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Hachette steals the show

24.01.08 Alison Flood, Liz Bury, Joel Rickett and Philip Stone

So it wasn't the Grinch that stole Christmas. It was Hachette Livre. Several of its companies had spectacular festive seasons, transforming a hitherto flat year for the UK's largest consumer publishing group.

Yet Tim Hely Hutchinson, c.e.o., is cautious in his outlook. "Nielsen [BookScan] figures don't take account of returns," he says. "Even if publishers are on average achieving 2% growth, that's less than the cost of inflation, and it puts real pressure on. There'll be a general atmosphere of belt-tightening in 2008."

The overall picture of 2007 is of publishers striving to keep ahead of the previous year, and hoping for a mega-seller. With most of the top groups' market shares dented by Harry Potter, each boss focuses on squeezing out every last drop of sales and profitability.

Nobody expects swathes of redundancies in 2008, but talk is of "careful" recruitment. Hely Hutchinson warns that that can only go so far: "If you concentrate entirely on costs, in an unforgiving market your sales could fall dramatically, wiping out savings."

Consolidate in 2008

With economic uncertainty ahead, publishers are crossing their fingers. "One hopes we may slither through with weak growth," says Gail Rebuck, Random House Group c.e.o. "Now is a time for consolidation—we'll have to make our acquisitions work. It's about having good lists, watching costs, balancing creativity with productivity."

Ian Chapman, c.e.o. of Simon & Schuster, which had an excellent 2007, also anticipates a "year of consolidation", but adds that that would be "the very least". "I'm going to be tediously egotistical for a moment," he says. "I'm feeling very bullish indeed because of the people and the list we've got. But that's not to say I underestimate the economic challenges we'll feel in the marketplace."

Penguin c.e.o. Peter Field is more wary. "It's a flat market overall. We will see some profitable growth this year, but if you're looking for 10% topline growth, you're kidding yourself."

Sharp focus on costs means more care with advances: "We've been assiduously trying to screen out flops," Hely Hutchinson says. "The watchword is accuracy. In terms of unearned advances as a percentage of sales, 2007 was the best year for many years."

Yet doubts about the economics of celebrity books remain. "The big question is whether celebrities overall made the industry any money," David North, Pan Macmillan m.d., says. Barnsley believes the answer is yes: "Time and time again the really big [celeb books] work."

That's an area where smaller firms find it hard to compete, and Hely Hutchinson speaks of "continuing polarisation" and "a lot of pain beyond the big four [publishers]". Yet the figures don't wholly bear this out: Pan Macmillan, Simon & Schuster and Egmont all outpaced the larger groups in 2007. "I don't think you can afford not to be growing," North says.

Risk or no risk?

Some concerns crop up repeatedly when speaking to publishers: the precarious state of the high street chains; endemic discounting eroding the perceived value of books; the challenges of serious non-fiction and literary fiction; and the lack of opportunities to break new books and authors.

"There's no question that creating profitability and value from the UK high street is extremely difficult," Stephen Page, Faber c.e.o., says. "Discounting offers readers good value, but my anxiety is that some of that stranger stuff is being priced out of the market."

Hely Hutchinson suggests that Waterstone's merger with Ottakar's has "reduced the opportunities for ‘non-obvious' books, and numbers for serious books like good biographies have crashed". Literary imprints are among the most vulnerable. "You can't impose expectations of steady upward profit on literary publishers," he says. "We are happy to absorb a loss of (e.g.) £500,000 for three years running, because they will have other spectacular years."

Page believes such conditions create risk-averse publishing; his view is not shared by Rebuck, however, who points to the success of début novels like Gods Behaving Badly, The Book Thief and Before I Die. "The initial subs will not knock you out, but you have to persevere," she says. "Boy, are we in the risk business—but we wouldn't have it any other way."

Hely Hutchinson compares serious non-fiction to the classical music market—both have settled at around 4% of overall sales. "When we widened the book market out [after the collapse of the NBA], we found people didn't want the same titles as intellectuals living in London. It's not a matter of retailers telling us what they will sell, it's the public. If they want comedians and cooks, we'll give them comedians and cooks."

