Harlequin reporting yet another loss... :(

I'm wondering what is taking its place? Ebooks? Films? Podcasts? How can we as authors see the curves in the trend and rise to meet them?

I know, another thread entirely, lol...

Cathy,

An excerpt and a link (which seems to be credible based on its list of members, but I may be all wet):

February 13, 2008, New York, NY: Book sales tracked by the Association of American Publishers (AAP) for the month of December saw a slight decrease of 1.8 percent for the month; however yearly sales were up with an increase of 7.4 percent.

The Adult Hardcover category was down by 19.5 percent in December with sales of $128.1 million; year-to-date sales were up by 7.8 percent. Adult Paperback sales rose 10.1 percent for the month ($116.1 million); sales were up by 0.2 percent for the year. The Adult Mass Market category rose by 46.8 percent for December with sales totaling $81.2 million; sales were down by 2.0 percent year-to-date. The Children’s/YA Hardcover category saw an increase of 16.7 percent for the month with sales of $52.6 million; sales year-to-date were also up by 46.4 percent. The Children’s/YA Paperback category was up by 10.0 percent in December with sales totaling $39.6 million; sales were up by 6.5 percent for the year.

Audio Book sales posted a decrease of 13.1 percent for December compared to last year’s figures, with sales totaling $11.9 million; sales for the whole year were up by 19.8 percent. E-books sales rose by 2.4 percent for the month ($3.0 million); the category also posted an increase of 23.6 percent for the year. Religious Books saw a decrease of 7.5 percent for the month with sales of $45.8 million; sales were up by 5.2 percent for the year.

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http://www.publishers.org/main/presscenter/Dec2007StatsRelease.htm

If their 4th quarter includes the Christmas season, I know one thing that might affect sales. When I worked for Borders, I used to run our store numbers by category every month. I found that sales of Romance dropped significantly twice a year: at back-to-school shopping time and during the Christmas holidays. My explanation is that women purchase Romance largely for themselves, and they make sacrifices at these times to instead spend their money on other things.

So, first I would check to see if sales are usually slower over the holidays--it might just be a seasonal pattern.

I'm just gowing to throw this out there, and I am not trying to be ageist or anything, but could it be that HQN's core demographic is aging, and so maybe not as voracious with their reading?

Cathy C said:

Let's talk about this. What do you think is the issue (specifically with H/S, or more broadly with the genre?)

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I'm sure it's me, but I don't see a lot of books being published that I want to read. I like sexy and emotional; where the story is all about the characters and the relationship. All the subgenres that get mixed into a romance and are the rage seem a distaction to me. I'm not into vamps, or paranormal or snarky chicklit and I don't like secret baby plots, or scottish lasses or nobelmen.

Yikes. That doesn't seem to leave a lot. LOL.

EM

I think that today books are seen as a luxury item - and with all the screaming about a recession, high gas prices and home forclosures, it may be less of a priority to go into a bookstore.

which is sad, because I think that literacy is so darned important that whether you go borrow from a library or pass up on some fast food for a new book, you should READ... but that's just me.

It's 4th quarter - I wonder if it's Christmas shipping and the like. Don't know. I buy just as many books as before. Maybe the art/advertising prices are rising higher than the books are selling. I know Mira is where they sink their big money, and every time I browse to eharlequin.com the one line that does NOT interest me is Mira. I rarely see Mira books in the grocery store either.

I'm an unpublished novelist.

That may be nothing to do with what I see, but I thought I'd mention it. What I write is not considered "literature" by my family or my friends. Popular fiction is not something they read. Personally, I don't really care about that. My feelings are not hurt. I soldier on

Pardon me for being a dummy
But is this all fiction inclusive or are we aiming this thread and the written reports generally on popular fiction?

I see in the biggest book store in my Canadian city that the romance section has been squeezed aside by the Mystery section and the Fantasy/Paranormal section. That is still popular fiction. Mainstream is a huge shelving area.

"Literature"? Hmm, that's a toughie, could be in with Mainstream.

