By Porter Anderson, Editor-in-Chief | @Porter_Anderson
Rabe: PRH an ‘Earnings Mainstay’Today (March 30), on the news of Bertelsmann’s strong 2020 profit news, Penguin Random House‘s worldwide CEO Markus Dohle has issued a statement to the company’s international workforce and provided to Publishing Perspectives.
Dohle is careful to preface his commentary by writing that the company’s “pride in our accomplishments and the prosperity of our business” amid the ongoing coronavirus COVID-19 pandemic “is tempered by our awareness of the suffering and loss that characterized last year, disrupting many industries, causing individual and social wounds, and underscoring racial injustice and economic inequality.
“While the narrative of the coronavirus continues to unfold,” he writes, “one thing is certain: Globally, people turned to books—to understand, to learn, to be entertained—and you delivered for them.”
In its financial report, also issued today from Gütersloh, its base in Germany, Bertelsmann highlights several points, among them:
- An operating EBITDA over €3 billion (US$3.5 billion) for the first time
- Group profits above €1 billion (US$1.2 billion) for a sixth year
- Revenues exceeding €17 billion (US$19.9 billion)
“Overall,” the parent company of Penguin Random House says it “recorded a revenue decline in the low single-digit percentage range, a record operating EBITDA of €3.1 billion (US$3.6 billion), and a group profit of €1.5 billion (US$1.8 billion), 34 percent above the previous year’s figure.
“Strategic milestones during the financial year included the completion of the full acquisition of Penguin Random House in April and the announcement of the acquisition of the renowned United States publisher Simon & Schuster in November.”
The report singles out Penguin Random House for its strong performance along with that of the services subsidiary Arvato, for Bertelsmann’s overall gain in EBITDA from 2019’s €2.9 billion to 2020’s €3.1 billion.
“The markets for printed books saw a positive development overall in 2020. Revenue from printed books grew strongly in the United States and increased significantly in the United Kingdom, whereas the German market saw a slight decline and the Spanish-language market a significant decline. Publisher sales of ebooks and digital audiobooks climbed strongly in both the United States and the United Kingdom.”
PRH sales, as Jim Milliot points out at Publishers Weekly, “increased 4.6 percent in 2020 over 2019, to €3.8 billion, or US$4.46 billion at current exchange rates.”
Bertelsmann CEO and chair Thomas Rabe is quoted, saying, “2020 was an exceptional year, which we closed with strong results despite the coronavirus pandemic. We recorded revenue declines primarily in the second quarter, but in the second half of the year nearly all businesses were seeing growth again. …
“Alongside RTL Group, we have built up two other major earnings mainstays in recent years with Penguin Random House and Arvato.
“Bertelsmann reduced costs early on in the coronavirus pandemic and secured the company’s liquidity. Priority was given at all times to protecting our employees, many of whom have been working from home since the beginning of the pandemic. Fortunately, there were very few infections in our workplace.”
The Simon & Schuster Acquisition
The report from Gütersloh leads with PRH in its section on the corporation’s “global content” sector, writing, “After Bertelsmann had completed its full acquisition of Penguin Random House in April 2020, the group in November announced its acquisition of the Simon & Schuster publishing group. Bertelsmann is optimistic to receive all approvals required from the competition authorities later this year.”
The Simon & Schuster acquisition, of course, is not a done deal.
On March 22, Jeffrey Trachtenberg at the Wall Street Journal wrote about the fact that the United Kingdom’s Competition and Markets Authority is examining the proposed acquisition “on the grounds it may lessen competition, and said it would decide by May 19 whether to proceed to a second phase, signaling more intense concerns over competition.”
Trachtenberg’s report includes NPD BookScan’s assessment that PRH accounted for some 25 percent of all print books sold in the United States in 2020 through October 24, and Simon & Schuster accounted for some 9.1 percent.
Bertelsmann’s readout continues, “Penguin Random House delivered a strong publishing and business performance, especially in connection with the great worldwide success of Barack Obama’s A Promised Land, another global bestseller, after Michelle Obama’s memoir Becoming. ”
Bertelsmann’s breakdown shows Penguin Random House revenues for 2020 at €3.8 billion over 2019’s €3.6 billion. In the Bertelsmann portfolio, it was bested only by the Arvato supply-chain operation (€4.4 billion) and the broadcasting RTL Group (€6 billion). The PRH operating EBITDA was €691 over €561 in 2019.
Sara Grace, in her report today at Publishers Lunch, notes Bertelsmann’s singling out of “the growing US business” as “the biggest driver of the year’s results—with US-based sales up €170 million or 8.34 percent at €2.208 billion (US$2.6 billion)—plus “a larger proportion of digital products in the sales mix.”
Grace adds, “The German division, now part of PRH following the buyout of Pearson, had sales of €277 million, up €12 million from 2019. UK sales were €454 million (up €44 million).”
Dohle: ‘Looking Forward in Solidarity’
Dohle, in his messaging to the staff, looks with hope to a future for the cultures in which PRH operates:
“To gain clarity about the future,” he writes, “it’s illuminating to look back in time. History is rife with examples of how societies responded after large-scale calamitous events. What can follow is a period of connection and creativity, of greater solidarity, and a renewed commitment to humanity.
“As Penguin Random House, we will do our part to build a more equitable and just world through the power of books and reading. Driven by content, enabled by reach, our ambition is to grow in 2021,” Dohle says.
“We will continue to support our imprints’ distinct identities and cultures and we will align our reach capabilities and resources in sales, marketing, and publicity even more with a marketplace increasingly dependent on the online, e-commerce, and digital channels.
“Online optimization will help us grow our backlist sales significantly, which will help fund incremental investments to support our front page-making new releases and our organic growth in general. Our service-oriented approach fuels continuous improvements in our first-class supply chain, and we will steadfastly remain a loyal and reliable partner to physical bookstores.”
While some commentary in the world industry is trending toward a suggestion that in the post-pandemic world, books and reading will lose some of the luster they’ve had under the confinements of the contagion, Dohle writes, “Consumers who leaned on books to help them through these challenging times will likely continue to do so.” He mentions “diverse authors” as a goal in how the company seeks to provide those consumers with what they want.
“I look forward with optimism,” Markus Dohle concludes, “because I look forward in solidarity: with you, with readers globally, and with all those who embrace our collective responsibility to each other and to our world.”
More from Publishing Perspectives on Penguin Random House is here, more on its parent company Bertelsmann is here, more on Markus Dohle is here, more on Simon & Schuster is here, and more on mergers and acquisitions is here.
More from us on the coronavirus COVID-19 pandemic and its impact on international book publishing is here.