News Corp announced the purchase of Canadian based Harlequin from Torstar on May 2nd, 2014. The entire deal was a cash purchase of $455 million dollars and the romance publisher will be a division of HarperCollins. What does the future hold for readers of their beloved brand? Why was Harlequin even available to purchase in the first place? What is the future of digital and softcover titles?
Harlequin was originally purchased by TorStar in 1975 and saw massive success in their affordable softcover books that were a staple in bookstores, grocery stores and supermarkets all over North America. When you envision the quintessential title from Harlequin, often shirtless hunks abound. In the 1980s and early 1990’s Fabio was a household name.
What made Harlequin an attractive acquisition target? It was one of the most profitable aspects of TorStar Corp, a Canadian media company. It currently publishes 110 physical and digital books every single month. The books are translated into 30 different languages and available all over the world. They have 1300 authors signed to publishing contracts and over 1,000 employees worldwide. Obviously the romance genre is still very popular with 24 of the top 100 bestsellers in April belonging to Harlequin.
Why is Torstor selling the largest Romance company in the world? TorStar is seeing a decline in their entire portfolio, primarily due to the newspapers. It owns popular brands such as the Toronto Star, Canada’s largest newspaper, and a equity stake in The Canadian Press as part of a joint agreement with the parent companies of the Globe and Mail and Montreal La Presse. TorStar was seeing decreased revenue from their newspapers and will use 158.5 million to pay off their current debt.
“We think we did the right thing in exiting,” David Holland, president and CEO of Torstar, said during a conference call to discuss the sale. “While making the decision to sell was difficult, we are confident that this transaction represents excellent value for Torstar shareholders and importantly further strengthens Torstar’s financial position and capital base as we continue in our evolution as a company,” Holland told financial analysts.
Harlequin’s chief executive, Craig Swinwood, said that the publisher would remain based in Toronto, and that it would continue to operate as a “distinct and successful brand” within HarperCollins. Brian Murray Chief-Executive at HC echoed those sentiments, saying that the “Harlequin rich name and heritage will be preserved independently.”
Harlequin as a company was stagnating under the ownership of Torstar. In 2009 they saw $493 million in revenue, $468 million in 2010, $459 million in 2011, and $426 million in 2012. One of the reasons the company was losing money was the decline of the softcover book and the rise of the eBook. In 2007 the big decline started when paperback sales took a 2% dip, bringing in a staggering $1.1 billion dollars. The landslide of decreased revenue continued, plummeting 68% from 2007 until 2013. Now, the entire softcover industry worldwide is $373.1 million.
One of the bright spots of Harlequin was the early adoption of eBooks. They were one of the first companies to digitize their new titles in 2007 and their backlist in 2011. Their cade of Authors were kept happy with some of the highest royalty rates in the industry, around 30% of each book sold. They also started one of the first digital first imprints, Carina Press. This program allowed authors to forgo book advances to get a higher revenue earned on their books. The saved money helped Harlequin remain profitable and still give authors marketing attention.
HarperCollins intends on leveraging Harlequins team of translators and tap into their international distribution pipeline. 95% of all HC books are English only, which limits their market penetration. Romance readers are also voracious readers, with the average reader consuming almost 100 books a year.
It is important to note that Harlequin will be a division of HarperCollins and will be able to conduct business autonomously. Unlike the Penguin/Random House deal where the two sides actually merged together to now publish 1/4 of all books in the world.