipes available. Last year the portal generated 49 million visits in December alone, a 35% increase from the previous year.

Bestselling authors & titles

More than 70 million copies in English, German, and Spanish-language multi-country editions in less than one year turned E.L. James’ “Fifty Shades of Grey” and its two sequels “Fifty Shades Darker” and “Fifty Shades Freed” into a global phenomenon. “Our strategy was to maximize the phenomenon by taking the books, which could have been seen as strictly romance-genre publications, and publishing them as novels with broad appeal for a more general female readership. All of our publishing efforts, from marketing to PR messaging to retail positioning, emanated from that strategic idea: reaching a mainstream audience”, says Anne Messitte, who served as publishing director of Vintage Anchor Books until Dohle promoted her to executive vice-president of the Knopf Doubleday Group, after Messitte bought the series for Vintage. Each week brought a new print run up to 900,000 copies.

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