Top 10 UK Publishers by Revenue 2007

Pos  Publisher Revenue Growth  Share
1 Hachette Livre UK £298.8m +5.1% 16.6%
2 Random House Group £263.4m -2.5% 14.6%
3 Penguin £177.3m -0.8% 9.8%
4 HarperCollins £142.7m 0.6% 7.9%
5 Bloomsbury £74.7m 140.0% 4.2%
6 Pan Macmillan £61.4m 12.0% 3.4%
7 Oxford University Press £33.1m 0.3% 1.8%
8 Pearson Education £32.3m -4.8% 1.8%
9 Simon & Schuster £26.9m 12.1% 1.5%
10 Egmont £24.9m 8.9% 1.4%
* Independent Alliance £39.1m -5.5% 2.2%
See note at end of this article


Hachette Livre

Hachette Livre was comfortably the strongest performer of 2007. Tim Hely Hutchinson, c.e.o., says it didn't always look that way. "It was not an easy year, despite selling a million copies of [‘Richard & Judy' favourite] The Interpretation of Murder. After a reasonable spring, the summer and early autumn were awful—there were heavy returns from cautious booksellers." But as soon as Christmas began in November, the group came good.

Hodder & Stoughton had an "amazing year", with fiction from Jodi Picoult, Elizabeth George and Stephen King, and titles from festive flyers Russell Brand, Al Murray, and Clarissa Dickson Wright. Its Euston Road neighbour Headline also did well. Martina Cole did not dominate the charts—thanks partly to intense competition from fellow Hachette authors Patricia Cornwell and Maeve Binchy—but Hely Hutchinson insists there was "no falling off" in her fanbase. Then there were England sporting veterans Sir Bobby Charlton and Lawrence Dallaglio.

After a tougher year in 2006, Little, Brown rebuilt with the likes of Do Ants Have Arseholes?, the second Sharon Osbourne memoir, and Long Way Down; in fiction there was "R&J" pick The Girls by Lori Lansens, as well as Cornwell. Sales were up 3% to £62m, bolstered by Piatkus.

Orion matched commercial non-fiction (Richard Hammond, Michael Palin) with hardback fiction (Ian Rankin's final Rebus title, Exit Music; Kate Mosse into hardback). Sales were up by nearly 9% to £73m.

Hachette Children's Books had a "very good year", with brands and authors spanning Rainbow Magic, CHERUB, Tiara Club, Beast Quest, Lauren Child, and Charlie Fletcher. Meanwhile, Orion Children's Books led with the ever-growing Horrid Henry.

Octopus, trimming its list to focus on author-led titles, stabilised BookScan sales at £19m with Grow Your Own Veg and wine critic Hugh Johnson. Hodder Education, building for curriculum change in 2008 and digital investment, grew its share in a declining overall textbook market.

Random House Group

Nielsen BookScan figures for Random House Group include backdated sales for its acquisitions Virgin and BBC Books, both of which saw sales decline in 2007. If those are stripped out, Random's organic UK growth through BookScan is 3.8%, Gail Rebuck, chairman and c.e.o., says. This reflects a "really satisfactory performance, ahead of our internal plan," she adds.

Of the established RHG divisions, the steepest year-on-year sales fall came from Transworld (6.6%). Rebuck attributes that to the continued fall-off in Dan Brown sales, and Paul O'Grady's memoir moving to 2008. Transworld's underlying sales were up 7%, Rebuck says, citing paperbacks from Richard Dawkins and Bill Bryson, and bestsellers from Terry Pratchett, Andy McNab, Sophie Kinsella and Lee Child.

The group's star was CCV, with Nigella Express pulling in more revenue than any other book last year aside from Harry Potter, and Ian McEwan dominating the charts with On Chesil Beach and the Atonement film tie-in. CCV's sales rose 35.7%, also bolstered by the launch of Vintage Classics.

CHA saw sales slide 5.6% after the Peter Kay phenomenon in 2006. Rebuck lauds Alastair Campbell, Eric Clapton and Katie Price: "The underlying picture is that CHA is a profitable, well-run company," she says.

Ebury had a quieter year, driven by Rick Stein, Dr Who, Alan Titchmarsh and Chris Moyles, and a foray into fiction led by Julian Clary.

RH Children's Books' sales fell 7.4%, owing to the "mix of the list".

However, each division "reached or surpassed their targets", Rebuck says, and she is confident BBC and Virgin will grow in 2008. The group will be even more aggressive at Christmas: "We didn't play in the celebrity pen particularly last year—but we have a number of high-profile non-fiction books coming up, including Dawn French and Paul O'Grady."

