Costs Cut into Profits at Big Publishers

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From Publishers Weekly:

Simon & Schuster was the only one of the country’s four largest trade publishers to show an improved profit margin in the first half of 2023 compared to last year. While industry sales were generally flat in the first six months of the year, companies cited higher costs as the major reason profit margins shrank in the first six months of 2023.

In reporting Penguin Random House’s first-half results last week, where sales rose 9.5% but profits were up less than 1%, interim global CEO Nihar Malaviya told employees the small earnings increase “should come as no surprise, as industry inflationary cost pressures and increased costs across our businesses have continued to impact us.”

HarperCollins CEO Brian Murray noted earlier that in addition to higher manufacturing, freight, and distribution costs, the industry has faced macroeconomic headwinds that he hasn’t seen since the Great Recession of 2008. Those challenges, as well as the unique conditions tied to the pandemic—including overprinting by publishers and over-ordering by most accounts to meet the early surge in book buying—created a bubble that began to fizzle last year, and it took time for all industry players to recover, Murray said. That resulted in earnings falling 32.4% at HC in the first half of the year on a 6.5% decline in sales.

Profits fell 19.7% at Lagardère Publishing despite a 2.5% increase in six-month sales. In addition to inflationary pressures, Lagardère cited increased costs incurred on “transformation projects in France” as the reason for the earnings decline. Some of those costs were partly offset by higher selling prices and the impacts of operational efficiency plans, particularly in the United States, the company said.

Among the cost-cutting measures employed by all three companies were workforce reductions, with HarperCollins’s and PRH’s efforts garnering the most attention. HC was under a corporate mandate to reduce its North American workforce by 5%, while PRH cut staff through layoffs and an early retirement program for employees over 60 who were with the company for at least 15 years (voluntary separation offer). HBG also had its own early retirement initiative (voluntary resignation benefits program).

Link to the rest at Publishers Weekly

1 thought on “Costs Cut into Profits at Big Publishers”

  1. One wonders how C-suite compensation packages were diminished accordingly.

    One also wonders whether the Tooth Fairy will top the September New York Times bestseller list with a ghostwritten memoir.

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