S&S Consumer Group Prepares to Go It Alone
Jim Milliot -- 3/23/98
It's been a year of reordering priorities in acquisition and distribution, after a `horrible' start. Even without the rumors that sprang up at the end of the year that Viacom was putting Simon &Schuster up for sale, 1997 was an unusual year for the company's consumer group. According to consumer group president Jack Romanos, the early part of 1997 was "horrible." The company began 1997, he said, with the realization that the publishing environment was much different than it had been in the past. "We knew we had to move away from the traditional framework of how things had worked and adapt to new business realities," Romanos said. "I'm proud that everyone here knew we had adjustments to make and didn't give up."
One of the key things that S&S did was to look more closely at its different channels of distribution to see what was working and what wasn't. S&S eliminated about 1000 direct accounts that were inactive or unprofitable and also decided to cut printings and ship fewer books than in the past. S&S also worked more closely with its suppliers to get quicker turnaround times for books that were selling well. In addition, S&S "developed the discipline to say no to books that we didn't feel we could sell well, which left us with more resources to devote to the titles we did publish," Romanos explained. "We got a grip on the acquisitions process." As a result of "tightening the basics," the consumer group saw returns fall about 2% and posted a record-breaking year in terms of cash flow and profits.
The group's fortunes "changed dramatically" in June, a change that continued through the rest of the year. "I have never seen a second half of the year that was so good," Romanos told PW.
The driving force behind the strong turnaround was the Simon &Schuster trade division, where sales were up about 15%, although Romanos noted that all the divisions-with the exception of Pocket, which was hurt by the weak mass market paperback business-boastedimproved sales in the year. PW estimates that the consumer group had total revenues of about $550 million in 1997.
The trade division's president and publisher, Carolyn Reidy, noted that beginning in July, the unit "piled bestseller on top of bestseller." Reidy said that all of the division's imprints - Scribner, Free Press, Simon &Schuster and the trade paperback imprints - did well last year, but that Scribner, led by the "stupendous success" of The Joy of Cooking by Irma S. Rombauer and Marion Rombauer Becker headed the pack. Joy now has some 1.2 million copies in print.
Echoing Romanos's remarks about the importance of distribution channels, Reidy said the trade group "worked extremely hard with our customers to tailor marketing plans for particular accounts." For example, the company offered a number of different marketing tactics for Joy, Reidy said, adding that the cookbook did extremely well in warehouse clubs, which to date have sold approximately 400,000 copies. Reidy said that for the first time in several years, direct sales to retail accounts comprised the majority of the division's revenues. And yet, while Reidy is a big fan of the larger stores - be they chain or independent - she said a major challenge for publishers is to "lead customers to specific titles, especially midlist books that can get lost" at superstores.
The trade group trimmed its list to about 550 titles in 1997 and will publish about the same number in 1998. With fewer titles, and lower initial shipments, Reidy said one of the biggest tasks she faces is to correctly allocate marketing dollars. "You'd better be right or your marketing budget will be out of whack," she said.
While the AAP's figures show adult hardcover sales to be down 6.8% in 1997, Reidy said S&S did very well with the format and published such bestsellers as Underworld by Don DeLillo, Doris Kearns Goodwin's Wait Till Next Year, Angela's Ashes by Frank McCourt, Andrew Morton's Diana: Her True Story and The Letter by Richard Paul Evans. In addition, S&S had "a lot of books" that did not reach bestseller lists but still sold in the 50,000- to 90,000-copy range. The trade paperback imprints had a couple of nice surprises as well, including Chocolate for a Woman's Soul, edited by Kay Allenbaugh, and Sark's Succulent Wild Woman, which have sold more than 150,000 and 200,000 copies, respectively.
Strong Gains in Children's
Although the S&S trade division had the biggest impact on the group's performance in 1997, the division that had the largest overall gain was the children's operation, with a double-digit sales improvement. According to group president Rick Richter, the gains in the year were led by the unit's imprints that have generally lower price points - the paperback publisher Aladdin; Little Simon, which focuses on novelty books; and Simon Spotlight, which d s media tie-ins. The latter imprint "has done brilliantly," Richter told PW, and is working closer than ever with Nickelodeon. The unit has shipped more than three million Rugrats books and is publishing titles based on such media properties as the Weather Channel and Rocky and Bullwinkle.
