Audio and Becoming lift PRH worldwide revenues by 1.9%

Sales now reaching 10 million for Michelle Obama's Becoming across all editions, and "substantial" growth for audiobooks in all core markets, drove revenues up at Penguin Random House worldwide in 2018. PRH c.e.o. Markus Dohle also confirmed this morning (26th March) that the publisher "hopes", as expected, to publish Barack Obama's book by the end of this year. 

But Bertelsmann c.e.o. and chairman Thomas Rabe, reporting the company's results for the 2018 financial year, has said Brexit will "go down in history as one of the most destructive decisions ever".

Including the German division Verlagsgruppe Random House which is wholly owned by Bertelsmann, Penguin Random House upped global revenues by 1.9% to €3.4bn in 2018. Organic revenue growth was 1.3%. The book group's operating EBITDA increased by 1.3% to €528m (previous year €521m), with the EBITDA margin again high at 15.4% (last year 15.5%). Negative exchange rates effects were more than offset by a strong bestseller performance, acquisitions and growth in digital audio downloads, Bertelsmann said.

Penguin Random House UK recorded "stable" revenues in 2018 with growth in digital formats and license revenues, Bertelsmann said, with the group's British imprints publishing 39% of the Top 10 titles on the Sunday Times weekly bestseller lists, and Michelle Obama's Becoming, Jordan B Peterson's 12 Rules for Life, Jamie Cooks Italy by Jamie Oliver and Diary of a Wimpy Kid: The Meltdown by Jeff Kinney picked out as hits.

In the US, 481 titles went onto the New York Times bestseller lists, 69 at number one, with major sellers including the Obama and Peterson titles plus The President is Missing by Bill Clinton and James Patterson and The Reckoning by John Grisham.

Across PRH, digital revenue grew 17% last year.

Bertelsmann's Rabe, reporting the company's results for the 2018 financial year, praised PRH's "unique creative, sales and marketing power" in handling the globally coordinated release of Becoming, and said it was on track to become "the most successful memoir ever". 

The performance of Penguin Random House was posited as one of the main drivers for Bertelsmann's revenue rise for 2018, alongside that of the company's RTL Group, BMG, Arvato and the Bertelsmann Education Group. Overall, Bertelsmann's 2018 revenues rose to their highest level since 2007, up 2.8% year-on-year to €17.7bn (previous year €17.2bn), despite negative exchange rate effects. Operating EBITDA stood at €2.59bn (last year €2.64bn, including a benefit from gains on real-estate sales). Bertelsmann said that on a like-for-like basis, operating profit rose by 4.5% or €112m. Group profit stood at €1.1bn, "slightly below the prior-year figure due to higher negative special items", the fourth consecutive year that it has exceeded the billion-euro mark.

Digital revenues for Bertelsmann stood at nearly 50%.

Twenty-eight per cent of revenues were generated outside Europe (up from 20% in 2011). Bertelsmann said in addition to China, India and Brazil, Bertelsmann's regional expansion would primarily focus on the United States, its second-largest market, plus increasing exploration of future investments in Latin America, Africa and South-east Asia, it said.

Rabe said: "2018 was a successful business year for Bertelsmann. We became a faster-growing, more digital and more international Group. Organic growth is higher than it has been for years, and nearly half of our revenues came from digital activities. Both of these factors demonstrate how far we have come with the Group's transformation."

But on Brexit, he noted: "It has already affected our business, the damage has already been done. The pound is devalued, and economic growth in the UK and Europe would be higher without Brexit. There is a significant element of uncertainty, which is very bad for people, especially people working for Bertelsmann. The European Union has become totally defocused. The European summit last week was supposed to be focused on China, and ended up totally about Brexit... It will go down in history as one of the most destructive decisions ever."

At a press conference in Berlin this morning, Dohle confirmed that, as expected, the publisher hopes to publish Barack Obama's presidential memoir "by the end of this year", although the exact date is yet to be announced, saying sales for Becoming had "exceeded our wildest expectations" and were continuing, and the book could become a modern classic.

Meanwhile, in a letter to staff, he thanked his teams for their "herculean" work in 2018 and predicted a "positive" outlook for 2019, saying: "If January and February are any indication—with strong performances in almost all our territories—we are already on a growth trajectory. 
 
"We know that we live in uncertain times, and the disquiet in our cultural climate often makes optimism feel unrealistic.  For me, the best response to this crisis of confidence is trust.  Trust in our values, our business, and our future.  Trust in our books.
 
"Consumers are turning to books to help them understand the times in which we live.  Thus the global book market was again up in 2018.  In the coming years we want to grow above the market averages—organically and through acquisitions—particularly in categories that are expanding, such as audio and children’s books—and of course benefit from great frontlist publishing and the growth of our rich backlist—in both fiction and non-fiction." 

On audiobooks, he said: "We are the leading audiobook publisher in the world—and audio books are currently the fastest-growing format globally. Our expertise in mature, thriving audio markets in the US, the UK, and Germany provide us with opportunities to share and scale our experience with colleagues in emerging audio markets, such as Brazil, India and Australia." Children's book categories, meanwhile, remain rapidly growing segments in most of PRH's markets, bringing "our opportunity to turn younger generations into lifelong readers—a goal that is not only aligned with our mission and purpose to create the future of books and reading for generations to come—but is essential for our future and the future of our democratic and human values, and societies."

Dohle added: "The continuing digital transformation of our business is about the shift to online, e-commerce, and with that toward the end-consumer.  Our mandate is to ensure the discoverability and visibility of our books on every platform, and to connect those books with readers everywhere.  If we become the best in connecting stories with readers, it will create additional demand for our books, and it will draw more authors to our 275 imprints globally.  And that will result in organic and market-share growth.
 
"Another essential pillar of our strategy—along with being the leader in discoverability and visibility—is the physical availability of our books. The efficiency of our global and local supply chains continues to be instrumental; it is a competitive advantage we have built over the last ten years in bringing books into the hands of readers in the fastest and most profitable way, for our retail partners and for us.  We have exceeded 160,000 retail locations that carry our books around the globe, and we are expanding this number as we speak.  That physical presence will continue to be important for us to further grow our business over the coming years." 

Bertelsmann's Rabe said that a focus for the Group going forward would be strengthening its tech skills, especially in the areas of Cloud, Data and Artificial Intelligence. "There are numerous specific ways we use these in the Group, and we will massively expand them in the years ahead," he said. Personalisation of content, recommendations and algorithms to reflect the preferences of users, and the use of AI to generate content were all among the likely applications of those technologies, he said. "It will enhance the quality of service to customers, it will drive efficiency," Rabe stated.