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09.10.08 Catherine Neilan

Alongside organised crime and show business, the publishing world has often been described as recession-proof. Cheaper than a night out and longer lasting than a meal or trip to the cinema, books can come into their own when people are tightening their belts. But the modern world is home to a number of large publishing houses which have grown exponentially in the past few years into multinational megaliths. These face the problems that many other companies, irrespective of industry, must deal with: currency fluctuations, inflation, and the tightening of credit.

For Paris-based Hachette Livre—the books division of giant French conglomerate Groupe Lagardère—margins are more important than ever. The company converts much of its revenues from weakening currencies such as the dollar and sterling into the strengthening euro. And chairman and chief executive Arnaud Nourry admits the credit crunch has already started to have an impact on sales.

"I guess we don't feel unaffected," he says. "If you exclude Harry Potter here, the market is not up. And in France, if you exclude a few exceptional books, the market is down." In particular, he says, the US is experiencing the biggest impact— exacerbated by downward currency movement—creating a tough market to be working in. "Some of the top authors are selling slightly less than their previous books, and the trend is not very good," he says.

Nourry is confident, however, that Hachette can offset the global slowdown with "huge successes" from a few of the publisher's top books.

Tim Hely Hutchinson, c.e.o. of Hachette Livre UK, Britain's biggest trade publishing group, agrees. "It is our constant imperative to gain market share, so we are very aware of the need for that in this environment," he says. "We are not going to get the growth we need to pay for rising costs out of the market, so we have to gain market share."

Equally, both Nourry and Hely Hutchinson say, Hachette is not looking to grow the business through acquisition. This is partly a "prudent" measure, brought about because of the economy and the high lending rates that even banks are currently facing. "In a way I am glad we don't have a big acquisition in the pipeline right now," Nourry says. "This would not be the perfect time."

But while dismissing the "extraordinary and unprecedented" times, Hely Hutchinson doesn't write off a return to an acquisitive strategy, and is optimistic about using the standing of Lagardère to benefit from the eventual easing of the credit markets. In particular, the education sector, which offers a steady cashflow thanks to its reliance on backlists, is a likely area for Hachette to jump into once credit conditions become more conducive to acquisitions.

In the past few years, Hachette has become more outward and global looking. Nourry is in London, in part, to announce the new worldwide logo for the entire Hachette business, which emphasises its global reach, and drops the word "Livre". According to Nourry, France now makes up just a third of the group's global business. In 2007, it ranked sixth in publishing consultant Rudiger Wischenbart's run-down of the world's biggest publishers with turnover of $3.1bn (£1.8bn).

Though a huge player on the world stage, Hachette continues to retain its "federated structure" of largely independently operating, sometimes competing, imprints and publishers. The company first made inroads into the UK market by acquiring the Orion Group and Cassell in 2001.  Its publishing companies now also include Headline Publishing Group, Hodder & Stoughton, John Murray, Octopus Publishing Group, Little, Brown Book Group and Hodder Education Group.

Nourry believes the competition among imprints is crucial. "Even in France, we will publish three books for the same ages and on the same topic," he says. "We would never ask one of the three publishers to stop, even though I know they will publish for the same market, because it is important that they have their autonomy."

"One word I hate is synergy—it doesn't exist in my business," says Nourry. "There is no synergy when it comes to content. People have to be independent. But when it comes to digitalisation and investments, I think it makes sense to share—the formats are the same. That is really the exception."

Although neither Nourry nor Hely Hutchinson believe the digital medium will become a major income stream for some time, they are equally sure it will not rob sales from print. "Right now we are experimenting selling both print and digital copies and we don't see any decline in the print form," says Nourry. "People love to read books in print, and are testing the new way of reading. When they travel for example, they can't carry the three or four books they need so they go digital."

One of those all-important preparations is infrastructure. Across the world, Hachette publishes some 13,000 titles a year, and in the UK alone typically has some 20,000 backlist titles in print at any one time. The digital conversion and storage of this is a big project, and one that is being handled in stages. The UK arm expects to have roughly 1,000 titles in digital format by the end of the year.

To assist with this, Hachette in France recently acquired digital platform Numilog, which protects copyright, enables downloads and stores all the necessary files. This is already in use in France and is expected to be rolled out to the UK soon.

"We needed an extremely complex system, which would have been very costly. Millions of pounds of infrastructure was needed, despite the e-book market not being expected to grow much at first," says Hely Hutchinson. "Luckily this was solved by our French colleagues' purchase of this system."

While Nourry's eyes are firmly on the digital world, growth is expected to come, in the main, from the traditional print format for some time. Britain and France are, Nourry says, very mature markets, which are unlikely to experience "significant growth" over the next few years. However in the US, where Hachette accounts for roughly 4% of the overall trade, he is confident more growth can take place either through acquisitions or organically.

"Three years down the road, I think we will be significantly bigger in the US," he says. And while the firm is not bullish about building a presence in China—government controls make it very difficult—the recent creation of Hachette India means the firm has a foothold in what is undoubtedly one of the most important emerging markets.

Entente cordiale
Although Britain and France may share a level of maturity in their respective markets, the population's buying habits are entirely different. While the British market has become almost polarised between million-selling memoirs and the 1,000-print run literary novels, France has a strong midlist, but few superstars.

"But, on the other hand, in France we deliver direct to 10,000 retail customers," says Nourry. He estimates the British equivalent, including independent booksellers, would be something like 1,500—despite the market being approximately 20%–25% bigger. "I love both markets," adds Nourry. "And that is not a political statement".

Nourry does, however, describe the British market as "a little wild, perhaps because of the pressure put on publishers by retailers". This means there is less variation when it comes to books—and shops. "The French market offers a much bigger diversity of retailers and publishers," he explains. "It is not difficult for any type of book to find half a thousand retailers to take three books, so you have your print run of 1,500 and you survive. But it is very difficult to sell a million or half a million, as one can in the UK. It is difficult to bring authors to the next level, as you do here."

Nourry also believes that in Britain advances are "still on the excessive side", which leaves publishers taking on much more of the risk for a book. It is this, he argues, that has (alongside a concentrated retail sector), stymied the British midlist while the French midlist has remained strong. "[Large advances] limit the level of risk you as a publisher take, and that can be counter-productive," he says.

Advances are dropping off slightly in the UK, although there is still some way to go before they are lowered to France's levels. Hely Hutchinson says he has recently turned down a number of memoirs from  celebrities whose agents were requesting "large six or, in one case,  seven-figure sums. In at least two of those cases, they have not found a home at all," he says. "There came a stage when every celebrity wouldn't look at an offer less than a million, but now if they want to get a book published, they are going to have to be more realistic."

Once again, the differences between France and the UK are profound. France has no interest in celebrity culture. Nourry cites last year's big "celebrity" memoir—the former president of the European parliament Simone Veil, which sold three-quarters of a million copies.

"That is our type of celebrity," he says. "The book was not very exciting, but it is a different market. The misery memoir segment of the market does not exist at all."

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