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Penguin Random House

Penguin Random House is the world’s leading trade book publisher, comprised of nearly 250 imprints and brands on five continents, with more than 15,000 new titles and 800 million print, audio and e-books sold annually. The company employs 12,500 people globally and was formed on July 1, 2013 by Bertelsmann and Pearson, who own 53 percent and 47 percent, respectively.

Bertelsmann is an international media company whose divisions also encompass broadcasting (RTL Group), magazine publishing (Gruner + Jahr), outsourcing services (Arvato), and printing (Be Printers), operating in fifty countries.

The publisher’s imprints include Doubleday, Viking, and Knopf in the US; Ebury, Hamish Hamilton and Jonathan Cape in the UK; Plaza & Janés and Alfaguara in Spain; Sudamericana (Argentina); and the international imprint DK.

The German-language publisher Verlagsgruppe Random House is not legally part of Penguin Random House, but is under the same corporate management and is part of the Penguin Random House operating division.

Gruner + Jahr is present in over 30 countries, with 25.1% of the company owned by the Jahr publishing family in Hamburg. The Brown Printing Company, a G+J subsidiary, is one of the largest offset printers in the United States.

Analysis & Key Developments

Financial

Bertelsmann’s group revenues from continuing operations rose 3.1% to 16.7 billion EUR. This was a seven-year high, primarily attributable to the merger of Penguin and Random House as well as other acquisitions. Other factors included positive performance from book publishing in the United States and in the UK, thanks to strong children’s and YA sales.

Revenues from Penguin Random House increased by 25.2% in the year after the merger to 3.32 billion EUR, up from 2.65 billion EUR in the previous year. Operating EBITDA rose by 24.5% to 452 million EUR against 363 million EUR in 2013, driven by numerous bestselling titles, especially in the field of children’s books, as well as popular movie and TV tie-ins and the strong performance of its US business.

Acquisitions

On July 1, 2014, Penguin Random House fully acquired the Santillana trade publishing business from the Spanish media company Prisa. The purchase includes the Brazilian trade publisher Objetiva, which merged with Penguin Random House’s activities in Spain, Portugal and Latin America, significantly reinforcing the growth potential in Latin America.

Change in management

Germany’s Verlagsgruppe Random House saw a change in management. CEO Klaus Eck retired from the operating business in June 2014. He is followed by Thomas Rathnow as CEO, serving alongside of Claudia Reitter and Frank Sambeth. Nicola Bartels, Ulrich Genzler, Thomas Pichler, and Georg Reuchlein moved up to the management board.

Consolidation

In September 2014, PRH announced the Penguin Publishing Group, which unifies all Penguin adult imprints. Madeline McIntosh was named president of the new unit. She served formerly as PRH’s COO and president of U.S. operations. Susan Petersen Kennedy, former president of Penguin Group USA, left at the end of 2014. In a letter to PRH staff worldwide, Markus Dohle categorized 2014 as a “year of preparation” for PRH in terms of its systems, IT infrastructure and distribution environments, while 2015 will be a “year of implementation.”

Random House’s social media channels and corporate, book and author-related newsletters moved to the corresponding Penguin-branded channels, since Penguin held a larger presence on social media. There are no plans to rebrand them.

Education business to become Bertelsmann’s third pillar

In November 2014, Bertelsmann acquired the US online education provider Relias Learning from the private equity company Vista Equity Partners. This purchase is the largest acquisition of Bertelsmann in the United States since the takeover of Random House in 1998. Relias is a US e-learning provider with more than 4,000 institutional clients, offering training on an online platform for employees in the healthcare sector, including elder care and other health-care professions. According to Rabe, “it benefits from three global megatrends: education, health, and digitization” and thus, it’s the “ideal nucleus” for Bertelsmann’s e-learning business, which is one of three segments in the education sector. The group will invest during the next few years to make education the “key pillar of the new Bertelsmann” alongside media content and services, “aiming for revenues of 1bnEUR in the next few years.”

In addition, Bertelsmann invested in the Silicon Valley-based online education provider Udacity, which offers online professional development courses with a focus on technology and IT.

In another move to expand the services sector for universities, Bertelsmann plans to build a network of medicine and human-sciences universities under the umbrella of its US subsidiary Arist. The first institution, the Alliant International University, is comprised of 3,700 students at ten campuses and was added to the network in February 2015.

International

Revenues of 3.05 billion EUR were generated internationally, with 279 million EUR in Germany.

Digital

According to PRH CEO Markus Dohle, the company’s core goal is to “to crack the code of discoverability” and induce a paradigm shift in book marketing to reach more consumers. PRH launched the Penguin Hotline, a book-gift recommendation service in the United States, and My Independent Bookstore, a book recommendation and discovery website in the UK carried out in collaboration with the retail website HIVE. At the same time, Penguin withdrew from the content discovery website Bookish and Anobii, a social networking site aimed at readers.

PRH further consolidated its market leadership in the digital business. In 2014, the publishing group sold more than 100 million e-books and now offers more than 100,000 titles in electronic form.

E-book sales account for 20% of PRH annual revenues worldwide, as Dohle noted in the presentation of PRH’s annual report in Berlin. The share differs by region: in the US e-book sales make up 30%, with 15% in Germany and less than 10% in Spanish-language countries. One in two purchases of romance titles are purchased in e-book form.

In Germany, Verlagsgruppe Random House’s e-books publishing program saw double-digit percentage growth.

The German e-reader operating partnership is comprised of Der Club Bertelsmann, Hugendubel, Thalia, Weltbild, Libri (joined in October 2014) and Deutsche Telekom. According to figures from the Association for Consumer Research (GfK), the alliance surpassed Amazon in e-book sales market share in Germany in the third quarter of 2014. 1.5 million e-book titles are available in the Tolino system. Tolino was made available in Belgium in collaboration with Standaard Boekhandel, and in Italy through the online bookseller IBS.

Bestselling authors & titles

In the United States, 502 Penguin Random House titles were placed on the New York Times bestseller lists in 2014, with 64 at number one. Additionally, 31 Penguin Random House titles topped the New York Times e-book bestseller list. The top-selling book in 2014 was John Green’s YA novel The Fault in Our Stars, which sold more than ten million copies in hardcover and e-book formats.

Children’s books and movie and TV tie-ins yields the biggest sales of 2014. Book tie-ins to the Disney movie Frozen exceeded 17 million copies during the period. The movie tie-ins for Gone Girl by Gillian Flynn, Unbroken by Laura Hillenbrand and The Lego Movie and television tie-ins for A Song of Ice and Fire by George R. R. Martin and Outlander by Diana Gabaldon all sold millions of copies in multiple formats. Also adult titles such as Gray Mountain by John Grisham, The Invention of Wings by Sue Monk Kidd, and Make It Ahead by Ina Garten were successful.

Penguin Random House UK experienced a solid year despite a difficult market environment. Girl Online by YouTube star Zoe Sugg, aka Zoella, was Britain’s fastest-selling debut novel ever. Its publishers placed 43% of the top ten titles on the Sunday Times bestseller lists.

Germany’s Verlagsgruppe Random House recorded a stable year, placing 358 titles on the Spiegel bestseller lists. Top-selling titles were Der Distelfink by Donna Tartt and Krähenmädchen by Erik Axl Sund.

Penguin Random House Grupo Editorial was able to more than offset weaknesses in the difficult book market in Spain with strong sales in Latin America. Leading bestsellers were El juego de Ripper by Isabel Allende and El umbral de la eternidad by Ken Follett.

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