Last week, the biggest of the Big Five publishers, Penguin Random House (PRH), announced its 2016 financial results, and the news wasn’t positive: PRH suffered a 9.6 percent sales decline. The decline is directly related to the dip in ebook sales experienced widely across the US and UK industry in 2016.
Michael Cader at Publishers Lunch (paywall) helpfully summarized the last four years of performance at PRH in the US and UK (expressed in euros—remember that PRH is owned by European-based publishing conglomerates):
2016: €3.059 billion
2015: €3.394 billion
2014: €3.007 billion
2013: €2.986 billion
While 2015 looks like a great year, Cader says these more positive-looking results were affected by a strong dollar and pound; he estimates that sales were approximately €2.975 billion without the lift of currency exchange. His conclusion on the US-based business: “Absent changes in foreign exchange and mergers and acquisitions, the publisher has not been able to consistently grow sales and is flat to declining modestly.”
The stated fix: more dynamic ebook pricing. The full report issued by Bertelsmann says that PRH plans to employ a “differentiated pricing” strategy, but this strategy is not detailed further. We assume, based on conversations heard at industry events such as Digital Book World, that this could mean lower prices for debut authors, and more strategic discounting and promotions, as seen with competitors (such as Amazon Publishing and indie authors) who have increased their ebook market share.
Bottom line: PRH CEO Markus Dohle, in a letter to employees, cited the lack of a new bestseller in 2016 as one reason for the lackluster results. (This lack of a breakout book is something we covered in Hot Sheet last year.) Keep an eye out for developing news around Bertelsmann increasing its stake in PRH, since Pearson—which has issued even more dire financial reports—plans to sell its 47 percent share.
Jane Friedman has spent her entire career working in the publishing industry, with a focus on business reporting and author education. Established in 2015, her newsletter The Bottom Line provides nuanced market intelligence to thousands of authors and industry professionals; in 2023, she was named Publishing Commentator of the Year by Digital Book World.
Jane’s expertise regularly features in major media outlets such as The New York Times, The Atlantic, NPR, The Today Show, Wired, The Guardian, Fox News, and BBC. Her book, The Business of Being a Writer, Second Edition (The University of Chicago Press), is used as a classroom text by many writing and publishing degree programs. She reaches thousands through speaking engagements and workshops at diverse venues worldwide, including NYU’s Advanced Publishing Institute, Frankfurt Book Fair, and numerous MFA programs.
