HarperCollins Reports Slight Dip in Revenue, Huge Drop in eBook Sales in FY 2016

24817419710_924e6da456_hAbout a week and a half ago S&S, PRH, and Hachette released their bad news about ebook sales (variously obfuscated). Now HarperCollins  is joining the fun.

News Corp released its FY2016 report today. You can read the press release over on Talking New Media, but the more interesting details like how today's results compared with the previous year's data were quietly left out of the release.

Luckily for you I spent some time digging and can report that HC's ebook sales dropped last fiscal year - likely as a result of the return to agency ebook price controls in April 2015.

So here's what HarperCollins announced officially:

Revenues in the quarter increased $43 million, or 11%, compared to the prior year... . Digital sales represented 19% of Consumer revenues for the quarter. Adjusted Revenues increased 9% compared to the prior year. Segment EBITDA increased $17 million, or 52%, from the prior year due to higher revenues as noted above.

Full Year Segment Results

Full year revenues decreased $21 million, or 1%, compared to the prior year, driven by ... lower e-book sales and negative foreign currency fluctuations, partially offset by the release of Go Set a Watchman by Harper Lee, the inclusion of the results of Harlequin, which was acquired in August 2014, continued expansion of HarperCollins’ global footprint and the $19 million impact from the additional week. Digital sales represented 19% of Consumer revenues for fiscal 2016. Full year Segment EBITDA decreased $36 million, or 16%, from the prior year primarily due to the factors noted above, partially offset by cost savings initiatives. Adjusted Revenues and Adjusted Segment EBITDA declined 2% and 19%, respectively, compared to the prior year.

According to a different part of the press release, annual revenues for the book publishing division was about $1.646 billion, so that 1% decline is negligible.

The decline in ebook revenues, however, was not.

According to the press release for the FY2015 report, digital sales in News Corp's book publishing division made up 22% of the $1.667 billion in revenues for the year and 23% of the $360 million in revenue for the 4th quarter.

And so HarperCollins' ebook revenues have dropped significantly last fiscal year.

Given that we have been received similar reports for the past two quarters, this was to be expected.

image by Kevin Doncaster

About Nate Hoffelder (11598 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

26 Comments on HarperCollins Reports Slight Dip in Revenue, Huge Drop in eBook Sales in FY 2016

  1. Curent digital formats are not good enough and current plans indicate there won’t be anything significantly better until 2020 unless the IDPF/W3C significantly change their plans.

    • Not good enough in what way? For the basic novel EPUB 2 is just fine, and I suspect Kindle is too.

      For image heavy coffee table-type books… I can’t remember what EPUB3 calls it but there is a a solution and IIRC iBooks uses a variant on this.

  2. Exactly – digital formats are great for basic stuff and no more.

    • Basic stuff *is* what sells in digital.
      It’s a perfect match of technology and market needs.
      That is why enhanced ebooks, appbooks, and especially ePub3 have consistently failed to gain significant traction. The customer that buys that stuff doesn’t buy digital.
      And we’re long past the chicken and egg phase: all the major platforms already support enhanced ebooks. Apple most notably. Sales remain minimal.

      For now and the immediate future digital = narrative fiction. That’s where digital dollars cone from.

  3. If basic stuff sells why are sales declining?

    • Because the major publishers are raising their prices, and driving readers away from digital.

      • They are driving readers away from *their* digital.
        Other publishers,notably Indies, are seeing growth.

        A second reason for digital sales “declining” is the stupid metric they use. Instead of trying to track unit sales they track consumer spending which means that with expensive BPH titles pricing themselves out of the market they are selling much less expensive titles and readers are buying cheaper books and pocketing the difference.

        For example, a reader looking to buy a $10 BPH title sees it at $13 and walks away. Instead, they buy two $3.99 Indie titles and pockets two bucks. A report of unit sales would see a doubling of digital sales while a reader spend report would see a 20% drop.

        Now, the BPHs currently control less than 22% of all ebook sales but their prices are roughly double the average Indie title. So a 20% drop in their unit sales (a 5% drop in total sales) would show a 10% drop in total digital revenue. Which is not happening. That means the money not spent on $13 BPH ebooks is still being spent on other ebooks.

