High inflation and supply chain challenges combined to drop earnings at Penguin Random House 20.7% in the first half of 2022. Compared to a year ago, EBIT (earnings before interest and taxes) fell to €257 million, from €324 million in the first half of 2021. Revenue rose 6.2%, to €1.92 billion, but even there, the news was disappointing with parent company Bertelsmann noting that excluding the favorable impact of currency exchange, sales declined from 2021. Despite the down six-month period, revenue was substantially higher than the first six months of 2020 (€1.63 billion) at the start of the pandemic and profits were higher (€209 million) than two years ago.
Bright spots in the first half of 2022 included strong backlist sales with Bertelsmann pointing to titles like Where the Crawdads Sing by Delia Owens and Atomic Habits by James Clear. Dr. Seuss titles sold more than 5.7 million copies in the period. Audiobooks also performed well, with PRH global CEO Markus Dohle declaring that “our ever-expanding global audio business has become a strong growth pillar of our publishing efforts.”
In his letter to employees, Dohle also reported that DK “had the strongest first six months globally since they became part of Penguin Random House.” PRH’s Grupo Editorial business had “another record performance—which includes our market-leading Spanish-language business in the U.S.,” Dohle wrote. Penguin Random House Publisher Services also had sales gains and is poised for more gains in 2023 when Disney becomes a distribution client.
Looking at trends, Dohle said that “the long-term shift to online sales has resulted in strong backlist growth and a technology- and data-driven transformation of our sales, marketing, and publicity instruments and tools.” He added: “We will continue to invest in this transformation and develop new competitive advantages to maximize the positioning, visibility, and sales of both our new publications and our rich catalogs on a global scale.”
But Dohle is not expecting a quick bounce back in profits. “Worldwide, significant cost increases, from paper and production to distribution and freight, among others, won’t disappear in the foreseeable future” Dohle wrote. “Therefore, we all need to approach our business with a lean, efficient, and productive execution mindset while maximizing value for our authors and their works. Ultimately, it is, and will always be, about the books and the maximization of readers’ demand for every single one of them.”
Dohle made no mention of the recently concluded trial in which PRH contested the Department of Justice’s efforts to stop its acquisition of Simon & Schuster.
In the Bertelsmann print group, revenue rose 11.5%, to €696 million, an increase the company attributed to the passing on some of the costs of higher paper prices. Despite the revenue gain, profits plunged 41.4%, to €15 million, due to higher costs. The news wasn’t all bad in printing, with Bertelsmann noting that investments in the U.S. “improved productivity and provided sustainable capacity for publishing customers in the U.S.”
For all of Bertelsmann, the German media giant said it had a strong first half of 2022 with revenue up 6.9%, to € 9.3 billion, and operating EBITDA “reached a new high at € 1.429 billion.”
