Sluggish Start for Big Houses

Worldwide sales at the five largest trade publishers in the U.S. inched up 0.5% in the first half of 2008, to $4.24 billion. Figures include sales from all of the publishers’ global businesses, although with the exception of Hachette, the majority of sales are in the U.S. The anemic growth is slightly lower than the 3% increase in bookstore sales for the first six months of 2008, as reported earlier by the U.S. Census Bureau. The figures indicate that even on a worldwide basis, publishers’ gains mostly come at the expense of their competitors rather than from an overall growth in the market.

Random House was the last company to report its results—and sales and earnings were down, with revenue off 7.9% and EBIT (earnings before interest and taxes) down 29.5%. In his letter to employees, new CEO Markus Dohle attributed the decline to the weak dollar and pound and to a declining worldwide economy that has hurt consumer spending. Sales in North America were flat in the first six months, and the company’s operations there were also faced with higher publishing and operating costs for freight and paper. During the period, RH’s U.S. subsidiary acquired Monacelli Press and Watson-Guptill Publications, the only acquisitions made by any of the top five houses in the period. E-book sales in the U.S. are already double all of 2007, although Dohle said they still represent only a tiny part of sales. Dohle told employees in his first worldwide memo that the company has “much catching up to do from September through December to reach our ambitious targets.” The title RH is most counting on to spark a second half rally is Brisingr, the third novel in Christopher Paolini’s Inheritance cycle; it has a 2.5 million—copy printing for the U.S. and Canada.

Simon & Schuster had the weakest six-month performance, with sales off 9.8%. The company was facing a tough comparison to 2007, when The Secret sold in record numbers and two Stephen King books also sold extremely well. The publisher is hoping to do better in the second half, although it was doubtful it will reach last year’s revenue, since S&S had a strong fourth quarter in 2007. Hachette Book Group USA did much better than the 1.4% turned in by the entire book group, posting an 11% increase in the period. All divisions contributed to the improvement and, with Breaking Dawn and The Shack released in the second half of 2008, Hachette Book Group USA was expecting solid gains in the July—December span. Similar to Hachette, it was Penguin Group USA that drove gains in the first half of 2008 for the entire company, although all Penguin subsidiaries were up in the period. A record number of bestsellers led the increase at Penguin USA, particularly in the adult group, where hardcover, trade paperback and mass market paperback all had strong gains. The January—June period at HarperCollins is actually the second half of HC’s fiscal year, which ended June 30. The company posted gains in both its third and fourth quarters after a weak start.