Thanks to E-Books, Flat Revenue is No Problem for Publishers

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courtesy Amazon

Large book publishers’ most recent earnings reports reflect a new normal: Revenues are roughly flat, but profits are up—in large part due to e-books.

In the 2011 Bertelsmann annual report released this week, Random House said it has nearly 40,000 titles available as e-books worldwide, and while revenues were down for the year, “operating EBIT was higher year on year, especially in the United States. This rise was helped by continued cost-cutting measures and lower return rates in North America and the United Kingdom due to increased e-book sales.”

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Similarly, Pearson’s 2011 annual report shows that Penguin’s sales are roughly flat, while adjusted operating profit rose by 5 percent, again due in part to e-book sales. “Penguin saw e-book revenues in 2011 double on the previous year,” the report says. “In 2011 they accounted for 12% of Penguin revenues worldwide and more than 20% in the US. Since 2008, digital downloads of apps and ebooks across Penguin have totalled approximately 50 million.”

And CBS’s most recent earnings report shows Simon & Schuster revenues down by 1 percent for full-year 2011, while “publishing adjusted OIBDA for 2011 rose 28% to $92 million from $72 million for the prior year, reflecting lower direct operating costs” due in part to “the decline in expenses resulting from an increase in more profitable digital sales as a percentage of total revenues.”

In other words, e-books are generally more profitable than print books for publishers. In 2012, I hope to see that reflected in higher e-book royalties for authors.

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Republished with permission from paidContent, which writes about the transformation of the media-and-entertainment industries in the digital era, with a focus on emerging-business models and technologies.

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