        The BPH’s loss is everybody else’s gain.

        It’s all about the metrics and categories.

  4. Sales are declining with the big publishers because they’re charging too much for ebooks and readers aren’t willing to pay that much. Independent writers charge less, in the $2.99-$3.99 range (for fiction), and have claimed between a third to half of the ebook market, depending on what numbers you’re looking at. And it’s growing.

  5. Given that we have been received similar reports for the past two quarters, this was to be expected.

    What? Not unexpectedly? 🙂

  6. Bottom line is ePub revenues are growing very slowly in marked contrast to circumstances a few yeas ago.
    There are many explanations for this including the format. If the format was hot stuff, pricing issues would’nt matter so much.

  7. Regarding digital formats, targeting ePub 2 with reflowable text, an original content format that is independent of presentation (just like normal HTML best practices), and using inline scalable vector graphics (SVG) should give you a fantastic reading experience on the most widely used eBook platforms.

    Books that target fixed layout print as a starting point generally convert poorly to reflowable formats. We may need better information, techniques, and tools but I don’t think the format itself is terribly lacking. Books that target reflowable first can easily be used to generate beautiful fixed layout.

    Having said that, eBooks being published today that contain graphics/images/tables are generally very poorly formatted.

    • “eBooks being published today that contain graphics/images/tables are generally very poorly formatted.”

      This is a self-inflicted wound. It’s not at all difficult to provide high quality graphics, images, or tables in Kindle or similar formats. I do it regularly.

      • Exactly, and one doesn’t even need anything new in ePub 3 or some future format, it works now with a little bit of knowledge and elbow grease.

        You Span both sides of C.P. Snow’s Two Cultures (science/humanities). Perhaps most authors and the book publishing industry are too entrenched on the humanities side and struggle with the technical challenges.

  8. Given that all the big publishing houses seem to be following the same playbook and the results are consistent, are they maybe following a sound strategy? Some kind of price framing strategy that keeps the old business model relevant?

    • Romance, thrillers, and SF&F genres are increasingly digital, so I wouldn’t call this a sound strategy. Furthermore, this strategy forecloses the possibility of growing revenues by selling even more ebooks than before.

      • It is not a strategy intended to improve margins (and hence profits) since it seeks to reduce unit sales of high margin ebooks in favor of lower margin print books.
        So far they’ve succeeded in the first part but failed at the second.

  9. It’s very clear that if they actually care about revenues all they have to do is adopt more realistic pricing strategies — meaning, in the first instance, pricing e-books below $10 (just like Amazon has always said). This will result in moving some customers from p-editions to e-editions (which is apparently why they don’t do it) but will also improve unit margins as well as unit volumes. In other words, they (and their shareholders) are paying a very real premium to continue propping up the p-book market and marginally delay its inevitable decline.

  10. The big publishers are charging too much. I’m not going to buy ebooks at hardcover prices. Not when I can find plenty of less expensive books to read. I also wonder if the dismal decisions by BN have something to do with this situation. I never buy books from BN because I can no longer back them up to my own computer (among other things). It can’t be good for ebook sales to have fewer places to sell them.

  11. I looked at the Publisher Weekly link (via Fjtorres) and also found the Top 20 listing for Kindle and Bookscan (paper books):
    http://www.publishersweekly.com/pw/by-topic/industry-news/bookselling/article/71068-frontlist-fiction-hits-a-dry-spell.html
    http://www.publishersweekly.com/pw/by-topic/industry-news/bookselling/article/71068-frontlist-fiction-hits-a-dry-spell.html

    I looked up the eBook pricing information on Amazon and put the Top20 Kindle data in a SQLite table. Some notes:
    – 13 of the Top 20 are Big Publishing Houses
    – 1 of the Top 20 is self-published (#7 “A Shade of Vampire” by Bella Forrest)
    – 7 of the Top 20 are priced below $9.99 (1, 4, 7, 8, 14, 17, 20)
    – Bookouture and Waterhouse are new eBook focused publishers that price below $9.99 (1, 8, 14, 17)
    – Bookouture and Waterhouse offer Print-on-Demand paperbacks but they don’t sell well
    – 1 Big Publishing House (HarperCollins) priced one of its three top 20 entries below $9.99 (#4 at $5.99)
    – 1 Amazon imprint (Union Lake) placed in the Top 20 (#20 at $4.99)
    – there is not enough information to objectively judge pricing strategies

