Wednesday, March 19, 2008

2007 Results For Random House

Both Publishers Weekly (PW) and Publishers Lunch (PL) reported yesterday that sales and earnings fell at Random House in 2007.

Revenue fell 5.6% to $2.39 billion and EBIT (earnings before interest and taxes) dropped 4.9% to $225 million. Parent company Bertelsmann blamed the drop on the weak U.S. dollar and the "slowing U.S. economy."

Peter Olson, Random House's CEO, wrote a letter to employees that said the company "felt the absence of newly published megaseller hardcovers, which in today’s trade publishing business can mean the difference between a good fiscal year and a great one.” (PW)

I found this comment by Olson (quoted in Publishers Lunch) very interesting:

Among the year's accomplishments cited, Olson notes that "more than 10,000 of our books [are] now available in our Insight search-and-browse service and some 23,000 frontlist and backlist titles fully digitized." The Bertelsmann report notes that they now have "digital platforms with book-content search-and-browsing capabilities in the U.S., Canada, and Germany."

Last May, I reported here that Bertelsmann's Direct Group (direct-to-customer businesses) had completed its purchase of Bookspan, which operates multiple bookclubs in the U.S.

The Direct Group also acquired Columbia House, which the company said "established Direct Group as the country’s leading direct marketer of music and DVDs."

PW reports the Direct Group's 2007 revenue fell 4.1% and that Bertelsmann's Chairman Hartmut Ostrowski said the company is "examining all strategic options, including the possible sale" of the group. The Direct Group's EBIT "plunged nearly 91%."

While the weak dollar was responsible for some of the decline, Bertelsmann said the weak performance of the U.S. division where music, DVD and book club membership declined significantly and sales per member were off, was also an important factor in the disappointing performance. (PW)

PL said that, during a press conference in Berlin today Random House announced Morgan Stanley will handle the sale of the Direct Group North America, but did not give a formal timetable.

The decision is still out on the possible sale of bookclubs in Europe and Asia.

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