A Closer Look at Harlequin's Success

I reported yesterday on Harlequin's great fourth quarter results.

In a world in which publishing house after publishing house has reported dismal financial results, this is not a sudden upswing in readers wanting romance novels. If so, why aren't all the other publishing houses that feature romance not doing equally as well?

Nor is this good news an accident.

Harlequin is doing well because they took proactive steps to reinvent themselves.

Less than five years ago, Harlequin was on a downward slide. In reporting the full year 2004 results on February 23, 2005, the Torstar (Harlequin's parent company) CEO said, "For the year as a whole, our results were mixed with record profits in our newspaper group and disappointing results in book publishing. For 2005, our goals are . . . to invest in Harlequin's future growth while maintaining current levels of profitability in book publishing."

The foundation of Harlequin's empire--their famous book clubs--had begun to crumble. The book clubs' results are reported under the North American Direct-to-Consumer heading. For 2004, revenues in that Direct-to-Consumer category were down $12.6 million. Harlequin acknowledged fewer books were being sold.

And this made sense in view of the shifting romance landscape. Two trends were emerging: a growing interest in hotter romances and an increasing willingness to download romances online.

Why would readers subscribe to a Harlequin book club in which they could expect to receive four to six unknown novels every month in the mail when--instead--they could go online and select what they wanted to read when they wanted to read it at a fraction of the price Harlequin charged?

But Harlequin had already begun acting to re-position itself in the market. The company dropped unprofitable lines and opened new lines (erotic romance among them).

Among their other initiatives:

1) Harlequin jumped into e-books in a big way in 2005.

2) In mid-2005, Harlequin announced an exclusive marketing and content licensing agreement with Audible.com. According to that press release, "Under the agreement, Audible will be Harlequin's exclusive partner for digitally distributed audiobook publishing of its romance and women's fiction genres."

3) In November, 2005, they announced they would make many of their "novels available as downloadable eBooks on library websites through Overdrive."

4) In December, 2005, they begin producing two lines of manga in the States: one for teens and the other for readers in their early 20's. They'd been producing manga in Japan for years.

5) In August, 2006, Harlequin announced the launch of "four digital entertainment ventures": Harlequin Mini eBooks, Harlequin Mini Round Robin eBooks, the eBook Boutique on eHarlequin.com, and www.writeharlequin.com, "a platform for gathering reader-generated content."

They established an ebook website at eHarlequin.com, they began to play with shorter length ebooks (minis), and they began inviting would-be writers to create original content.

eHarlequin was an immediate hit.

It would be hard to overestimate the importance of this. Most readers pay no attention to the publisher that releases the books they read . . . unless given a reason to do so. As an example, starting in 2000, I hunted down every book produced by Kensington Brava, an independent publisher's imprint for erotic romance. Kensington was the only print publisher I could find producing erotic romance at that time. They gave me a reason to pay attention to the publishing house.

Harlequin gave romance readers reasons to visit their eHarlequin website. They held contests and offered help to would-be romance writers. They made their site a place readers wanted to visit.

6) In October, 2006, Publishers Weekly reported that Torstar had announced a restructuring of Harlequin to eliminate about forty jobs or 4% of their worldwide workforce.

PW also reported that "For the first half of 2006, operating profit was down 47% on a 6% decline in sales." That stat suggested that the company was incurring LARGE expenses as they continued to reinvent themselves.

7) In March, 2007, talking about fiscal year 2006, Torstar finally publicly acknowledged the truth: " . . . shipping disruptions, in conjunction with the long-term decline in the customer base and higher product costs contributed to the year over year decline in earnings. Improved sales through the Internet channel partially
offset this decline." They openly admitted their former business model wasn't working, but that their online efforts were beginning to bear fruit.

8) In April, 2007, I reported that Harlequin had signed with a British company, ICUE, to offer "the capability to transfer books into mobile phone-friendly content."

The UK publishing director for Harlequin Mills & Boon Ltd. said ". . . it's women who like reading on phones, and romantic fiction that's rising to the top."

9) In September, 2007, Harlequin issued a press release, announcing that "they have become the first major publisher to make their complete front-list catalog available in the eBook format. Harlequin releases more [than] 120 titles per month, and their complete list can be found at http://www.harlequinebooks.com."

10) In July, 2008, Harlequin distributed a press release to announce the launch of their "Enriched Edition eBooks." The enriched edition refers to e-books that are enriched by the addition of interactive buttons that provide hyperlinks to web sites that contact more information about the material in the e-book.

It's taken more than four years, but Harlequin's proactive moves are now paying off.

They took a hard look at their operations and made the necessary changes to ensure their survival.

[Shrug] It remains to be seen whether the rest of the industry will take similar steps.