PublishersLunch
As expected, sales of the 50 Shades of Grey
trilogy--selling more than 30 million units in the reported period in
English--powered Random House to "record operating profits" for the
first six months of the year and made the book division a standout performer
for Bertelsmann as well.
Random House's sales for the reported
period grew 160 million euros, or 20 percent, to €947 million for the period,
and operating EBIT increased to €113 million, up 64 percent from €69 million a
year ago. The company notes that "favorable currency exchange rates also
contributed to its positive performance." (The weakened euro helps the
European conglomerates with substantial interests in the US and the UK, since
those revenues are "worth" more when converted into euros.) In a
letter to staff, Random House ceo Markus Dohle notes that "our first-half
momentum continued through July and August." Digital revenues accounted
for 22 percent of Random House's overall sales worldwide, and 27 percent of the
US division's sales. Dohle wrote that "growth in our e-book sales, which
continued to rise significantly in each of our divisions, was complemented by
our increasing market share among physical retailers. The special programs and
services we have created for them have led to their enthusiastic sell-through
of Random House books."
Just how much of that performance did 50
Shades drive? Bertelsmann does not break out the number, but with sales running
roughly equal between print and ebooks, by our rough calculation the three
books accounted for about 170 million euros in sales--driving all of the gain,
and then some. Dohle remarked that "creating and fulfilling the unequalled
demand for the novels has mobilized an ongoing Random House publishing effort
of unprecedented scale and teamwork within and across our international
divisions."
Companywide, sales from continuing
operations at Bertelsmann rose to 7.572 billion euros, up from 7.209 million
euros a year ago, and "operating EBIT from continuing operations almost
reached the prior year's high level," at €731 million. (meaning, in plain
English, that they declined, slightly). CEO Thomas Rabe reminded investors of
their "four strategic approaches to gradually reshape Bertelsmann
over the next few years. The first of these strategic thrusts is strengthening
our core businesses; second the transformation to digital of our businesses;
third the development and expansion of growth platforms; and fourth expansion
into growth regions, especially in Asia and South America." At a press
conference, Rabe
said that "acquisitions will play a role, next to organic growth, in
the implementation of our growth strategy. We are also looking at the
opportunities resulting from the takeover of EMI's publishing business by Sony
and the recorded media business by Universal Music" (which may sell some
music labels to satisfy regulators).
Separately, as predicted earlier in the
week, 47-year-old Christopher Mohn will take over as head of Bertelsmann's
supervisory board in January, as former chief executive Gunter Thielen retires
from that position. And Gruner + Jahr chief executive Bernd Buchholz resigned
from the board earlier this week "in an apparent protest about
strategy", the
FT reports, just days after Bertelsmann dropped hints about taking over the
25 percent stake in G+J still controlled by the Jahr family.
Results
Results
What you can say about Lagardere
Publishing's reported sales for the first half of the year is, it could have
been worse. Even with "a substantial market contraction in all countries
in which the division operates"--from a 2.9 percent decline in French
results to a 4 percent drop in US sales and a 7.6 percent decline in the
UK--totals sales of 905 million euros were actually up, by a slim 0.5 percent
on a reported basis, compared to 900 million euros a year ago. (Apparently
"a complex accounting adjustment linked to reserves for returns in
education" helped balance out those reported declines, along with
gains in Japan helped outweigh the drops in major territories.)
Even on a like-for-like basis, which
excludes a 30-million-euro currency exchange gain, results were down 2.4
percent. Similarly, EBIT declined to 57 million euros, down from 71 million
euros a year ago. Conditions clearly worsened in the second quarter, since HBG
USA was up 2.8 percent in the first quarter and even the UK division was down
by only 0.4 percent.
The company says "prospects are
positive" for the second half of the year and "profitability in the
second half will be significantly higher than in the first half, due to a
seasonal effect" (no doubt thanks in part to JK Rowling's first novel
for adults THE CASUAL VACANCY, as well as the French translation of FIFTY
SHADES OF GREY).
eBooks accounted for 27 percent of US
revenues and 23 percent of UK sales (compared to 28 percent and 25
percent respectively after the first quarter.) Consistent with other reports we
have highlighted--the even more so at HBG USA than some other houses--ebook growth slowed
considerably, gaining just 20 percent over the same period a year ago. Overall,
ebooks comprised 8.4 percent (or 76 million euros) of all Lagardere Publishing
revenues.
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