The numbers game

Trade publishing has become more profitable, and those profits are not being passed onto authors—that is the long-held view of many writers, their agents and Nicola Solomon, head of the Society of Authors, who is calling for writers to complete the Authors’ Licensing & Collecting Society’s latest income survey. But is it true? Andrew Franklin, m.d. of Profile Books, argues that the publisher’s role is to be solvent, that each book is a financial risk, and that the rewards remain slim.

Of course, as I write this, the futures of both Bonnier Publishing and Parragon remain—somewhat—in doubt. Publishers that can’t balance the books are far worse for authors than publishers that are mean with their money. Yet, it is undeniable that trade publishers are making more than they were.

It helps to have a long memory; when I first started reporting on publisher finances, a decent profit margin for a general trade house was 8%. In 1995 HarperCollins UK was at 6%, Penguin 9%, Hodder Headline 6%, Little, Brown 7%. Only Transworld regularly bettered those numbers, with its 15% margin. Franklin suggests 10% is now a good target, but that his own business is at 12%. Consolidation and globalisation have improved profits: today, the average profit margin for the large corporate publishers is around 13%, a third up on what it was pre-digital, with both Penguin Random House and Simon & Schuster at 16%. What’s also remarkable is the level of consistency—portfolio publishing works.

There are qualifications. Corporate publishers will highlight big profits in the way private companies need not. The UK accounts of these corporate publishers do not always reflect the profit growth reported by the parent, where much can depend on how costs are allocated. Furthermore, the biggest impact on profits is from bestsellers—of the big groups, only Hachette’s margin is lower than it was in 2008, partly because of its success with the Twilight series in the Noughties. The big books still bail out the rest.

Solomon makes a compelling case, but it is not open and shut. In a flat market, the more authors who are published, the less each will receive; publishers strongly contest that they are not playing fair, the money—said one this week—goes to those authors who generate the sales (a cohort not adequately represented in the ALCS survey) and so-called bestseller clauses will only make this worse. Furthermore, though publishers have undoubtedly improved their businesses, it is not always through factors under their control: returns and digital are not yet fixed entities, while Amazon looms ever larger. Last, agglomeration is not an absolute. It may work, but it is generally resisted by authors and agents.

Solomon is right to raise the questions; publishers could do worse than provide some answers.