Lessons Publishers Can Learn From Harlequin’s Annual Results

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

38ensoHarlequin announced their annual results last week and it was another disappointing year for the world’s leading romance book publisher.

Harlequin is an interesting case study review about how the disruption of digital has affected traditional publishing. Harlequin has sold direct to consumer (D2C) for decades and has one of the few publishing brands that carry weight with the consumer. They are one of the strongest brands in the industry.

Harlequin’s annual revenues have dropped by almost $100-million over the past five years.

Digital has fundamentally changed all of book publishing, but the romance category has been affected more than any other. Harlequin’s annual report is very helpful in describing the market conditions that have led to their results. I applaud them for their candor.

There are many reasons for the decline in revenue at Harlequin. These lessons can be applied to most traditional publishers– and especially one that is driven by a single genre. Italics at the end of each are from Harlequin’s annual report.

  • Self-publishing increases competition – Romance is one of the biggest published categories in self-publishing. The onslaught of titles has crowded the marketplace and made it harder for traditionally published titles to be discovered. Plus, some of Harlequin’s authors have chosen to self-publish. “The proliferation of less expensive, and free, self-published works could negatively impact Harlequin’s revenues in the future.”
  • Pricing competition is fierce – Driven, in part, by self-publishing, this genre is very price sensitive. There are thousands of novels priced at $0.99. But a huge group of free reads too. This has put pressure and made the $4.99 ebook seem high. “The low cost of digitization has also led to a proliferation in the number of digital titles available and increased competition.”
  • Physical book shelf space is drying up– Romance continues to be one of biggest areas for mass market titles. But this format has been hit the hardest with the conversion from print to digital. Plus the bankruptcy of Borders (and compounded by losing the mall-based Waldenbooks division), the decline of BDalton (B&N closed them all over time) and the reduction of titles at Wal-Mart have all hurt distribution. “The significant growth of the digital book market in recent years has resulted in a contraction of the retail print market.”
  • Amazon is always in the mix – Romance is one of the key areas for Amazon publishing and their Montlake Romance imprint. This has led to increased competition and also Amazon giving preferred placement and promotion on their site. “Online retailers have also entered into the book publishing business creating additional competition.”
  • Direct to Consumer has changed – Harlequin has a much more developed D2C business than most publishers. The shift of this business from mail-order and print catalogues to the internet has opened up competition. “The decrease in North American revenues was the result of declines in the retail print and direct-to-consumer channels.”
  • Competition from other media – This has always been an issue with book publishers, but the increase of accessibility (e.g. – watching movies waiting in line at the DMV) and the vast amount of options has cut into reading. “Harlequin competes not only with other book publishers but also with other providers of entertainment including television, music, movies, games and magazines.”

What is happening to Harlequin is an indication of what all traditional book publishers should be aware and see how each area applies to their business. The book publishing world is changing and the rules of the game are vastly different than they were just a few years ago.

6 thoughts on “Lessons Publishers Can Learn From Harlequin’s Annual Results

    1. Jack W PerryJack W Perry Post author

      Bob – just read your piece. I enjoyed it. I like your story about mortgages in the early-mid 2000’s as a cautionary tale of what might happen! The title of your piece is great, “True Lies 10: Reality Sucks.”
      — Jack

      Reply
  1. Jeff Johnson

    Looking at these lessons learnt, while publishers need to adapt, they also need to take advantage of some of the remaining advantages they do have – such as their reservoir of published content. Look at http://whycode.com/ to understand how the WHY Code could provide a solultion for publishers seeking to reinvigorate their content in the digital age.

    Reply
  2. Jacob Donley

    Your article makes me wonder how long it will before books are offered in digital format only, with hardback becoming a luxury for the super-fans. After all, digital editions are more cost effective to produce and require no distribution fees or middle-men to get to the market. Paperback will most likely continue to be available with the rise and cost effectiveness of pay on demand book printing.

    Reply
    1. Jack W PerryJack W Perry Post author

      I do think some categories (Romance, Science Fiction-Fantasy, Mystery) will continue to be more and more digital. But others may stubbornly remain print. I think there is a definite market for a deluxe hardcover edition with better paper, cloth bindings etc.

      Reply

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