John Sargent, CEO of Holtzbrinck Publishers U.S., readily acknowledges that things could have gone better for the company's trade group last year. Following good gains in 1999 and 2000, "2001 was a tough year," Sargent said. He laid the blame for the disappointing performance to an unusual source--St. Martin's Whitman coin guide series. The line, which the company acquired from Golden Books, had a huge sales spike in 2000, when the U.S. Treasury began issuing quarters that commemorate individual states; in 2001 "sales stopped," Sargent said.
Despite the off year, there are no plans to radically change the group's highly decentralized organization, under which the group's four major houses--St. Martin's, Henry Holt, Tor and Farrar, Straus & Giroux--all operate as individual businesses with their own boards of directors. Sargent notes that each publishing house takes a different approach to growing its business. What the company does not depend on for success is bestsellers. "We have a conservative cost structure and have no plans to build a big infrastructure," Sargent said. With sales estimated to be just above $300 million, Sargent said Holtzbrinck "is big enough in places where scale matters," such as warehousing, production and sales.
Sargent is just one of a handful of executives whose responsibilities cut across the entire trade group. Functions such as human resources, legal and warehousing are centralized (although there is no central office in New York City), but only some aspects of production and sales are handled by the group. While Holtzbrinck has an umbrella contract to buy paper, all the publishing houses have their own production departments. And while the Holtzbrinck sales force handles all sales for St. Martin's, Tor and Picador, it doesn't do all the selling for Holt and FSG. Holt has its own national account reps, while FSG has some commission reps. The sales structure reflects Sargent's belief that it "pays dividends" to have sales people within the different houses to bring back information from the field.
Sargent is looking to move ahead in certain areas. He hopes to continue to expand Picador, particularly its ties to FSG, Holt and St. Martin's, whose hardcovers it publishes in trade paperback. Picador had a solid 2001 led by The Red Tent and The Amazing Adventures of Kavalier & Clay. Also on the agenda is bringing Holtzbrinck's spoken-word audio operation up to speed. Last year the company acquired Audio Renaissance as part of its strategy to retain audio rights for its publications rather than licensing them to other audiobook publishers. And like most other mass market paperback publishers, Sargent is looking for ways to "optimize efficiencies" in that segment.
In electronic publishing, Holtzbrinck will maintain a presence in the e-book market, but there are no plans to increase the publisher's commitment. E-books "will have slow, steady growth and can be profitable if you keep costs down," Sargent said. He is less bullish than some colleagues on the subject of print-on-demand. For instance, Holtzbrinck does not automatically digitize all new titles. "We publish more than 2,000 books a year, and we don't want to drain resources" on titles that don't have a place in the digital world, Sargent said. Books are put in digital format when the company thinks there will be a market for a print-on-demand edition. "Some novels have a life span of one or two years," Sargent observed. "We put plenty of books out-of-print every year."
Acquisitions are not a priority for Holtzbrinck in the trade area, and any acquisition would be of a niche company to fill a gap. "We like organic growth and are happy with our portfolio," Sargent maintained. He is more interested in expanding Holtzbrinck's distribution business. "We have a little excess capacity. I wouldn't mind adding a client or two in the $5-million to $10-million range," Sargent said.
Sargent is optimistic that the trade group will have a good year in 2002, noting that all the publishing groups have strong fall lists. He is less optimistic about growth prospects for the overall trade market. Unlike the years when the opening of large numbers of superstores or the debut of online sales spurred sales, he sees no growth "driver" in 2002. As a result, all publishers "will need to work harder to grow. There will be more competition for customers and pressure on margins."
