Hachette UK has acquired independent e-book publisher Bookouture, just four years since it was founded in 2012 by former Harlequin/Mills & Boon marketing controller Oliver Rhodes.
The terms of the deal have not been disclosed, but Rhodes joins Hachette UK in the newly-created role of digital publisher, while continuing to run Bookouture. He will also join the Hachette board.
All of Bookouture's 16 staff will remain with the company, which will retain its offices in London's King's Cross.
As digital publisher for Hachette UK, Rhodes will be responsible for "steering and advising" Hachette to help it grow e-book sales across the group. He will report to David Shelley, c.e.o. of Little, Brown and Orion, and Bookouture will have a "special relationship" with Little, Brown, which will publish some of Bookouture’s authors in print.
Hachette UK chief executive Tim Hely Hutchinson hailed the acquisition as a "landmark event" for two "ambitious" companies. He said Bookouture "probably knows more about selling e-books than any other publisher in the world" and would continue to operate as a standalone business within Hachette. The businesses will pool their expertise to result in mutual growth, he added.
Bookouture sells a high volume of e-books - 9m since it launched - for low prices, for example Robert Bryndza’s thriller The Girl in the Ice, which has sold more than 1 million copies in less than a year, is selling on Amazon for 99p in digital. This pricing strategy sharply contrasts with Hachette’s, which operates the full agency agreement model for e-books with higher prices. Hachette also offers authors a 25% royalty rate for e-books, while Bookouture offers 45% royalty rate.
However, Hely Hutchinson said the acquisition of Bookouture did not signal a move away from the agency model for Hachette UK and the Bookouture business and its trading model would be “ring-fenced” within Hachette.
"However, we are both trying to maximise our authors' sales, so we will learn important marketing techniques from each other," he told The Bookseller. “We are experimenting more than ever before and this involves both raising and lowering prices to find the optimum point of revenue generation, which can vary literally from day to day in each of the market we serve.”
Rhodes told The Bookseller this difference in business models was "something we'll need to work on".
Bookouture sold 81,000 e-books globally in 2013; 362,000 in 2014; 2.5m in 2015 and 6m in 2016. By contrast, Hachette UK's e-book sales have fallen, from 14.7m in 2014 (pre-agency) to 14.2m in 2016.
Rhodes said the company's acquisition by Hachette UK will propel Bookouture to even more rapid growth by allowing it to focus on publishing and enhancing its author offering. Building on the print on demand offering it already has, paperback editions will help Bookouture to both attract and retain authors, as well as representing another revenue stream, Rhodes said.
"I am always looking at ways to improve the business, and, when I started talking with Hachette, its vision for the company is very much in line with mine, keeping all the things that have made us successful to date," Rhodes told The Bookseller.
"In addition to that there is the opportunity to enhance the business. In particular, being able to add more value to our authors by exploring paperback editions for some of our most successful authors, which absolutely makes sense. I think also, as we try and grow the business, which we are trying to do very quickly, having the support of a parent company like Hachette with the back office infrastructure it has will really allow us to focus on publishing and on growing the business and I believe we will be able to do that at a quicker rate."
Hachette UK's acquisition of Bookouture follows its purchase of mobile games company Neon Play in June last year, which Hely Hutchinson then called a "serious first step" in making the business "more digital”.
Hely Hutchinson said buying Bookouture was part of an overarching policy which will see the company making two or three acquisitions a year of firms which would best fit into Hachette UK's ethos of "staying entrepreneurial".
"The perfect outcome at the end of the first year is that the Bookouture team is happy, with the business continuing to grow, and that Hachette joins Bookouture at the forefront of e-book marketing," Hely Hutchinson said.
"There isn't anyone else like Bookouture. We have very successfully welcomed both young companies, such as Rising Stars, Neon Play and Quercus, and long established houses such as Constable & Robinson and John Murray, and we are typically acquiring two or three businesses a year of any length of establishment. Making acquisitions is one of our core policies and skills. We make a particular point of completing our transactions quickly, nicely and and at the originally agreed price, and then creating the best environment in which the publishing can thrive."
Speaking at Hachette UK's 2017 showcase this afternoon (6th March), Hely Hutchinson added: "The acquisition of Bookouture is a landmark event for Hachette UK, demonstrating the scope of our ambition to expand and develop our core publishing business by acquiring the best companies in their field where the fit is right and their ambition matches our own. Bookouture has achieved remarkable things in its short history and, while it will continue as a standalone business, I know that we will mutually enhance and grow our businesses through, where it is appropriate, sharing our expertise and pooling our talents.”
Shelley added: "I have long admired the work Oliver has done at Bookouture – he and his colleagues have discovered some amazing authors and have enjoyed extraordinary success with them; they publish with real flair and creativity. I could not be more excited to work with Oliver and his team in taking Bookouture and its authors to the next level, and to have Oliver’s input into Hachette’s digital publishing more generally. I think he will bring something very special to our business.”
Other e-book publishers have praised the acquisition and said it shows digital-only players are being taken “seriously”.
Michael Bhaskar, co-founder of Canelo, said: “We think it’s good for two main reasons. One, it’s good for the e-book market overall. We’ve always been believers in quality dedicated digital publishing and that’s what this is about. Secondly it’s a huge vote of confidence for the role of ebooks in the future of the publishing industry. At Canelo we’ve always believed that and built the company around that, so it’s good to see the area being further supported and invested in by the big players.”
Matthew Lynn, co-founder of Endeavour Ink, which recently announced it would begin publishing in print as well as digital, said: “I think it’s a good move. Will be interesting to see whether they can actually keep the culture of it…In some ways, of course [the acquisition] is an admission of failure. Because [Hachette] isn’t sufficiently in that market to be able to do what Bookouture is doing. Given that they haven’t, it’s probably a good idea to catch-up.”
He added: “It does show that industry needs to be taking digital market more seriously.”
Read The Bookseller's editor Philip Jones' thoughts on Hachette's acquisition of Bookouture here.