Though he said he’s happy with HarperCollins’s results for fiscal 2022, CEO Brian Murray told PW that beginning in early spring, the higher costs of freight and fuel began to have a noticeable impact on the company’s bottom line. (In fact, HC’s earnings for the quarter ended June 30 were down 2% from a year ago.) Those higher costs, as well as a change in title mix, limited earnings growth at the publisher in the fiscal year ended June 30 to 1% over fiscal 2021, despite a 10% increase in sales. Boosted by a $149 million contribution from HC’s May 2021 purchase of the Houghton Mifflin Harcourt trade group, revenue at HC was $2.19 billion and EBITDA (earnings before interest, taxes, depreciation, and amortization) rose to $306 million from $303 million.
On the top line, sales in the U.S. rose about 12%, Murray said. He noted that in addition to the $149 million pop from the HMH acquisition, the U.S. business enjoyed some organic growth, led by the general books group, which had strong frontlist sales, including The Storyteller by Dave Grohl, Pioneer Woman Cooks: Super Easy! by Ree Drummond, and The Stranger in the Lifeboat by Mitch Albom. Sales of the Bridgerton series, which skyrocketed in fiscal 2021 due to the release of the Netflix series adaptation, fell $16 million in the year.
Digital sales increased 4% compared to the prior year, said HC parent company News Corp, driven by continued growth in downloadable audiobook sales. After rising in fiscal 2021, e-book sales fell in fiscal 2022. Digital sales represented 21% of HC’s consumer revenue for the year, down from 22%.
As a new fiscal year begins, all costs—particularly the cost of four-color printing in China—remain high, and while container ship costs have come down, they’re still much higher than they were before the pandemic, Murray said. He doesn’t see any real easing of costs before the beginning of 2023 at the earliest. While gas prices in the U.S. may be coming down, he added, the cost of diesel fuel that truckers rely on shows no signs of dropping, and fuel costs in Europe will likely remain very high because of the war in Ukraine. He was reluctant to discussing pricing, only saying that in order to make new books successful, higher costs need to be taken into account.
Murray is pleased that despite supply chain issues last year, the majority of books “got to where they needed to be” in time for the holidays, but he noted that that effort was expensive. There continue to be supply chain bottlenecks this year, particularly in China. Murray’s biggest concern about the coming holidays, however, is whether consumer spending will hold up. Book sales were strong during the pandemic, and while reading still appears to be above prepandemic levels, high inflation and more entertainment and travel options could dampen spending on books, he explained.
HC does have something of an ace in the hole for the final months of the year, though: the September 2 release of the J.R.R. Tolkien–inspired Amazon Prime series The Lord of the Rings: The Rings of Power, for which Murray expects Amazon to mount a mammoth marketing campaign. HC had already owned rights to Tolkien’s books in the U.K., and the purchase of HMH gave it the book rights in the U.S. as well. “It’s the first time we can have a full team effort” to take advantage of the release of a Tolkien series or movie, Murray said. He estimated that HC has created about 60 SKUs (stock keeping units) based on the series, ranging from calendars to box sets and tie-ins. HC sales reps have been reaching out to bookstores to make sure they have what they need to promote the Tolkien titles, he added.
Murray wouldn’t predict how Rings of Power will impact HC sales, but he didn’t disagree with Robert Thomson, CEO of News Corp, who told analysts that the release is “going to have a profound impact on HarperCollins’s performance” in the third and fourth quarters of the calendar year.