The company's traditional publishing imprints, Simon &Schuster Books for Young Readers, Atheneum and Margaret K. McElderry, had a satisfactory 1997, Richter said. Sales were led by the Newbery Award winner The View from Saturday by E.L. Konigsburg, which sold more than 100,000 copies last year. Richter was also excited about the prospects for a new Richard Paul Evans book, The Christmas Candle, that will be released by the children's group this October. The diversity offered by the children's book group is one of its strengths, he noted. "One minute I can be talking about the Rugrats and the next minute about a Newbery winner," Richter said. The division published about 450 titles in 1997 and will do about the same number this year.
Hard Times in Mass Market
Despite having 27 paperback bestsellers and seven hardcover bestsellers, sales at Pocket dipped last year. Pocket president Gina Centrello attributed the decline to weakness in the mass market area, though Pocket's paperback sales did slightly better than the 7.8% decline reported by the AAP. While returns of other formats have fallen somewhat, they remain a problem in the mass market category. The continuing consolidation of the IDs and weak support from superstores are the two main factors hurting the paperback market, Centrello said. "The top of the list still sells well, but unknown authors have it much tougher," she told PW.
Centrello said her mandate is to make Pocket less dependent on mass market paperbacks, although the format still accounts for the majority of Pocket's sales. Pocket published approximately 550 paperbacks in 1997 (including YA titles) and Centrello anticipates making only minor trims in the lists. "We've already made a number of cuts," she observed. To diversify the list, in 1998 Pocket will publish about 75 hardcovers and 50 trade paperbacks. In fact, the performance of the division's trade paperback and hardcover lines was one of the positives in 1997, Centrello said. Other strong performers last year included the Star Trek series, as well as romance in both paperback and hardcover. YA titles such as Buffy the Vampire Slayer, Hanson and Sabrina have all sold well, and Pocket's synergistic efforts with Viacom, such as MTV Books, have been a success. Centrello added that she is excited about working with Nickelodeon on new projects (News, Feb. 9).
Sales were up slightly at S&S's audio division, publisher Seth Gershel told PW. He attributed the slowing growth rate for S&S, and the entire audiobook industry, to booksellers' preoccupation with other issues during the past year. "We [audiobooks] have more shelf space than ever, but it's hard to keep the booksellers' attention focused on the section. My goal for this year is to help booksellers merchandise the titles better," Gershel said.
S&S Audio released six to eight titles per month last year and will produce a similar number in 1998. The division's strongest title in 1997 was Angela's Ashes, which sold more than 100,000 copies. The company sold more than 50,000 copies of the Grammy Award-winning Charles Kuralt's Spring and also did well with five audio editions of Oprah's book picks.
Although bookstores are the primary outlet for audiobooks, Gershel said the titles are being sold in more places than ever before, noting that mass merchandisers and warehouse clubs have become dependable outlets. In addition, mail order has grown in importance.
Gershel said the audio unit, which is always looking to work with other Viacom companies, will continue to aggressively search for titles outside of the S&S family and will continue to do original productions (such as the Kuralt title). The audio unit also added to its catalogue by acquiring Pimsleur, a producer of foreign-language cassettes, late last year.
Interactive Settles Down
After a number of turbulent years, Simon &Schuster Interactive had a stable 1997, and division head Gilles Dana said he believes the unit is poised for growth. The division will publish 15 to 20 titles this year, most of which will take advantage of an S&S or Viacom brand. S&S Interactive has sold more than one million copies of its various Star Trek titles, and has sold more than 500,000 copies of its Richard Scarry CD-ROMs.
More Star Trek and Scarry titles are planned for this year, but the big event of 1998 will be the release of Douglas Adams's Starship Titanic, a CD-ROM game. "We have a lot invested in this title," Gilles said. S&S Interactive will use the CD-ROM in another attempt to increase the medium's presence in bookstores. Several Adams signings are set for Barnes &Noble, the only chain that carries multimedia in any meaningful amount. "We're still hoping to reach the book channel," Dana said.
Looking forward, Romanos told PW that the consumer group management team is prepared to operate in a changed publishing climate. "You just can't wait for things to `get back to normal,' because that isn't going to happen," Romanos said. Among some of the new realities Romanos sees for the industry is more author contracts modeled on the ones the company recently negotiated with Stephen King and Clive Cussler. (In those deals, both authors agreed to take a smaller advance than usual, in exchange for sharing a greater portion of the profits.) And although he d s not think that Internet sales will be large enough to change the business in the short term, Romanos acknowledged that "you can't overlook the growth of Amazon.com."
Regarding the pending divestiture of the other S&S divisions - which will see the company shed its educational and professional operations, which generated approximately $2 billion in sales last year - Romanos said that while it will have an impact on the consumer group's infrastructure, he "has confidence in our ability to move forward." -Jim Milliot
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