With digital content generating 18% of total revenue in the first quarter of 2011, Simon & Schuster reported that profits more than doubled and sales rose 2% to $155 million. Adjusted operating income rose to $5 million from $2 million, while adjusted operating income before depreciation and amortization increased to $7 million from $3 million.
“We got out of the gate faster than usual,” said S&S CEO Carolyn Reidy led by sales of e-books that doubled in the quarter and accounted for 17% of revenue with digital audio adding the other one percent (about $28 million). The steep increase in profits was attributed to lower shipping, production and returns costs as well as the “painful” belt-tightening that S&S has implemented over the last 18 months plus the higher sales, Reidy said. The digital gains at S&S followed the announcement earlier Tuesday that Hachette Book Group’s e-book sales rose 88% in the quarter and represented 22% of revenue.
As e-book sales have increased, print sales have fallen across the board, Reidy said, noting that the major concern in declining print units is what it means for the viability of physical stores which she said are still vital to the health of S&S and all publishers. Reidy noted that S&S is starting to turn its attention to ways to make print books objects that people want to buy, noting, for example, that the company has put a lot of attention to David McCullough’s May 24 release The Greater Journey: Americans in Paris which is 576 pages long and has a $37.50 cover price.
S&S is measuring whether total print and digital units are rising and while it’s too early to make a definitive determination Reidy said early indications from some of S&S’s long-running bestselling authors suggests that total units are indeed increasing. One of its bestsellers in the quarter, Dr. Mike Moreno’s The 17 Day Diet, has sold almost 600,000 copies in print and digital formats.
Sales in the children’s group were led by Cassandra Clare’s City of Fallen Angels, which Reidy noted had the biggest one-day sale of e-books in S&S history. International sales rose 10%, driven by a 13% gain in the U.K.
Among S&S’s bestselling authors who reached #1 in the quarter for the first time were Kresley Cole, author of the mass market original paranormal Dreams of a Dark Warrior, and children’s author Brandon Mull for Beyonders: A World Without Heroes.
Given the good start to the year, Reidy said she is “pretty confident” S&S will finish 2011 with a slight increase in sales and a significant increase in profits with e-book sales likely to represent at least 17% of revenue for the year. In 2010, S&S had a slight sales decline (0.3%), but a big jump in earnings (43%).