Most of the shifting to squeeze smaller is category Romance in the Popular fiction.

Don't know if this has any relevance, a kind of sign of the times?

Josie

I never buy Harlequins new. I either get them ten for a dollar at the local charity shop, or get a free box from my MIL. She's the only person I know personally that buys them new. Per Lila's point - she's in her seventies.

I'm on a very strict budget. I have to carefully select the books I buy new, and it's very hard to find reviews of Harlequins so that I can make that informed choice. I'm not going to buy them off the shelf. Not with such a high couldn't finish rate.

Could it also be the result of increased production costs, since sales only dropped 2%? Fuel costs and anything using oil based products, like inks for printing, could be a concealed culprit.

I think that's more likely to be an artifact of the global energy crunch, as Rllgthunder suggests.

However, the new Harlequin covers are HIDEOUS and if I wasn't buying them because I'm writing them, I would be deeply turned off.

Forgot to mention what appeals to me to read.

I am writing category romance at the moment to get published of course.
Some of the lines have talented writers, I have to say, no matter how the story is presented and written. Don't get me wrong. I think these writers also put a lot into these stories.

Maybe that's how a lot of the public feels. I myself like to read romantic suspense and romantic comedy. I used to like paranormal to write and read. I'm starting to get fussy. Tastes change and so does the economy.

I belong to a few blogs, etc. which leads me to the authors' books, so if I had to pick them according to the cover I'd probably never buy them. Also cheaper are the e-books and much faster. I don't buy any category romances consistently in one line, I kind of waffle around, because they can in total be very expensive. And if I don't like it that is disappointing and puts me off. So places like eharlequin have helped me choose (because I'm trying to write for that particular line). Around and around.

Gad I would not want to be a marketing specialist. Make me crazy.

Cathy C said:

I just saw in today's Publisher's Lunch newsletter that Harlequin reported a fourth quarter loss of over 11% , with operating profits down 23%. The full year wasn't as bad. Sales fell by 2%, but they had an increase in overall profit of 8%.

So what does that say? Are sales of all BOOKS down, or is it more that the company isn't meeting readers needs?

Let's talk about this. What do you think is the issue (specifically with H/S, or more broadly with the genre?)

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Being a marketer in my day job, my question is: 4Q sales and profits are down in comparison to what?

In comparison to the average sales and profit for the prior 3 quarters? In comparison to the 4Q of prior year? Or in comparison to a forecasted target?

Numbers are a magical thing and can look a lot of different ways depending upon the context that you view them in. For example:

• If they are down in comparison to the prior 3 quarters, then Marlys mades a great point --it could a seasonal buyer tic.
• If they are down in comparison to the same time last year, then RT makes a good point about rising costs sinking profits. It'd be interesting to understand marketing cost, cost of goods sold and operating costs in comparison to prior year. Did they dump a bunch of money into marketing in 2007 and not as much in 2006?
• If they are down in comparison to target I'd want to know what the forecasted target was. If they failed to meet a forecast, that does not mean they are underperfoming year over year. Sometimes the forecast is just plain wrong.

Since overall they are reporting an 8% increase in profits and a 2% decrease in sales, they are clearly making money. Did they do anything goofy like raise prices or cut product lines (if they discontinued lines the "loss" in sales might be attributable to not shifting readers to another line)?

Just random thoughts that I would want more info on before drawing conclusions. I tried looking at the HQN press site but couldn't quickly find the sales figures easily for more detail, so I wasn't able to satisfy my curiosity on the above questions.

Well, I hope it doesn't affect their intake too much, 'cause I got a full at Luna.

I can't help thinking that gasoline prices are crimping wallets and purses. Was or has the word ressession been used or bantered about?

Tri

Here we are --the details! This is a report for Torstar Corporation overall, which includes sections on "book publishing" (aka Harlequin Enterprises, LTD)

2007 OVERALL

Book Publishing revenues were down $1.0 million in 2007 excluding the impact of foreign exchange. North America Retail was up $3.6 million, North America Direct-To-Consumer was down $5.0 million and Overseas was up $0.4 million.

