Gains at trade and children's divisions offset by weak mass market performance
Revenues at Simon &Schuster inched ahead 1% in 1998 to $564.6 million, while operating income fell 12% to $53.2 million, according to year-end figures from S&S's parent company Viacom. Results are for the consumer publishing group only; sales from the education and professional and reference groups, which were sold to Pearson last year, were excluded from the report.
Despite the decline in earnings, S&S president Jack Romanos told PW he was pleased with the results. While some of the drop in earnings can be attributed to disruptions caused by the divestiture of the consumer group's sister companies, as well as costs associated with creating a new corporate staff, Romanos said most of the decline was due to a change in the mix of sales. He explained that S&S's trade and children's divisions had good years, while the mass market paperback unit had a difficult 1998. Because of the volume of business S&S d s in mass market, the category has higher margins than the trade and children's operations. Romanos thinks that S&S's problems in paperback "were a function of the changing mass market business." While he believes the segment has a bright future, "we will need to adopt some different approaches to be successful." A top priority for 1999 is to find a new publisher for Pocket to replace Gina Centrello.
The company has already been successful in exploiting its ties to Viacom. Romanos estimated that approximately $40 million of revenue came from S&S's relationship with its parent company; he cited such examples as the success of Star Trek, Blues Clues and movie tie-ins. "I think that number [$40 million] is sustainable," Romanos said.
The decline in earnings notwithstanding, S&S still posted a respectable operating margin of 9.4% in 1998, compared to a margin of 10.9% in 1997. Romanos was also pleased that the company ended 1998 on a high note, with sales up 9% to $177 million and operating earnings up 32% to $30.7 million.