Saturday, February 16, 2013
S&S Finishes with Soft Sales But Growing Profits; Denies Sale Rumors
CBS reported fourth quarter earnings after the close of the market on Thursday, with Simon & Schuster recording a 6 percent decrease in sales, down $14 million to $215 million. Consistent with their recent pattern, however, profits rose even with lower sales. Adjusted OIBDA gained $3 million (or 11 percent) to $31 million, and adjusted operating income rose $2 million, at $27 million. S&S took a $3 million restructuring charge this quarter related to their realignment into new "publishing groups" and the elimination of some positions. (This time a year ago they took a $2 million charge.)
As usual, CBS stated that the improvement in income was "principally driven by lower expenses resulting from the growth in more profitable digital book sales as a percentage of total revenues." CEO Carolyn Reidy explained to us that "the biggest effect on the P&L of the move to digital...is the lack of returns" and "that's where a lot of the money is being saved." She attributes roughly "50 percent of the increase in profitability" in recent years to the rise of digital sales and its reduction on publishing costs, "and the other half is that after recession hit us in the jaw we've been assiduous in our processes...and figured out how to take costs out of the business."
With ever-growing but unsourced rumors inside publishing claiming that a sale to News Corp. is in process, Reidy responded clearly, "I have been assured it's not true." She added more broadly: "We don't believe we are for sale. CBS has said to us and said publicly many times that they like having publishing as part of their portfolio, and they like their position in the industry."
Digital sales accounted for 24 percent of fourth quarter revenue for S&S, a 24 percent increase from a year ago (and another example of the overall slowdown in digital growth for trade publishing in 2012). As for the recent return to discounting of some ebook titles as a result of the DOJ settlement, Reidy said that "from what we can see, it's having very little effect on any consumer behavior," either digital or physical purchases.
As in previous quarters, S&S's international and children's divisions "did very well" as did audio, while adult books "comparatively had the toughest quarter and year," in part because of the comparison to Walter Isaacson's STEVE JOBS and Stephen King's 11/23/63 a year ago. Key betsellers for the quarter were Eben Alexander's PROOF OF HEAVEN and Vince Flynn's THE LAST MAN.
Reidy celebrated the launch of Bookish and looks forward to the addition of more features still in development. On goals for the site in its first year of operation, Reidy said if Bookish can build "good, strong traffic and it it's making enough sales, either by itself or through referrals, to be self-supporting, I will consider it a big success." She added that "if it can increase the conversation about books in any way, shape or form" the site will have made an important contribution.Simon & Schuster's results for the full year point in the opposite direction of the fourth quarter numbers: sales increased by $3 million (or 1 percent) to $790 million, as adjusted OIBDA was down $3 million to $89 million and adjusted operating income also dropped by the same amount to $80 million. But those income figures suffered from over $20 million paid out for the settlement of the states' lawsuit, as well as legal costs related to all the investigations.