Book Publishing operating profits were up $6.3 million in 2007 excluding the impact of foreign exchange. North America Retail was up $5.8 million, North America Direct-To-Consumer was up $2.2 million and Overseas was down $1.7 million.

North America Retail operating profits were up $5.8 million in 2007 from a combination of the positive impact from the mid-year price increase on series books, a more profitable mix of titles, reduced overhead and promotion costs and lower amortization expense. Overheads were lower due to savings realized from the restructuring undertaken in late 2006. North America Retail had been recognizing $2.1 million of amortization expense each year related to the cost of a distribution agreement. This cost was fully amortized by the end of 2006. The number of books sold was stable for both series and single title product in 2007.

North America Direct-To-Consumer operating profits were up $2.2 million in 2007 with improved performance from the 2007 promotional programs. A portion of this year over year improvement was related to the shipping disruptions associated with the bankruptcy of a key supplier in 2006 which negatively affected last year's results. North America Direct-To-Consumer benefited in 2007 from higher sales via the Internet, lower promotional spending and the positive impact of the mid-year price increase on series books which helped to offset underlying volume declines.

Overseas results were down $1.7 million in 2007 with growth in the Nordic group more than offset by lower results in the United Kingdom, Japan and Holland. The Nordic group had another successful year with growth in the series and single title businesses in both their retail and direct-to-consumer markets. The United Kingdom had lower results in 2007 as lower year over year positive adjustments to returns provisions and declining volumes in their direct-to-consumer market more than offset improvements in retail series book sales. Japan experienced success with their Manga line (series based comics) and digital downloads in 2007, but these improvements were not sufficient to offset declines in the core series book sales. Holland's results were down due to lower sales volumes during the last half of the year. Decreased losses from the Brazilian joint venture operations (launched in 2005) were offset by investment spending in India.

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4th QUARTER ONLY

Book Publishing revenues were down $3.1 million in the fourth quarter of 2007 excluding the impact of foreign exchange. North America Retail was down $1.3 million, North America Direct-To-Consumer was down $0.1 million and Overseas was down $1.7 million.

Book Publishing operating profits were down $1.7 million in the fourth quarter of 2007 excluding the impact of foreign exchange. North America Retail was down $1.0 million, North America Direct-To-Consumer was up $1.0 million and Overseas was down $1.7 million.

North America Retail sales volumes were relatively flat in the fourth quarter with revenues down slightly. [COLOR]The decrease in operating profit in the fourth quarter was driven by higher expenses[/COLOR]. North America Direct-To-Consumer results were up in the fourth quarter due primarily to lower promotional spending. Slightly lower sales volumes were offset by the positive impact of the mid-year price increase.

Overseas results were down in the fourth quarter. Higher results in the Nordic group and Japan were more than offset by lower results in the United Kingdom and Holland and increased investment spending in India. The Nordic group continued its growth trend during the quarter and Japan realized some cost savings. The lower United Kingdom results were due to lower year over year positive adjustments to returns provisions. Holland's results were down as it continued to be impacted by lower sales volumes during the summer and fall.

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The FULL DETAILS can be found here --->http://biz.yahoo.com/iw/080227/0367971.html

From what they're reporting, it would appear that sales volume remained steady/flat in 4Q and for the year. Fluctuations in operating profits are due to variable factors like expenses, promotion costs, price increases, etc. They have backed out the exchange rate factors for the purposes of this report.

Thanks for sending all that Melissa. Very interesting.

The worst thing the company has done in an effort to keep those profits rolling in even if sales are down (ARE YOU LISTENING, HQ?) is cut the editorial staff beyond the bare bones.

Frankly, I have no clue how the number of editors we have now are supposed to get the job done. They are stretched beyond the limit.

HQ is using more and more freelancers to fill the gap. (Freelancers, of course, probably don't make as much as an employee editor, nor do they require benefits.)

