Hachette’s UK Group CEO Reflects on State of the Industry – “Prospects Are Exceptional”

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The following letter from Tim Hely Hutchinson, Group CEO of Hachette UK, has just been released to the publishing community and we are happy to release it here.
Richard Curtis

March 2012

From time to time I write a letter to all authors published by the Hachette UK group of companies which, of course, includes your own publisher. My purpose is to give you our perspective on what is going on in general in the world of publishing and bookselling and in particular at Hachette: how we are adapting to change, planning ahead and – most importantly – doing everything we can to be the very best publishers for your work. It is now a little over a year since I last wrote. My last letter concentrated on our own – and the industry’s – digital transformation. An enormous amount has happened since then on that front; so, in that regard, this letter too is much concerned with digital matters.

As the letter has a very wide circulation, I hope you will forgive its fairly general nature. As ever, I am very happy to answer specific questions, for example about the content of the letter, about our publishing of your own work or arising from the very fast-changing media world in which we now all live.

The UK consumer book market in general

Our reading habits continue to change. Research from YouGov showed that 1.3 million ebook readers were sold in the UK over Christmas 2011 alone. All told, there are perhaps 3.5 million ebook readers in circulation in the UK, and as many as 7 million tablets. Internationally, over 20 million tablets were sold in just the last quarter of 2011 alone. The variety and quality of tablets and ereaders, and the wide variety of ebooks available, is good news for readers. Wherever we are, we can buy books in an instant, and sales of Hachette UK-published ebooks continue to grow at an extraordinary rate, from 1% of our relevant sales in 2009 to 12% in 2011. That number is running at over 20% so far in 2012 and, for fiction, at over 30%. At present most readers are simply swapping the purchase of a print book for an ebook and I am afraid the market for printed books is shrinking. Last month, in Britain, sales of printed books were down by 13% year-on-year, and in 2011 the total consumer market for printed books in the UK was down by 7.8% – the third successive year of decline. Even after we factor in sales of ebooks, the totals for the UK and most of our other markets were still slightly down so ebook sales didn’t wholly account for the drop in sales of printed books, although that equation has possibly stabilised this year. Readers now expect to get a lot of information and entertainment for nothing and, for example, free reference material, satellite navigation and free online resources have severely reduced the sales of printed dictionaries, maps and guide books. The continuing move online, whether for ebooks, printed books or free reference material, is having a marked effect on our traditional markets and particularly on those booksellers who have no significant digital offering.

A sea change can be unsettling, particularly when it happens so fast but, on your behalf, we are very well placed to capitalise on all the opportunities this new world brings us. The Hachette group continues to be very successful; we have a clear strategy and we employ experts in every field, ensuring that we have the vision, the investment and the expertise to deal on equal terms with the biggest players in our markets. In short, you can be confident that your own publisher within the group is fully supported with all the resources they need to publish you in the very best way they can devise with you in all formats, now and in the future.

Hachette in the UK

We ended a constructive year in 2011 with a flourish, strengthening our market-leading position in consumer books in print and ebooks. We published 154 bestsellers on The Sunday Times list, of which 23 were number 1 titles, and books published by the group were shortlisted for or won a number of prestigious awards including the Orange Prize for Fiction and the Costa Book of the Year.

I am delighted that we were voted amongst The Times Top 50 Employers for Women in the UK. Supporting our staff is fundamental to our philosophy and success and it’s very nice to have this publicly recognised.

I say it was a constructive year but that is really an understatement – 2011 was really our year of transformation. In my last letter, I told you of our 3-year digital plan: our major investments in training and infrastructure that have begun to revolutionise our publishing. Most of our plans started to come to fruition in 2011 and by the end of this year we will have installed a new state-of-the art publishing system, a new SAP finance system, a new HR and payroll system and completely new website architecture. The latter may perhaps be the most visible and useful development from your perspective as it will lead to the roll-out of new websites for the group, for all our publishing companies and, ultimately, for imprints, authors, genres and specialist and niche areas of publishing. As readers move online for more time every day to buy and to browse, so it becomes essential that we have a very strong web presence and the wherewithal to communicate directly with readers about our books, not only on our own websites but also via their links to social networks and other places. In due course, your own publisher will give you more information about the new sites and their plans for the future but I can tell you in advance that what we are developing is state of the art, affording us opportunities to talk to readers and markets and sell your books in ways that are revolutionary in publishing.

