Random House Reports a Flat 2009, Better Than Its Parent, Bertelsmann

Media company Bertelsmann AG's overall year-end earnings report cited a "difficult economic environment" for plunging earnings and profits. But its giant publishing division Random House sent out its own annual missive full of surprising optimism.

Worldwide company revenues totaled €1.7 billion ($2.3 billion), up 0.1% from the previous year, while the operating profit, at €137 million ($185 million), was almost exactly the same as 12 months ago. The return on sales remained at 8%.

E-Books and No. 1 Hits

In the midst of this overall flatness, Random House singled out "triple-digit" increases in e-book sales at its main divisions in the U.K., Germany, and Canada: easily the fastest-growing segment but one representing only about 2% of total revenues. The U.S. division's 238 New York Times bestsellers (with 28 no. 1's, including Dan Brown's The Lost Symbol and Stieg Larsson's The Girl With the Dragon Tattoo and The Girl Who Played With Fire).

In a letter to staff, Random House CEO Markus Dohle cheered "a positive full-year result in the context of 12 challenging months of recession" even as the continued economic downturn means the company is "facing another tough year, with very cautious, highly selective booksellers and book buyers."

Even so, Dohle remains optimistic for 2010's prospects, thanks to what he called "particularly rich fall lists" of books. He also singled out the "three most important priorities" for the coming year: being the "best sales and service partner for each and every customer in our marketplace," investing in new and established authors, and embracing the digital transition, calling e-publishing "an opportunity to increase access to our books and to the universe of readers."

Then the Bad News

The Direct Group, which oversees Bertelsmann's book club and bookselling business, fared worse. Direct cited the recession and declining membership rates as to why revenues fell 10.7%, to €1.3 billion ($1.8 billion), and operating EBIT dropped 3.4%, to €28 million ($38 million). The return on sales was slightly higher than last year, at 2.2%, but even that figure was better than for Bertelsmann as a whole: The company reported a net annual loss of €82 million ($111.1 million), a far cry from 2008's net profit of €142 million ($192 million). Sales also dropped 5.4%, to €15.4 billion ($20.8 billion).

Bertelsmann CEO Hartmut Ostrowski (pictured) said in the release: "Like other media companies we felt the global effects of the economic crisis, particularly in the areas dependent on advertising. But Bertelsmann responded quickly and in a decentralized way, aligned to their markets and to its customers."

This year, Bertelsmann expects the market to remain in flux and advertising markets to remain low. But with economic conditions expected to stabilize, the company anticipates revenues and operating profits remaining stable, and the group result should increase significantly.
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