    Data Notes:
    – I looked up the prices on amazon.com which I think are in $US (vs. $Canadian for me)
    – I entered the prices by hand and did not re-check them
    – Amazon only reports sales rank, not actually sale numbers

    Here are the 7 priced below $9.99, the formatting will probably be bad (should be monospaced):

    sqlite> select kindle_rank, title, author, publisher, parent_publisher, kindle_price, pbook_price, hardcover_price, amazon_link from top20 where kindle_price < 9.99;

    kindle_rank = 1
    title = The Girl in the Ice
    author = Robert Bryndza
    publisher = Bookouture
    parent_publisher =
    kindle_price = 0.99
    pbook_price = 10.82
    hardcover_price =
    amazon_link = https://www.amazon.com/Girl-Ice-gripping-thriller-Detective-ebook/dp/B019G6DSDE

    kindle_rank = 4
    title = The Wedding Dress
    author = Rachel Hauch
    publisher = Thomas Nelson
    parent_publisher = HarperCollins
    kindle_price = 5.99
    pbook_price = 9.31
    hardcover_price = 49.89
    amazon_link = https://www.amazon.com/Wedding-Dress-Rachel-Hauck-ebook/dp/B005ENBASO

    kindle_rank = 7
    title = A Shade of Vampire
    author = Bella Forrest
    publisher = Bella Forrest
    parent_publisher =
    kindle_price = 0.99
    pbook_price = 9.67
    hardcover_price =
    amazon_link = https://www.amazon.com/Shade-Vampire-New-Lengthened-2015-ebook/dp/B00AOHDMFE

    kindle_rank = 8
    title = The Girl You Lost
    author = Kathryn Croft
    publisher = Bookouture
    parent_publisher =
    kindle_price = 2.99
    pbook_price = 10.19
    hardcover_price =
    amazon_link = https://www.amazon.com/Girl-You-Lost-gripping-psychological-ebook/dp/B019D70QIQ

    kindle_rank = 14
    title = January
    author = Audrey Carlen
    publisher = Waterhouse
    parent_publisher =
    kindle_price = 2.99
    pbook_price =
    hardcover_price =
    amazon_link = https://www.amazon.com/January-Calendar-Girl-Book-1-ebook/dp/B013CVOJEG

    kindle_rank = 17
    title = The Girl with No Past
    author = Kathryn Croft
    publisher = Bookouture
    parent_publisher =
    kindle_price = 3.99
    pbook_price = 9.27
    hardcover_price =
    amazon_link = https://www.amazon.com/Girl-No-Past-gripping-psychological-ebook/dp/B014C5K68Y

    kindle_rank = 20
    title = When I’m Gone
    author = Emily Bleeker
    publisher = Lake Union
    parent_publisher = Amazon
    kindle_price = 4.99
    pbook_price = 6.99
    hardcover_price = 13.72
    amazon_link = https://www.amazon.com/When-Im-Gone-Emily-Bleeker-ebook/dp/B0142IHZPI

  12. Smart Debut Author // 10 August, 2016 at 11:17 am // Reply

    RAD,

    Worth noting that 1 of your 2 “ebook-focused publishers”, Waterhouse, is actually Meredith Wild’s original self-publishing imprint, which she has expanded into a submission-accepting small micropublisher now.

    • Yes, I was reading about both Waterhouse / Meridith Wild and Bookouture. I knew nothing about either company before looking at the list. Bookouture seems to have a number of multi-book self-publishing authors. Both companies add some kind of marketing magic that increases the reach of their self-publishing eBook authors and helps them reach the Top 20 in Kindle sales.

      Very interesting stuff. I have a million more questions now than I did when I started looking into it.

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