E Not Replacing P

More results have come in about whether growth in digital sales will keep pace with the decline in print. In the second quarter/six-month reports from Penguin Group, Simon & Schuster, and Harlequin filed in the past two weeks, the common thread was an increase in digital revenue and a decline in print with overall sales falling or flat.

Based on reports supplied by the publishers, digital sales in Penguin’s worldwide operations rose approximately 64% in the six-month period, to £64 million (14% of sales), while print sales fell 13%, to £393 million. At Simon & Schuster, digital sales were up 115%, to about $56 million, but print sales fell 10%, to $282 million. Harlequin’s digital sales jumped 113%, to approximately C$32 million, while print sales declined 10%, the same percentage as S&S.

The decline in print came from more than just the shift from print books to e-books, most notably the struggles at Borders, which severely limited sales of new print titles at the bankrupt chain. Still, evidence continues to mount that, at least in the short term, unit sales of e-books will not increase fast enough to offset declines of higher-price print books. That doesn’t mean profits will slip away. S&S reported higher profits in both the second quarter and six months, despite sales declines, and Penguin’s profits held up better than sales in the six-month period. Harlequin’s profits were down, something the company attributed in part to higher returns, which will be corrected in the second half of the year, leading to improved profit margins.

Penguin chairman John Makinson, in discussing first-half results, said that by combining e-books with the implementation of technology to make production of print books more efficient, as well as the development of new digital platforms, publishers can maintain profit levels. Indeed, the operating margin at Penguin rose slightly in the first six months of 2011, while S&S’s margin in the period rose to 6.5%, from 5.0%, in the first half of 2010.

Publishers’ Sales by Format, Six Months, 2010–2011
(in millions)