Penguin

Although Penguin's sales fell 0.8% and market share also dipped, c.e.o. Peter Field is content with the group's performance. "The first challenge was that we had such a fantastic 2006, we didn't expect to go forward in leaps and bounds in 2007," he says. "We're very happy."

Penguin m.d. Helen Fraser points to a "terrific" performance from Allen Lane, with Alan Greenspan's The Age of Turbulence and Orlando Figes' The Whisperers.

Michael Joseph had a "good year", while Puffin also brought in an "absolutely standout" performance, with Young Bond in hardback for the first time, and In The Night Garden and Dr Who strong. In fiction, Fraser says brands such as Marian Keyes and Jane Green continued to build, while R&J pick The Memory Keeper's Daughter, bought for a negligible advance, was hugely successful.

"We didn't take a bath anywhere," Field says, while Fraser is pleased that Penguin wasn't tempted into  "c-list celebrity land. When we go for a big celebrity book, it has to be big."

In a tough UK travel guides market, Rough Guides' sales fell 6.3% to £8.9m. Meanwhile, illustrated giant Dorling Kindersley held level at £31m.


HarperCollins

HarperCollins had a "terrific" first half of the year, but then "Hachette stole Christmas", according to HC c.e.o. Victoria Barnsley. Sales growth of 0.6% was better than Penguin and Random, she points out, and although market share slipped, she puts this down to an "incredible" 2006. "We had a record-breaking 2006 and so I'm greatly pleased by the fact we achieved growth at all."

Misery memoirs and non-fiction such as Lewis Hamilton were singled out for praise, along with children's, which did "very, very well" with titles by Darren Shan, Louise Rennison and Derek Landy. HarperPress had a "very good Christmas" with Bill Bryson's Shakespeare and 3 Para—and a good year overall with Half of a Yellow Sun and Provided You Don't Kiss Me—but reference has "never quite filled the Sudoku hole".

"We could have done with a couple more Christmas bestsellers," Barnsley admits, "but it was a really good performance", with market share "holding strong" until August.

Bloomsbury

Bloomsbury's year was all about J K Rowling's seventh and final Harry Potter book. Did it live up to the hype? "Yes, it did," Nigel Newton, c.e.o., says. "It was also the best published in that there were the smallest number of overstocks; the most accurate ordering."

Newton also points to the "many highlights" of 2007, including The Last Fighting Tommy by Harry Patch, Agent Zigzag by Ben Macintyre, and Samuel Johnson Prize-winner, Rajiv Chandra-sekaran's Imperial Life in the Emerald City.

He adds that Bloomsbury has been "planning for this moment [after the final Potter] for a long time. We completed many acquistions that are now on stream; for example, the Methuen Drama list."

A&C Black had an "unexpected and welcome" hit with Don'ts for Husbands and Don'ts for Wives after a story in The Bookseller triggered national newspaper interest. The books have "sold half a million copies between them", Newton says.

Bloomsbury Berlin last year had two "big bestsellers" with Khaled Hosseini's The Kite Runner and A Thousand Splendid Suns, which is "one of the most expensive ‘Richard & Judy' titles" this year, at £11.99.

Pan Macmillan

Pan Macmillan, with sales up 12.5%, grew the fastest in the top 10 apart from Bloomsbury. The figure for the first three quarters was even higher, before the Christmas celebrity juggernauts dominated shops.

As rivals were struggling, Pan Macmillan started the year with a blizzard of fiction paperbacks: C J Sansom, Peter James and Jeffrey Archer among them. There were new titles from veterans James Herbert and Wilbur Smith and, in the autumn, Ken Follett. On the literary side, Picador sales were flat; it had books shortlisted for several prizes, but no major win. Overall, "it was a cracking year", David North, Pan Macmillan m.d., says. "I've seen lots written about the difficulties of the middle ground, but we haven't felt it."

Oxford University Press

Dictionary sales kept OUP in growth as print editions of the reference works proved surprisingly resilient. More than 25 of its dictionaries, including its "mini" series, language dictionaries and school editions, saw solid sales. Richard Dawkins' The Selfish Gene also kept on selling.

"We worked closely with retail and wholesale partners during 2007 to drive sales across the trade," Alastair Lewis, sales and marketing director for the UK academic division, says. "We strived to support both head office and branch levels with interesting and varied campaigns."