And that, my friends, is impacting QUALITY. I cannot tell you how many more complaints I'm hearing from HQ authors about the HORRORS they're finding in their proofs. Errors that weren't there when they turned in the mss. (Probably due to sloppy keying-in of the ms and the changes.) Freelancers totally rewriting stuff that they shouldn't be. Now, some freelancers are good. But some obviously aren't.

Prices have gone up, quality has gone down. We've also discovered that with the tightening of print runs, HQ is now doing some short print runs, say for example, when an author has a signing or something. (There have been reports of authors finding these books on store shelves, too.) But apparently, these other books are of noticable lower quality -- the color's off on the covers, they're flimsier, etc. Now, I ask you, what consumer is going to want to pay MORE for a lesser quality book? That would tick me off as a consumer.

So, I don't think that's helping the bottom line, nor will it help the bottom line in the future.

I think the tanking economy is putting a hurt on things. More people will be buying used books because of the pain in their wallet. Of course, that means pretty soon we'll have fewer new books being published because it's not economically feasible for the publishers. It's a vicious downward spiral.

Lila, I think as people age they actually read MORE. They have more time to devote to reading. Plus they may find themselves unable to do some other things they used to do. I think the BEST thing HQ has done lately is introduce the larger print books. Those editions are so much easier on the eyes. That was a TERRIFIC idea, and one that I hope is working out for them. (Again, I know from personal experience that the booksellers at first didn't even know these larger print editions were available. I don't know if marketing has corrected that or not. Plus you don't find those books on store shelves -- I think they have to be ordered.)

Susan G.

It could be something as simple as Torstar shifting their attention to Metroland and the internet, leaving Harlequin in the dust as far as support goes. Just guessing, since I was at a staff meeting for Metroland just this week. Metroland is outpacing Harlequin in revenue at the moment.

Metroland is the group of community newspapers in the Golden Horseshoe (Toronto, Niagara, etc.) which Torstar owns as well as Harlequin.

Just guessing...

Chumplet said:

It could be something as simple as Torstar shifting their attention to Metroland and the internet, leaving Harlequin in the dust as far as support goes. Just guessing, since I was at a staff meeting for Metroland just this week. Metroland is outpacing Harlequin in revenue at the moment.

Metroland is the group of community newspapers in the Golden Horseshoe (Toronto, Niagara, etc.) which Torstar owns as well as Harlequin.

Just guessing...

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Interesting!

HQ always used to be the cash cow for the group. Times, they are a'changin', I guess. And I would have thought that papers are also losing their money, given the increase of the internet.

Hmmmm...

Susan G.

Harlequin also maintains that it's getting slammed by the recent devaluation of the U.S. dollar against...well, against nearly every other currency, it seems. To be honest, they pride themselves on their international reach, but their business model--choose a partner publisher in each country, and let that publisher decide which of Harlequin's books it wants to print--prevents them from making the most of their subsidiary rights when a local publisher elects not to do a particular book. For example, I worked with several NYT-level authors there whose work routinely sold in certain foreign markets--but for whatever reason, the Spanish (just for example) Harlequin partner didn't want to buy Big Name Author's book for their list. Even if a different Spanish publisher wanted it, Harlequin won't permit it to be licensed.

Not to backtrack on the thread, but which Harlequin covers do you guys not find attractive? Cause I am thinking of Nocturne or HQN or Luna, and I find their covers still extremely attractive. The only one I haven't liked lately that I've seen was one for the SPICE line, and it was just the particular style.

Have you seen Gena Showalter's upcoming releases? Now those are some purty covers.

Irysangel said:

Not to backtrack on the thread, but which Harlequin covers do you guys not find attractive?

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Harlequin American Romance (horrible, all of them--awkwardly-posed photos of bland catalogue models; some of them have topic-tags amateurishly Photoshopped on with less skill than a child's); Silhouette Desire (not as bad as American Romance, but still lame, and the women are all 10+ years younger than the actual characters); Harlequin Medical (again with the awkward photos, but at least the title and tagline layouts are competent, unlike the American Romance).

My husband calls the Harlequin American Romance books "Harlequin Canadian Nerds" because they really look like outtakes from "The Kids in the Hall" or "SCTV".