Germany’s Bertelsmann Reports a Half-Year Decline at PRH

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From Publishing Perspectives:

In its report arriving overnight from Gütersloh, Bertelsmann—parent of Penguin Random House—is reporting that its overall 2018 first-half revenues rose to €8.2 billion (US$9.6 billion), its highest result, the company says, in 11 years, with a group profit of €501 million (US$584.4 million).

The news on Penguin Random House, however, is different, recording “declines in sales and earnings” in the same period, the first half of 2018.

And in a letter to staff dated today (August 30), Penguin Random House CEO Markus Dohle writes, “I’d like to give you some context and perspective on those numbers, highlight some of our key global achievements so far this year, and, especially, thank you for all you are doing on behalf of our books.”

. . . .

To Penguin Random House staffers, Dohle writes, “Even though the reported Bertelsmann headline numbers were down for its book division in euros, the underlying operating revenue and profit numbers for Penguin Random House in US dollars have been stable year-over-year.

“This means that the quality of our business and our earnings have been on the same—high—level as in the prior year. Our core business remains very strong globally.”

. . . .

Dohle’s message is, in essence, better things are ahead. “We have a terrific publishing lineup worldwide to carry us to this year’s finish line,” he writes, ” with new potential national and local bestsellers on the schedule from now through December.

. . . .

Overall, Dohle’s messaging asserts, all is well and getting better, despite disappointing financial reportage from Germany. “In this year of ongoing unrest and anxiety worldwide, our authors’ books across categories are needed more than ever,” writes Markus Dohle.

Link to the rest at Publishing Perspectives

PG says the Bertelsmann report that prompted Dohle’s pep talk letter to PRH employees said the first-half revenues of PRH were down 3.3% from last year. Operating EBITDA fell by 17.0 percent.

What interested PG even more was another section of the Bertlesmann report was the following:

“In the United States, Penguin Random House had 178 titles on The New York Times bestseller lists in the first half of the year, 25 of them at No. 1. The biggest bestsellers of the reporting period [included] … Ernest Cline’s novel Ready Player One, which served as the basis for the eponymous Steven Spielberg movie, and was also very successful as an audiobook.

“In the United Kingdom, 41 percent of all books on the The Sunday Times bestseller lists were Penguin Random House titles. In addition to the above-mentioned works that were successful in the United States, Sapiens by Yuval Noah Harari and Still Me by Jojo Moyes sold particularly well in the United Kingdom.

. . . .

“In Germany, Verlagsgruppe Random House had 251 titles on Der Spiegel bestseller lists, 11 of them at number one.”

Unless PG has missed something in recent months, Amazon doesn’t share its book sales data with The New York Times, The Sunday Times, etc., for purposes of those publications’ bestseller lists.

A few months back, Mike Shatzkin said that 69% of book sales (print, ebooks and audio) are happening online and only 31% in physical bookstores. The online number for adult fiction and non-fiction is now about 75%.

Let’s put things together:

  1. PRH is killing it on the traditional bestsller lists.
  2. PRH revenues are down.
  3. Amazon sales aren’t reflected in the bestseller lists.

PG admits other factors come into play, but if he combines these reported facts, he suspects that PRH is underperforming on Amazon. PRH books compete quite successfully in the traditional bookstore world, but they can’t compete on Amazon.

Bertelsmann says PRH’s declining sales and earnings are “due to exchange rate effects, among other factors.” PG suggests that among the “other factors,” not being able to sell very effectively on Amazon might be significant.

Of course, whether Barnes & Noble continues to circle the drain or actually goes down the drain, sales on Amazon will become even more important to Big Publishing’s financial performance.

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15 thoughts on “Germany’s Bertelsmann Reports a Half-Year Decline at PRH”

  1. The external environment is unfavorable for both big publishers and B&M bookstores. The factors that gave them a competitive advantage are losing their power. That loss is measured in market share. It can’t be reversed.

    Look for both to highlight their high quality and try to capitalize on stuff like literary tradition, real authors, serious literature, and stewardship of our cultural legacy.

      • Considering how much he hates Jeff but has yet been able to do anything to Amazon, I’m not to worried about our chef twit – other than to wonder what else is going on in the world that’s not being noticed – because TDS makes for better press …

        • Lots of things are going on.
          A likely genocide, a humanitarian crisis, the slow death of a major democracy in Turkey…

          For that matter, a major milestone in technology is on the horizon with global geopolitical impact that is being swept under the rug of ideological battles.

          Over on the UK mecia, I saw talks of fruit picking robots being commercially available by next year or so. I had seen lots of experimental farm robots but that was the first claim that they might be ready this decade instead of next.
          Either way, that is going to drastically change the nature of farming more than anything since the green revolution of the 50’s and 60’s. And the impact on global migration policies will be enormous.

          But no. No mention in the “major” media outlets on this side of the atlantic.

          • I’m not sure democracy’s death in Turkey will be all that slow.
            Which does not affect the truth of your statements.

  2. PRH books … can’t compete on Amazon.

    Saw an offer earlier this week where Glen Cook’s Black Company was *free* for a few days … all I had to do was hand over my email address to teh Torlings. Looked up the other ebooks on ‘Zon: $13 each, so no sale.

    Meanwhile, a few indie authors that I like had automatic sales for their new releases ($5) — I didn’t even blink.

    I’ll usually snag backlist trad books when they hit BookBub ($1.99); otherwise, I just ignore them.

  3. “In the United States, Penguin Random House had 178 titles on The New York Times bestseller lists …”

    You mean that list that you can pay to have your dud of a book listed as a best seller? A list that doesn’t track Amazon book sales?

    Like that joker on Mythbusters was always saying, “There’s your problem.”

    • The thought that came to mind is that they are big in the outlets that sell less books and smaller where a majority of books are sold. If that trend continues they’ll be well on the way to nichedom.

      Big fish, small lake?
      They look big as long as you ignore the ocean beyond.

  4. “PG suggests that among the “other factors,” not being able to sell very effectively on Amazon might be significant.”

    —-

    Well, the competition on Amazon is undeniably harder. There’s the need to compete with Indies, APub, Very small tradpub, newPub, used books, remaindered books…

    It’s a tough crowd and if your act is getting long in the tooth…

    B&M has much smaller catalogs that they can squat on and keep smaller competitors off tbe shelves.

    (Plus, according to KKR, the randy Penguin is tightening its requirements for authors under contract. They are insisting the new books be exactly the same as the old books. Which is apparently why Nora Roberts bolted. KKR called it the hamster wheel of doom.)

    https://kriswrites.com/2018/08/15/business-musings-writers-and-the-hamster-wheel-of-doom/

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