18 months ago at our transformational Digital Ideas Day we unveiled our digital strategy and surprised and delighted our staff with plans for our digital future. Since then, we have fulfilled our promises to become the leading British ebook publisher, now with a market share of about 20%, and to invest some £20 million in new infrastructure and systems. This September, we will follow up with a Consumer Insight Day. Once again the group will come together, this time to focus on our relationship with readers, to hear from other industries, to enhance our own market research and to identify our new investment in the tools and equipment that will enable us to talk to readers and communicate with them directly. This day will be another pivotal moment in the growth and development of our group.

We have matched our investment in IT equipment and software with a far-reaching training programme for our staff. It’s a very fast-moving world and I am proud that everyone at Hachette, ably supported by our outstanding digital team, has access to the training, information and tools to ensure that they can stay up to date with developments and opportunities, enabling them to publish your books with flair and care in every format, and to promote them in many new ways.

Hachette overseas and in export markets

We see growth and lots of opportunity in both traditional export markets and in emerging markets. Hachette companies are either number 1 or number 2 in all the markets where we operate and we are constantly looking at ways to expand and develop. Last year we opened an office in Dubai to cover the Middle East. This follows our recent investments in start-up businesses in India, Ireland and Canada. We are putting renewed sales and marketing focus into Europe, with the aim of becoming the number 1 publisher of English-language books on the continent. Asia is an increasingly important market for us. Walter Isaacson’s biography of Steve Jobs, published by Little, Brown last autumn, was not only a number 1 bestseller in the UK but also the bestselling exported non-fiction title ever published by a UK publisher, selling hundreds of thousands of hardback copies in English in Asia (including China) alone.

India

The Steve Jobs biography was the biggest selling English-language non-fiction book for adults ever sold in India. This success, together with exceptional sales of other books published in the UK and distributed in India and a burgeoning locally published list, helped us consolidate our position as the second largest English-language trade publisher in India. I have just returned from a trip to Bangalore and Delhi and I was once again struck by the vibrancy of the Indian book market and the potential for growth there.

Australia and New Zealand

The Australian book industry had one of the most challenging years in its history with an almost perfect storm of troublesome issues, including the loss of the largest retail chain, the REDgroup, and the very strong Australian dollar, which has given offshore, online print and ebook retailers a competitive edge over the local trade. Despite this, Hachette Australia has adapted well, vigorously publishing bestseller after bestseller. New Zealand also had a difficult 2011, with the added, miserable catastrophe of the earthquake in Christchurch, but our company still had one of its best ever years and published a most moving account of the aftermath of the earthquake in aid of Christchurch’s Family Help Trust.

Ireland

The virtual collapse of the Irish economy has meant difficult times for the Irish book trade, but we remain the number 1 publisher in Ireland, with the lion’s share of number 1 bestsellers from UK and locally published books and we will continue to support the Irish trade through these difficult times for everyone in Ireland.

2012 and beyond

Our prospects for 2012 across the group, in the UK and overseas, are exceptional. We have already had a raft of UK bestsellers including five number 1 titles in The Sunday Times lists this year, amongst them Jennifer Worth’s Call the Midwife, the inspiration for the very popular BBC TV series. Hodder & Stoughton has just announced publication of Sebastian Coe’s autobiography and Miranda Hart’s memoirs, and Little, Brown has just announced J.K. Rowling’s first novel for adults. These very special announcements come in addition to the strongest programme of both fiction and non-fiction we have ever had. I have just finished reading, with great enjoyment and interest, the typescript of Antony Beevor’s masterly The Second World War, which Weidenfeld & Nicolson will publish in June. I am a keen reader of fiction and I already know that the new novels we have coming are the best we have ever had.

As I indicated earlier, our own digital sales have gone to another level in the first quarter of this year. In February they were 250% up on the same month in 2011 and March looks even better. Although traditionally the UK has lagged behind the US in digital adoption, we are catching up quickly so that the 10-12% digital share of all our relevant business we saw in 2011 will more than double in 2012. The rate of growth is so fast that it is taking us into uncharted territory. It is not at all hard to foresee that fiction and narrative non-fiction sales could be 50% digital within just one or two years. As tablets become more widely owned and we and our authors and illustrators dream up new formats, children’s and illustrated books may follow quite closely. Some people see copyright and royalty issues as a potential battleground between publishers and authors but we do not. We think publishers and authors are natural allies and that we should be able to work out what is fair amongst ourselves in a collegiate way.

Hot Topics

There are still some big issues facing us, which I will touch on briefly here:

Piracy: As your publisher, we see the fight against piracy as one of our principal responsibilities. The explosion in legitimate sales of ebooks has encouraged some people to take our files without permission or payment, for their commercial benefit, and this is theft. We will do everything we can to protect the rights of our authors including, where possible, pursuing copyright infringers through the courts. We recently took action successfully against the owner of a UK website selling thousands of ebooks without permission and I hope that this well-publicised action will act as a warning to others.

