Following a disappointing first six months of 2016, in which sales fell for five large trade publishers compared to the first half of 2015, third-quarter results showed signs of improvement. Revenue rose over the third quarter of 2015 at three of the four publishers that reported sales for the period ended Sept. 30, 2016, and profits increased at two of the three companies that reported earnings.
In general, publishers said that sales of print books rose in the quarter, while sales of e-books continued to decline. At Simon & Schuster, revenue increased 11.3%, led by higher print and digital audiobook sales that offset declines in e-book revenue. The decline in e-book sales limited the increase in total digital sales in the quarter to 5%, to about $52 million. S&S CEO Carolyn Reidy observed that the share of total revenue represented by digital depends on the mix of titles, noting that one of its biggest books in the recent quarter, Born to Run by Bruce Springsteen, did very well in print. Total digital sales accounted for 23% of revenue in the most recent quarter, down from 25% a year ago.
Digital sales at HarperCollins accounted for 20% of consumer revenue in the most recent quarter, the same level as in the third quarter of 2015. But with overall HC revenue falling, digital sales dropped about 6% in the period, to approximately $77 million. Print sales rose slightly.
The decline in total revenue was attributed to unfavorable comparisons to last summer, when the blockbuster Go Set a Watchman generated $32 million in revenue. HC was somewhat able to make up for the absence of Watchman sales with strong performances by a number of frontlist books, including Hillbilly Elegy, The Black Widow, and Jesus Always. In a conference call discussing results, Robert Thomson, CEO of HC parent company News Corp, said that the success of Hillbilly Elegy and Jesus Always was the result of HC looking for titles that “resonate beyond the traditional elites.”
Despite the revenue decline, HC’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) rose 14.3% in the quarter, and its margin increased to 12.3% from 10.3% a year earlier.
Third-quarter revenue at Lagardère’s worldwide publishing operation rose 11.2% over 2015, to €675 million. At its American division, Hachette Book Group USA, sales rose 12.9%. In the first half of 2016, revenue at HBG USA declined 6.6%. HBG’s revenue excludes sales from the publishing arm of the Perseus Books Group, which Hachette bought in March. HBG CEO Michael Pietsch said that the purchase has “had a sizable positive revenue impact” and that the integration of the two houses was going “extremely well.” (Lagardère reported that since the purchase, Perseus has added €40 million, or about $43.5 million, to HBG). HBG cited a notable rise in bestseller revenue as well as double-digit sales gains in its distribution business as reasons for the improvement in the third quarter.
Revenue jumped 30.1% in Lagardère’s U.K. division, led by strong sales of Harry Potter and the Cursed Child. Revenue in France was up 7.8% in the quarter, but fell 8.4% in Spain and Latin America.
Houghton Mifflin Harcourt’s trade division posted a huge increase in EBITDA and a solid 5.9% sales increase in the quarter. The gain in revenue was driven by strong sales of popular titles such as How to Bake Everything, Little Blue Truck Halloween, QB, and The Whole30. Partially offsetting the increase in print revenue was a decline in sales of e-books.
Third Quarter Financial Results, 2015–2016
($ in millions)
|Houghton Mifflin Harcourt Trade|
|Simon & Schuster|
Source: company reports, publishers weekly.