What You Don’t Know About Publishing Can Hurt You

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

I’ve recently seen a lot of interesting debate about start-ups and publishing, and discussions of how publishing is different from other industries. My experience with publishing is relatively short and I’ve spent a few years in a bunch of different industries (tech, start-ups, fortune 500 companies, banking, entertainment, and now publishing) and I’ve noticed that all industries are different, but all of them surprisingly work pretty well (are profitable).

As part of a start-up (I’m the chief technology officer at Aerbook, a cloud publishing company), I need to know as much as I can about the industry I’m operating in. Anyone who is trying to operate in this industry and thinks otherwise is delusional: What you don’t know can hurt you. Let’s do a little research.

Here are some questions:

1. Is publishing that different from other industries?
2. Are the big six publishers profitable? Are medium sized publishers profitable?

Here is some research:

Pearson financials (which owns Penguin).
Summary: Penguin sales/profitability down, but still profitable

Lagardere (which owns Hachette Livre/Hachette).
Summary: Despite the great length of this document, I extracted that sales are down a bit, and there was a “non-recurring item” (usually a capital investment of some sort, couldn’t find what) that accounts for much of the loss. Couldn’t easily find stats for just Hachette, but this report would make me believe it is “OK” (slightly unprofitable, lots of income).

HarperCollins (which is owned by NewsCorp).
Summary: NewsCorp stopped breaking out HarperCollins earnings data recently, but according to these reports from Publishers Weekly from 2011, the company is profitable.

Bertelsmann (which owns Random House).
Summary: Not only is Random House profitable, it had a record-breaking first half of the year, making over $1 billion in revenue.

Simon & Schuster (which is owned by CBS).
Summary: Unsure if profitable, but healthy revenues.

Macmillan (owned by Holtzbrinck).
Summary: Private.

What does this mean to me?

What I see is an industry whose top U.S. leaders are all profitable. The profitability isn’t very high, but there are tons of industries that operate with 1% to 5% profit margins. One thing I did notice from doing my research is that some of them have cut costs/cut staff in the past few years, but the numbers weren’t staggering and often were lower than expected given the recent financial downturn and changes in the industry. The reports all noted digital being on the rise and a serious interest in fostering business in digital. From a Harvard Business-case-style review of publishing, I’d say things aren’t that bad (most readers of this blog probably know this and this is not new, but I think some people out there still believe publishing needs a bit of saving).

As a veteran of startups, here’s some advice for startups working with or wishing to work with publishers:

— Spend more time listening to publishers – what they’re doing right and what their struggles are
— The publishing model is not broken, but that doesn’t mean multiple business models cannot co-exist
— You don’t need to sell “going digital” to publishers.  They already get it.

Expert Publishing Blog
Nick Ruffilo

About Nick Ruffilo

Nick Ruffilo is the chief technology officer of Aerbook.com and has been involved in technology ventures for over 15 years including eBookFling.com, BookSwim.com, and a host of other start-ups outside of the publishing industry.


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