There is no better example of the cyclical nature of book publishing than the six-month results of the nation's five largest trade publishers. Four of the five houses reported significant changes in their operating performance in the first half of 2010 compared to one year ago, with big books, or the lack thereof, playing a major role in the shifts.

Random House and HarperCollins, which both had declines in revenue and earnings in the first half of 2009, posted gains in both areas this year. Simon & Schuster, which had a steep drop in sales and earnings in the first half of 2009, had a small dip in sales again this year, but a big rebound in earnings. Of the major publishers, Penguin Group has been the most consistent, posting a solid increase in sales in the first half of 2010 after recording a double-digit gain in the January-June period in 2009. Revenue and earnings at Lagardère Publishing, parent company of Hachette Book Group, had the expected decline as the company found it impossible to match the sales volume generated by the Stephenie Meyer books in 2009. The good news for Lagardère was that despite declines, it still had the highest operating margins among the big houses.

While the cooling off of a blockbuster series led to a decline in results at Hachette, the continuing sales surge for the Stieg Larsson trilogy was key in boosting results at Random House, with 6.5 million copies (hardcover, e-book, audio) of Larsson's works sold in the U.S. and Germany. Sarah Palin's Going Rogue played an important role in turning around the sales fortunes at HC. Released late in calendar 2009, the book's sales carried through for much of the first six months of 2010. One thing keeping S&S from returning to the sales levels of 2008 is that it has not had a blockbuster of the magnitude of Rhonda Byrne's The Secret, but that could change. Byrne's The Power, just out this summer with a one million–copy first printing, has become an immediate bestseller. S&S was able to show a dramatic improvement in its bottom line this year, despite a sales dip, because of improved operating efficiencies and cost cutting. S&S took restructuring charges of $1.7 million in the first half of 2010 related to severance costs; in the same period in 2009 it took $2.9 million in charges.

The secret to Penguin's success has been a number of long-running bestsellers. The Help; Eat, Pray, Love; and Three Cups of Tea have all been on bestsellers' lists for more than a year, while Charlaine Harris continues to release hit after hit.

All five houses reported robust growth in e-book sales over the first half of the year. Hachette Book Group, for example, said e-book sales jumped 280% in the first six months of 2010, while Random House predicted that worldwide sales of e-books will top $100 million for the full year. At the end of June, e-book sales accounted for about 8% of adult sales at the publishers.

In general, the major houses were optimistic about the second half of the year, although Lagardère warned that it expected earnings to fall further than the 9.8% decline recorded in the first half of the year. In his letter to employees about the first half of 2010, Random chairman Markus Dohle expressed cautious optimism about prospects for the remainder of 2010. The fall list has a number of big books with big first printings, led by the $9.99 mass market paperback edition of The Lost Symbol, which has a four million–copy first run set. New titles are led by John Grisham's The Confession (2.8 million first printing), Barefoot Contessa: How Easy Is That? (750,000), and Nora Ephron's I Remember Nothing and Other Reflections (500,000). The first printing for George Bush's memoir, Decision Points, has not yet been finalized.

Six Month Operating Results (in millions)

Publisher 2009 2010 % Change
Random House
Sales €734.0 €791.0 7.7%
EBIT 20.0 40.0 100.0
Margin 2.7% 5.1%
Penguin Group
Sales £452.0 £493.0 9.1%
Op. income 21.0 44.0 109.5
Margin 4.6% 8.9%
Sales $521.0 $578.0 10.9%
Adjusted Op. income (9.0) 4.0 NM
Margin NM 0.7%
Simon & Schuster
Sales $343.1 $341.4 -0.5%
Op. Profit 4.0 15.5 287.5
Margin 1.2% 4.5%
Lagardère Publishing
Sales €1,009.0 £975.0 -3.4%
Op. Profit 112.0 101.0 -9.8
Margin 11.1% 10.4%