Other highlights are Life On Air: A History of Radio 4, published to coincide with the station's 40th anniver-sary, and Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It by Paul Collier, which is "fast becoming a cultural classic", Lewis adds.

OUP children's had "another very successful year", Richard Hodson, trade and children's business director, says. Lauren Child's illustrated edition of Astrid Lindgren's Pippi Longstocking was its bestseller of the year, and Joanna Nadin's début, My So-Called Life: The Tragically Normal Diary of Rachel Riley, its top-selling summer read.

Simon & Schuster

"By our internal figures, we're up 15% year-on-year," Ian Chapman, Simon & Schuster UK m.d., says, after a "huge turnaround" that saw profits rise by 700%. "Does that mean a huge profit? Of course not, but some books made a good deal of money."

The Simon & Schuster imprint sold 700,000 copies of The Secret, including 200,000 in South Africa; The Star Wars Vault, priced at £40, sold 50,000; and Steve and Me, by the late crocodile hunter Steve Irwin's wife Terri, sold 68,000. Pocket had a corker, helped by Lynda La Plante, and S&S Children's had two books on the "Richard & Judy" list—Aliens Love Underpants! and Girl, Missing—as well as hit series Vampirates and Spiderwick.

"It was a good year all over the place," Chapman says. "We set high standards last year for growth and flowing through profit to the bottom line, but it was hard work." S&S' bespoke publisher, Martin Books in Cambridge, also helped to boost profitability. Chapman is confident that 2008 will continue in the same vein. S&S has signed up Philippa Gregory in a "huge deal", and has Benazir Bhutto's Islam, Democracy and the West, scheduled for 12th February to coincide with Harper US' launch.

Egmont

Egmont powered into the top 10 in 2007, shouldering aside Elsevier, with growth of 8.9%. "It was a good year," Rob McMenemy, Egmont UK m.d. and senior vice-president says. "We're fortunate that we have a broad spectrum of publishing, from licensing through to fiction and picture books. The mass market had a tremendous year, showing growth well into double digits, and more than compensated for trade decline."

He cited annuals, classic character lists such as Thomas the Tank Engine, Mr Men and Bill & Ben, with colouring and activity books also strong. Fiction was down without a new Lemony Snicket. Surprise hits included the Mr Gum series and Sir Charlie Stinky Socks and the Really Big Adventure.

McMenemy says Egmont held its ground in terms of profit, although "it's very competitive out there. Everything requires an offer, and it's not easy to maintain profit. We have managed to do so, mainly because we're growing on the top line."

Independent Alliance

After a storming 2006, the Independent Alliance saw sales slide 5.5% in 2007. "We didn't quite have the bestsellers we generated in Christmas 2006, and one or two books like that can transform our results," Stephen Page, Faber c.e.o., says. "Publishing has its cycles, and at least three or four Alliance publishers had gigantic years in 2006."

Quercus soared ahead last year, with sales up more than 300%. Profile and Faber both saw sales fall. The 30.1% drop at Profile, which now includes Serpent's Tail revenue, shows the difference a Christmas smash hit—or lack of one—can make. Page says: "This Christmas, the marketplace became decidedly mass market, more so than over the past couple of years. Across the board, we all published an awful lot of really good books aimed at  heavy book buyers but we got less of a look-in this Christmas." He points to a strong early start to 2007 for the alliance, with Canongate's two Booker shortlisted novels The Secret River and Carry Me Down. Later in the year, Faber's The Damned United took off in paperback.

But the alliance has struggled to find room for its literary fiction and serious non-fiction: "Those are the two areas where we have to work extremely hard to create a readership. We have to start from a lower base and create the success."

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Note about publisher market share table

Tables are compiled from Nielsen BookScan's Total Consumer Market (TCM), which covers more than 90% of UK book retail and internet sales, for the 52 weeks ending 29th December 2007. Revenue has been calculated using BookScan's Publisher Group Market Cube categorisations, and includes full-year sales and backdated previous-year sales for acquired companies. Hachette Livre includes Piatkus, Random House includes Virgin and BBC Group, and Pan Macmillan includes Kingfisher Group.
 

Retail Flagship Feature HarperCollins Liz Bury Hachette Penguin Bloomsbury Simon & Schuster Random House Macmillan

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