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HC Profits Rise in Fiscal 2017

12 August 2017

From Publishers Weekly:

HarperCollins finished the fiscal year ended June 30, with a $10 million decline in revenue, compared to fiscal 2016. However, parent company News Corp reported that the publisher saw a 7.5% increase in earnings. Revenue slipped to $1.64 billion, from $1.65 billion in fiscal 2016 , but EBITDA (earnings before interest, taxes, depreciation, and amortization) increased to $199 million, up from $185 million in the prior year.

. . . .

The expansion of HC’s global footprint also added to sales. Murray said between now and the end of the calendar year foreign-language sales will represent about 10% of the company’s total revenue

Sales of digital audio had double-digit gains in the year, Murray said, helping to offset another stretch of e-book declines.

. . . .

Murray said the continued decline in e-books isn’t a major concern at the moment, noting that in the North American market gains in print book sales made up for the drop in e-book sales.

Link to the rest at Publishers Weekly

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11 Comments to “HC Profits Rise in Fiscal 2017”

  1. Murray said the continued decline in e-books isn’t a major concern at the moment, noting that in the North American market gains in print book sales made up for the drop in e-book sales.

    If course it’s a major concern, but it’s not something one announces.

    They are losing market share to independents. That concerns any business.

    And what is often unsaid in these articles is unit market share. That’s a surrogate for eyeball hours. A firm can maintain revenue, yet lose its share of eyeball hours. Consumer behavior is always a concern.

    • Let me be the devil’s advocate today:

      It has happened that a company has been run into the ground by a blind obsession with protecting market share.

      Palm Computing, early this century, was totally obsessed with protecting their connected organizer market share. They swore they would never be undercut by handhelds running Microsoft’s Pocket PC software and they cut their prices to the bone to make sure nobody would be tempted by a cheap Pocket PCm they succeeded all the way to the grave. Because Microsoft wasn’t interested in the low-end connected organizer business. They were interested in the handheld computer business. So their partners focused on higher resolution screens, color displays, video and audio and action games. And they not only cherrypicked corporate PDA buyers and consumers willing to buy a premium product, but they also managed to upsell a lot of would be Palm buyers. True to their word, Palm kept Pocket PC from ever getting close to 50% unit share. Unfortunately, their Partners racked up virtually all the profit there was to make in PDA while PDAs mattered.

      It isn’t inherently self-defeating for a vendor to willingly give up unit share. Some customers you don’t want anyway.

      Where the BPHs are playing with fire is in deemphasizing their high margin format in favor of their lower margin format and (as you pointed out) in allowing consumers to get used to buying Indie, thereby legitimizing Indies.

      This particular scenario played out in the 80’s/90’s in the PC business. IBM benefited tremendously by the emergence of Compaq’s Portable PC. It addressed a niche they weren’t interested in and enhanced the ecosystem. Compaq sold portables, IBM sold desktops. All was well.

      But Compaq cloning the PC opened the floodgates.
      Soon, other companies were making true IBM compatibles (and not just workalikes) and consumers got used to the idea of buying clones. After a while, consumers noticed the clones weren’t just cheaper, they were using the latest tech *before* IBM or Compaq. They were smaller but they were nimbler. And over time, buying DELL and NORTHGATE and GATEWAY2000, and CompuAdd was respectable. And those brands were winning government contracts all over.
      It didn’t stop there: savvy small businessfolk all over realized they could buy standard PC components and build their own “White box” generic clones, make good coin, and undercut the namebrand clones.
      Of course, eventually, users realized they could do the same thing and, if their creations weren’t always cheaper, there were totally optimized for their personal use. Gakijg PCs were born out of this.
      By the mid 90’s all the original players except Dell had gone under, consolidated, sold out to giant Asian consumer electronics firms, or just gotten out of the business. IBM included. (They sold out to Lenovo.)

      And the wages of disruption continue.
      Today you can get quality Windows Laptops (good enough for a writer) for $150 and “PC’s on a stick”for under a $100. Name brand LCD displays, too. So $200 desktops can be assembled just by plugging in HDMI and usb cables.

      With Amazon (among others) greasing the way the wages of disruption that started in 1975 are stil washing away entire businesses in publishing. Some, like IBM, may be able to survive as a pale shell of what they used to be.

      But in the end it all boils down to forgeting about trying to control anything. Just keep an eye on the consumers and go with the flow.

      • Missing from this history of tech and market share is any mention of Apple. The growth of the iPod had a bigger impact on Palm’s decline and the iPhone destroyed it completely. Palm failed to innovate when carrying around MP3’s became more important than a PDA gadget and smart phones went to touch controls (rather than pen devices.) Apple’s software (and iTunes store infrastructure) was simply better. (And then copied by Android.)

