A Very Profitable Quarter for Four Big Publishers

If the U.S. publishing business is mired in a slow-growth environment, you wouldn’t know it from the third-quarter results of four of the country’s largest trade houses. All three of the companies that reported sales as well as earnings saw profits grow at a faster rate than revenue, improving operating margins at the publishers.

Strong backlist sales were an important factor in boosting revenue and profits in the quarter, especially at HarperCollins. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose nearly 42% at the company compared to the third quarter of 2017, and Susan Panuccio, CFO of HC parent company News Corp, said this was largely due to strong backlist sales led by The Subtle Art of Not Giving a F*ck and The Hate U Give. Backlist sales contributed 55% of total revenue in the most recent quarter, Panuccio noted. Overall, sales were led by a better-than-expected performance in the U.S., she added.

Digital audiobooks also had another great quarter, with sales up 55% over the same period last year. The growth in audio offset soft e-book sales, resulting in a 12% increase in total digital sales in the quarter; e-book and digital audio represented 22% of total HC revenue in the period.

Solid backlist sales were also a key factor in lifting sales at the Hachette Book Group. Sales at HBG were up 5.1% in the quarter over last year, said HBG parent company Lagardère, “driven by the continued success of the Perseus backlist, especially Jen Sincero’s You Are a Badass, and by a strong release schedule at Grand Central Publishing, including Sally Field’s In Pieces.” The release earlier this year of The President Is Missing also added to the third-quarter gain. The novel, by James Patterson and Bill Clinton, did particularly well in the e-book and digital audiobook format.

HBG CEO Michael Pietsch noted that third-quarter results also benefited from continued strong sales of digital audiobooks. In addition, HBG completed the purchase of the Worthy Publishing Group in the period.

The U.S. was a bright spot for the Lagardère publishing group, as sales in other regions were down. Worldwide sales at the company were €607 million in the quarter, down 6.1% from last year. Sales were down 14.7% in France, 6.7% in the U.K., and 8.2% in Spain and Latin America.

At Simon & Schuster, sales of three backlist young adult books by Jenny Han (To All the Boys I’ve Loved Before, P.S. I Still Love You, and Always and Forever, Lara Jean) were boosted by the August release of the To All the Boys I’ve Loved Before film. S&S CEO Carolyn Reidy said the success of the Han titles—the three books have over three million copies in print and sold as e-books—helped to increase third-quarter revenue in the children’s group 7% over last year’s third quarter, while sales in the adult group rose 6.5%. Adult group sales were led by a mix of political titles (Fear and Unhinged) and new fiction and nonfiction titles.

Reidy noted that the adult group was facing tough comparisons with last year’s third quarter, when Hillary Clinton’s What Happened and Stephen King’s It were big sellers. It did particularly well in digital audio, limiting the audio sales increase in the most recent quarter to 15%. For the year to date, audio sales rose 27%.

The large increases in sales and earnings in the third quarter at Houghton Mifflin Harcourt’s trade group were mainly due to a renewal of its licensing agreement for paperback rights to 1984 and Animal Farm. In addition to the licensing deal, HMH said revenue in the period benefited from strong sales of the latest edition of The Fall of Gondolin as well as from Instant Pot Miracle. Sales of the backlist title Beautiful Boy rose in the quarter thanks to the release of a film adaptation. Higher print sales at the company were offset by a decline in e-book sales.

Third Quarter 2017–2018

($ in millions)