DRM and File-Sharing: DRM (Digital Rights Management encryption, on which we insist) divides opinion. Our view is that the advantages greatly outweigh any perceived disadvantages. While DRM cannot prevent file-sharing by the most determined pirates it can and does act as a brake on the casual sharing of files and, in the overwhelming majority of cases, it works in the background without causing problems for anyone.

Google Settlement: We were strongly opposed to the old Google settlement and most people disliked it once they understood its complexities. It is one of our fundamental principles that anyone wishing to reproduce any material in copyright must seek permission in advance. A new Google settlement is under discussion in the USA and at the moment I cannot say anything more, other than to repeat that it is our policy to work with Google and others on an opt-in basis only.

Library Lending: In the spirit of protecting copyright, we must continue to tread carefully over the matter of ebook lending through libraries. Publishers and authors are in agreement on this. Nicola Solomon (General Secretary of the Society of Authors) says that while authors are very supportive of the library network, they have to protect their livelihoods, and proposals offering free lending of remotely downloaded ebooks for all, threaten not just authors’ and publishers’ copyright, but also our mutual income by directly competing with sales of books and ebooks. This is exacerbated because PLR is not paid on ebook lending. Nicola adds that when library resources are scarce, libraries should surely concentrate on delivering physical books to those least able to afford them, rather than offering ebooks to users who can afford ereaders. This message seems to be getting through. I hope we will arrive at a solution that is fair to all in due course, but in the meantime it is paramount that potential ebook loans to targeted groups should not become ebook giveaways to all.

Agency Pricing: As you will know, your ebooks published by us are sold under the terms of agency pricing, meaning that we set the price at which the retailer is permitted to sell the ebook on our behalf. The price is generally set well below the prevailing recommended retail price for the print edition of the book and includes VAT, which is payable on ebooks but not on print books. We have agency agreements with all legitimate ebook retailers and we believe that in this fiercely competitive new market, agency pricing is the best way to ensure fairness to all and in particular to encourage diversity of ebook retailing. Although the agency model is designed to be a pro-competitive one, it is counter-intuitively under challenge from USA and European competition authorities; we continue to make our case. I will let you know if any changes eventually affect how we publish your ebooks.

Self-Publishing: When people talk about self-publishing nowadays they generally mean by means of digital distribution. Now that communication with readers everywhere is possible and anyone can distribute their work over the internet, do authors need publishers? Of course, you would expect me to say that they do but I should like to take a few lines to explain why now – perhaps more than ever – we hope and believe authors need publishers. This is actually not a backward-looking defense of the status quo, but more a wake-up call for us, to make sure that we really do add value.

Publishers are:

Curators: We find and nurture talent. We identify authors and books that will stand out in the market place, separating the remarkable from the rest.

Investors: In the form of advances, we allow authors the time and resources to research and write.

Editors: We invest continuously in the tools and people that mean you get the best and most creative advice about your work and in support of the publication of your book.

Marketers: We generate and spread excitement about your book.

Sales and Distribution Specialists: We ensure the widest possible readership for your book in all formats, in all territories where you grant us rights.

Copyright Defenders: We protect your intellectual property through strict anti-piracy measures and territorial controls.

I hope your individual publisher is all the above and more: that you know your value to us and that we are regularly able to demonstrate our value to you; that you feel supported by your editor and others in your publishing company and that communication is open and transparent.

It is a key part of my job to make sure that our group’s future is even brighter than its past; please do not hesitate to let me know if there is any area in which we can do better.

With kindest regards,

Yours ever,

Tim Hely Hutchinson

Richard Curtis

About Richard Curtis

Richard Curtis is a leading New York literary agent (www.curtisagency.com) who foresaw the Digital Book Revolution and launched an e-book publishing company early in 2000. E-Reads (www.ereads.com) is one of the foremost independent e-book publishers in the industry, specializing in reprints of genre fiction by leading authors in their fields. Curtis is also a well-known authors advocate, author of numerous works of fiction and nonfiction including several books about the publishing industry, and prolific blogger – see his hundreds of other blog posts here.

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2 thoughts on “Hachette’s UK Group CEO Reflects on State of the Industry – “Prospects Are Exceptional”

  1. Having had recent first hand experience of some of the remarkable people who work in conventional publishing, I am newly convinced that we authors need their platform and enthusiastic expertise. My original intention, to e-publish my books without delay, is on hold while I try to find a good agent and proper publisher.
    My ambition was to write, now it’s to be read. These conventions are designed to deliver, even in the digital age.

  2. I found the letter from Tim Hely Hutchinson to be very interesting …. I’m pleased I took the time to read it.

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