Why Hachette Had to Settle: Revenues Fell 18% in Third Quarter
Much ink has been spilt over the past day on the subject of Amazon, Hachette, and their new book contract, and while we don’t know who got the better end of the deal there is strong evidence to suggest that Hachette blinked first.
Buried under the news coverage of the new contract was another story which offers insight into Hachette’s motivations. PW reported yesterday that Hachette’s US revenues were down considerably from last year:
Third quarter sales at Hachette Book Group USA fell 18.5% in the period ended September 30, 2014 compared to the third quarter of 2013, parent company Lagardere reported. The decline was attributed to difficult comparisons with last year when the company had an “unusually high” number of bestsellers led by The Longest Ride, Lagardere said. The “difficult situation” with Amazon also impacted sales and HBG also postponed some titles, Lagardere said.
For all of Lagardere Publishing, revenue in the quarter fell 2.9%, to 564 million euros. In addition to softness in the U.S., sales were down in France and the U.K., but rose in Spain/Latin America.
While revenues were down in most of Lagardère’s publishing divisions, the sharpest decline by far happened in the US and was likely due to the ongoing contract dispute with Amazon.
Given the steep decline in revenues and the timing of news, I think it’s clear that Hachette struck a deal before they released the quarterly report, before they had to admit just how big of hit they took from letting the contract lapse earlier this year.
If they had waited until after the quarterly report, I bet Amazon would have turned the screws another notch – or even worse, let the negotiations drag on until after the lucrative holiday season had already begun.
And with S&S already having signed a deal with Amazon, there wasn’t going to be any chance of another major publisher negotiating with Amazon for another 9 months. That’s much longer that Hachette could have afforded to wait.
image by Ida Myrvold