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HarperCollins

HarperCollins is a subsidiary of News Corp., a global media and information services company that covers a range of media, including news and information services, cable network programming in Australia, digital real estate services, book publishing, digital education, and pay-TV distribution in Australia. News Corp. is based in New York and operates primarily in the United States, Australia, and the United Kingdom. News Corp. split in two companies in 2013. Television and film assets were put into a new company, 21st Century Fox, while roughly 130 newspapers (including the Wall Street Journal and the Times of London), educational businesses and other assets formed a new company under the old News Corp. name. The split completes a process that the company announced in 2012, and responds to investor concerns that the newspaper and book publishing divisions were dragging on the faster growing pay TV business.

HarperCollins is one of the world’s largest English language book publishers. HarperCollins owns over 60 branded imprints, including Avon, Harper, HarperCollins Children’s Publishers, William Morrow and Christian publishers Zondervan and Thomas Nelson, which HarperCollins acquired in July 2012. In July 2014, HarperCollins acquired Harlequin, the leading publisher of women’s fiction.

Analysis & Key Developments

Financial

Revenues at HarperCollins increased by 5% to 1.43 billion USD for the fiscal year ending on June 30, 2014. The 65 million USD increase was attributed to higher print and digital book sales of 88 million USD, mainly from sales of Veronica Roth’s Divergent series. More than 19 million net units of the Divergent series were sold during fiscal 2014, 35% of which were e-book sales.

With the integration of Harlequin, News Corp. executives projected 20 million USD in savings, with which be on par with the savings generated from acquiring Thomas Nelson.

Internal organization

In order to give as much autonomy as possible to the house’s editorial operation, HarperCollins CEO Brian Murray limited the number of executives at the company who report directly to him. Among those who do are the leaders of HC’s five major business groups are Michael Morrison, president and publisher of U.S. general books and Canada; Susan Katz, president and publisher of HarperCollins Children’s Books; Mark Schoenwald, president of HarperCollins Christian Publishing; Charlie Redmayne, president of HarperCollins UK; and Craig Swinwood, president of Harlequin.

News Corp. CEO Robert Thomson described HC as one of its “core pillars”. In early 2015 HC and other News Corp. holdings in the UK moved into a new office building in London. The move “is a clear signal” of News Corp’s intention to make HC an integral part of the company’s future, Murray said.

Acquisitions

HarperCollins acquired Harlequin from Torstar Corporation for 455 million CAD at the end of July 2014. At the Digital Book World conference, CEO Brian Murray said the Harlequin purchase was “very transformative,” giving “a lot of runway” for future global opportunities considering Harlequin’s “international foreign language footprint in 13 new countries and 17 new languages for us.” HC expects Harlequin to contribute annual revenues of 320 to 340 million USD.

In the future, Murray hopes HC can publish rather than license in new territories and compete with Penguin Random House for rights on equal footing.

A similar strategy worked previously with the Thomas Nelson acquisition. The religious titles brought “a lot of opportunity, some in Latin America and beyond, and a critical mass that gives us the ability to do things vertically that we couldn’t do before,” Murray said.

International

According to News Corp. CEO Robert Thomson, HC will use Harlequin’s experience in the Japanese market to help expand HC’s presence throughout the rest of Asia. Understanding the nuances of different countries is crucial to HC’s global strategy, Thomson said.

The chance for overseas expansion was also one of the factors that led HC to acquire Thomas Nelson in 2012. “The Christian publishing business has stable values,” Murray said, “and its content travels well globally.” He is particularly excited about the opportunities for growth in South America. In fall 2014, HC acquired the majority ownership of Brazil-based Thomas Nelson Brasil from Ediouro, its partner in the joint venture.

Digital

To expand direct-to-consumer sales, HarperCollins introduced a pilot program with Aerbook, which enables Twitter, Facebook, and Pinterest users to read share excerpts of e-books and purchase them. In summer 2014, HC reaffirmed its commitment to direct sales by allowing consumers to buy print and digital books more easily on its redesigned website. HC followed up in the fall by giving authors an additional 10% of royalties on purchases by customers referred to harpercollins.com from the authors’ own sites.

Under Murray, HarperCollins has aggressively explored opportunities for growth in e-books in the U.S. and abroad. The company runs 200 digital storefronts in international markets and is continuing to open more.

HarperCollins offered 35,000 e-book titles as of June 30, 2014, which accounted for 22% of global consumer revenues in the quarter (up from 19% in fiscal 2013), making the company the industry leader for e-books. Nearly all titles published by HarperCollins in the past five years are available in electronic format along with the backlist. HarperCollins launched a “digital-first” series as part of HC’s romance imprint Avon to release at least one new romance title per week. The series has generated nine New York Times e-book bestsellers since the launch.

Bestsellers

Victoria Roths’s Divergent was HC’s strongest seller. More than 19 million net units of the Divergent series were sold during fiscal 2014, with 35% from e-book sales.

During fiscal 2014, HarperCollins U.S. had 158 titles on the New York Times bestseller list, with 17 #1 titles, including Divergent (series) by Veronica Roth, The 100 by Jorge Cruise, Heaven is For Real by Todd Burpo with Lynn Vincent, The Body Book by Cameron Diaz with Sandra Bark, The First Phone Call from Heaven by Mitch Albom, The Ocean at the End of the Lane by Neil Gaiman, The Pioneer Woman Cooks: A Year of Holidays by Ree Drummond, 10 % Happier by Dan Harris, and The English Girl by Daniel Silva.

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