Five days after it agreed to sell Harlequin to HarperCollins, Torstar reported that sales and earnings for the publisher fell in the first quarter of 2014, compared to the first period of 2013. Revenue declined 3.2%, to C$99.2 million, while operating profit fell 14%, to C$12.8 million.
Revenues in particular benefited from the favorable impact of foreign exchange. Excluding foreign exchange, Harlequin sales dropped a total of C$10.9 million with sales in North America down C$7.1 million and overseas sales down C$3.8 million. Torstar said the drop in North America was the result of declines “in all channels,” while overseas gains in digital sales were not enough to offset a drop in print revenue.
Global digital revenues were 25.1% of total revenue in the first quarter of 2014, up from 23.4% in the same period last year and up from 23.2% in the fourth quarter of 2013.
In addition to releasing first quarter results, Torstar said that a class action lawsuit brought against Harlequin by some of its authors in 2012 over e-book royalties will go forward, although on a somewhat limited basis.
On May 1, according to Torstar, the U.S. Court of Appeals for Second Circuit Court affirmed a lower court ruling that dismissed three of the authors’ claims, but reversed the dismissal on the fourth claim, permitting the suit to move ahead. There is enough evidence, the appeals court said, to allow the case to proceed. The remaining claim asserts that Harlequin breached the "all other rights" clause in contracts signed with authors between 1990 and 2004 when it paid e-book royalties based on an internal licensing deal that gave authors 6% to 8% of a book's cover price rather than 50%.
Harlequin said it will continue to defend itself in the matter, arguing that the authors “have been recompensed fairly and properly.”