After a long string of quarterly earnings gains, HarperCollins's operating profit for the third quarter ended March 31, 2001, was flat with the comparable period in fiscal 2000 at $12 million. Sales in the quarter fell 13.2%, to $210 million.
HC president Jane Friedman said that given the slowing economy, she was "delighted" to maintain the same profit level as last year's third quarter. The decline in revenues was due in part to the higher number of titles HC released last year as it finished publishing books it acquired in the Morrow/Avon deal. But Friedman also acknowledged sales comparisons in the general books group were hurt because of the success the unit had with an Oprah selection in last year's third quarter. The weak holiday season also lowered sales at Zondervan and the children's group, although Friedman said profits increased at the latter unit.
Friedman told PW the quarter "turned out much better than I thought in the first few weeks of January." She said HC began to see a turnaround in March and that April was a "terrific" month. Friedman is looking for a solid fourth quarter and is optimistic about prospects for fiscal 2002.
Class Action Granted
Judge Paula Omansky, who is overseeing a lawsuit brought by authors Ken Englade and Patricia Simpson against HC, has granted a motion by attorney Jerome Noll that the suit be classified as a class action. As a result of the ruling, any authors who had a book published by HC from January 1, 1993, through April 20, 2001, will be included as part of the lawsuit unless they opt out of the action.
The lawsuit was originally filed in late 1999 and alleges that HC has deprived U.S. authors of royalties by selling books to its affiliated companies (primarily HC Canada) at deep discounts (News, Nov. 15, 1999). "We hope to prove that HarperCollins has not acted in good faith" by selling U.S. titles to its affiliates at discounts that range between 65% and 72%, said Noll. HC's American authors are entitled to receive a royalty based only on the amount of money collected by HC's U.S. operations, and by selling titles at below market value, HC is depriving authors of receiving the full amount due, the complaint charges. Noll's firm, Lax & Noll, is in the process of receiving the names of the authors from HC who qualify to be part of the class action. Noll hopes to mail notices to those authors by the beginning of June informing them of the litigation. Noll expects the discovery process to begin soon, although no trial date has been set. Authors who think they may be part of the class can contact Noll at (212) 818-9150.
An HC spokesperson said the company's "relationships with each author are unique, and we don't think those relationships are appropriately dealt with on a class action basis."