Publishers Respond to Difficult, Changing Market

There were more examples last week of how publishers are adapting to a book market going through a severe sales downturn as well as tremendous transition in its sales channels and formats.

After working on a new operational plan for several months, Macmillan last week implemented a more centralized approach to its business and production functions in a restructuring that eliminated 54 jobs in the company's book operations and another 10 at Scientific American magazine. The consolidation combined various production, publicity and rights positions. The changes were most evident in the children's publishing operation—seven imprints are now united into the Macmillan Children's Publishing Group, under the direction of Dan Farley. Several well-known figures in children's publishing were let go, among them Melanie Kroupa, whose eight-year-old imprint was eliminated. The remaining imprints will be overseen by Jean Feiwel and Simon Boughton, who were both promoted to newly created positions.

Macmillan is also scaling back its presence at the 2009 BookExpo America, moving from a booth to a room off the show floor. Lance Fensterman, v-p and event director for BEA, said the trade show is working with Macmillan to negotiate the publisher's presence at BEA, a presence Fensterman said may still include space on the show floor. The BEA cut is part of an effort, as Macmillan head John Sargent explained in a memo, to “retool our publishing expense structure,” and one of a number of initiatives to save money. In addition to the cost-saving move at BEA, Sargent said, the house's December sales conference will be virtual, and he asked employees to generally watch their spending.

Scholastic will be at BEA, but it will scale back its presence at some other trade shows as part of its efforts to reduce spending by another $20 million in the second half of its fiscal year. In the first part of fiscal 2009, which ended November 30, Scholastic eliminated about 300 positions, including 110 jobs held by employees who took the company's early retirement offer. A pay freeze on employees earning more than $60,000 was also instituted this fall. The one-time charges associated with the second quarter downsizing contributed to a 22% decline in operating income, with earnings falling to $107.8 million. Revenue fell 3.8%, to $661.6 million, hurt by changes in the exchange rate; excluding foreign exchange, sales were off 1%.

Given the recession, Scholastic has lowered its earnings outlook for the year, cutting its 2009 earnings forecast to $1.20—$1.50 a share from the $1.75—$2.10 a share it had forecast earlier. Chairman Dick Robinson said December revenue was running ahead of sales in December 2007. For the first half of fiscal 2009, sales were down 22%, to $944.4 million, and operating income fell from $155 million to $43.9 million.

At Random House, the integrations of Doubleday into the Knopf Doubleday Publishing Group and Broadway into the Crown Publishing Group led to an unspecified number of cuts at Doubleday and Broadway. In his first annual letter to employees, chairman Markus Dohle said the biggest challenge facing the company in 2009 will be rising costs, and said everyone must “consider reducing your spending as part of your daily decision-making.” On a corporate basis, Dohle said Random has begun the process of realigning its publishing and sales operations to better meet the needs of its customers. Looking at the U.S. in particular, Dohle said Random is looking at aligning its sales force “with how most of our customers actually buy books, by publishing category and format.”

Dohle emphasized that in 2009 Random will spend “several hundred million dollars” to acquire and market books worldwide. He said the core strength of Random remains its imprints, noting “their publishing independence and autonomy is ensured and their responsibility to be financially accountable is imperative.”

A bright spot has been in digital programs. Random's e-book sales in the U.S., for example, increased 400% over last year and its e-catalogue now has more than 15,000 titles.

Macmillan Children's Publishing Group