Digital Sales Pump Trade Book Earnings

Publishers may have put a thumb on the scale to boost print over digital sales – and of course, to preserve jobs and bookstores and a longstanding book culture – yet the efficiency and the profit margins for digital products [often turn out to be] much better, says PW’s Andrew Albanese.

A trio of major publishers last week reported financial results for the period ending June 30, 2020. While sales fell from a year ago, earnings were a different story, reports Andrew Albanese, Publishers Weekly senior writer.

For HarperCollins, Houghton Mifflin Harcourt, and Simon & Schuster, a combination of cost and expense cuts and increased sales of higher-margin digital products drove an improvement in their respective bottom lines for the quarter, notes Albanese, citing PW reporting by colleague Jim Milliot.

For HarperCollins, which closed out its fiscal year ended June 30, 2020, revenue dropped 2.9% in the quarter over 2019, though earnings increased 9.3%. Cost savings were part of that, says Albanese, but digital sales posted their best performance in years – up 26% over a year ago due to a 31% increase in e-book sales and a 17% gain in digital audiobook sales.

At S&S, sales for the second quarter 2020 dropped 8.3% from the same quarter in 2019 – about $200 million lower. But lower production and distribution costs were enough to give the company an 8.6% increase in earnings. For S&S, digital sales rose 44% over the second quarter of 2019, including a 51% jump in e-book sales and a 34% increase in sales of digital audiobooks.

“For me, this emphasizes a much-overlooked point in recent years: while publishers have put a thumb on the scale of digital sales to boost print – and of course, to preserve jobs and bookstores and a longstanding book culture – in fact, the efficiency and the profit margins for digital products are much better,” Albanese tells CCC’s Chris Kenneally. “This has always been the tradeoff with digital —smaller revenues, bigger earnings. Whether or not this changes the industry’s outlook for the future, we’ll just have to see.”

Every Friday, CCC’s “Beyond the Book” speaks with the editors and reporters of “Publishers Weekly” for an early look at the news that publishers, editors, authors, agents and librarians will be talking about when they return to work on Monday.