        Likewise, IBM was forced out of the personal computer business because they foolishly didn’t understand the value of software and gave the keys to the castle to Microsoft, which quickly stabbed them in the back. (Microsoft then dropped the ball with lousy smartphone software, letting Apple and Android take over the critical mobile market.) Apple, though widely criticized at the time, held onto their software operating system and survived and thrived even with small market share in the PC realm.

        How does this relate to ebooks and market share? The best IP usually wins. The biggest mistake I think the Big 5 is making is underestimating the importance of great IP. They don’t really know how to develop material and I would argue the best writers of the next generation will all start and thrive as indies. That’s the biggest long term threat, not favoring print over ebooks. They still treat writers as commodities, rather than important creators.

        • 1- I couldn’t fit everything that happened in one post.

          2- the reputability causality cascade of the 80’s was a PC-only thing. Hackintoshes are a much more recent development.

          3- Yes, IP matters. Great IP the most but when it comes to building ecosystems it *all* matters. Particularly niche stuff.

          4- The one area the BPHs are really messing right now is with debut authors. They’re nipping a lot of careers in the bud with their pricing policies. Many of thise will either be one-and-done or go indie, sadder but wiser.

          • 5- Palm wasn’t fighting a publicly declared market share war with Apple. By the time they noticed the media market they were a dead company walking. They weren’t particularly concerned by Apple. Odd because most of their management was ex-Apple. They should’ve known better.

  2. HC is another publisher insisting on audio rights now. No audio, no deal.

  3. It isn’t inherently self-defeating for a vendor to willingly give up unit share. Some customers you don’t want anyway.

    Sure, but for publishers, it probably is. Rolex can do very well with a sliver of the unit market share. Timex wouldn’t do too well.

    Big publishers are much closer to Timex than Rolex.

    (A great story is how the Swiss watch guys managed the digital disruption.)

    • Oh, I agree.
      Their whole business is about bulk.
      They put out new releases by the thousand each year in the hopes that one sticks.

      I was tempted to say “shovel out” but even PC shovelware companies devoted some marketing support to all their products, especially at B&M. Probably still do but I haven’t been to MicroCenter in ages.

      The thing is they act as if they sell Rolexes instead of Armitrons. That kind of thinking is what sunk the IBM PC: “We don’t need to compete with the white box PC rabble. We’re IBM!”

      I’m also reminded of a GM exec interviewed shortly after Nissan introduced the first Versa at under $10,000. Asked what GM was doing to reach the young buyers targeted by Nissan, he said, “Nothing. We believe the best $10,000 car a young person fan buy is a three year old Buick.”

      This was ca 2004-2006. By 2009 GM was going chapter 11.

      As the saying goes, business collapses happen two ways; slowly over time and then suddenly, “without warning”. Mostly hecause the warning signs are ignored.

      The warning signs are all over:

      – lower unit sales
      – lower number of “quality” submissions
      – shifting focus to higher price, lower volume product
      – shifting focus from revenue growth to earnings “growth”
      – staff downsizings
      – incremental/marginal overhead reductions/consolidations
      – lowering of the bar for bestsellerdom
      – one week wonder bestsellers

      And on and on it goes.

      Smaller, more focused tradpubs will do fine but it is the giants that are withering. Sooner or later that one jackpot winner that makes their year won’t arrive ans, as Vanity Fair put it, “a guy shows up from Germany…”
      (Or France, which is more likely in the near term.)

      There be storm clouds ahead.

      • Well, to also play devil’s advocate, it’s important to understand that these big publishers are all owned by even bigger congloms with lots of money. Traditional publishing, to some extent, is just a toy for these companies to play with. (Providing book deals for favorite associates, internships for children of the powerful and great cocktail party guests.)

        They almost always solve their market share problems by simply buying up competitors. Likewise, twenty years from now, they can probably buy up the back catalogues of many major indy writers and any indy publishing companies that are doing well. Not to mention, steal all the techniques indy writers develop for promotion and audience building, but throw more money at it.

        I’d love to think they are going to crash and burn and disappear, but I think the fact is they are going to be around for as long as very wealthy people and companies have too much cash to burn and look around for ways to play artistic patrons.

        • They own those toys because they shower them with currency.

          The moment the shower slows even a bit they’ll send the pink slip envoys. Hence the shift towards maintaining profit levels at the expense of growth.

  4. Declining revenue and increasing earnings is often a death knell. Cutting costs is the knee jerk reflex of a failing business.

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