Why Did News Corp. Bury HarperCollins' Earnings?

A number of major book publishers reported earnings this week and, by and large, the news was good, if not spectacular. But HarperCollins, which was supposed to release results for the first quarter of fiscal year 2011, did not -- thanks to a tactical change by its parent company, News Corporation (NWS).

As with previous earnings dispatches, we expected the quarterly statement to include a paragraph on HarperCollins' revenue and operating income (or lack thereof) with specific figures, such as the $310 million in revenue and $20 million in operating income reported at this time last year. Instead, News Corp. merged the book publisher's results under the larger umbrella of "newspaper and information services," which presumably includes other media-centric properties like the Wall Street Journal, the New York Post, the Times (London) and the Sydney Morning Herald.

Together, that unit reported combined sales of $2.046 billion (up from $1.403 billion reported last year) and operating income of $178 million (down sharply from $267 million reported twelve months ago). Overall Q1 revenue jumped to $7.4 billion compared to $7.12 billion a year ago. Further cementing News Corp.'s shift in priorities, HarperCollins' name is never mentioned in the release (and wasn't brought up in the earnings call, though that's nothing new) and even the word "book," as industry newsletter Publishers Lunchpoints out, is used just once. A close look at News Corp.'s 10-Q filing with the SEC, however, reveals that the publishing segment's gains were offset by "lower book sales due to fewer new releases."

No Comment from HarperCollins

A spokeswoman for HarperCollins declined to comment further on how the company did from a dollars and cents standpoint, though she did say the fiscal year began with a "solid quarter" thanks to the performance of books like Pinheads and Patriots by Bill O'Reilly, Sh*t My Dad Says by Justin Halpern, and My Mommy Hung the Moon by Jamie Lee Curtis. Looking ahead, HarperCollins expects to generate strong sales from Sarah Palin's next magnum opus, America by Heart; Straight Talk, No Chaser by Steve Harvey; and the various chronicles of reality star Lauren Conrad.

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On the U.K. side, the Booksellerextrapolated some data from Nielsen Bookscan for the quarter through September 4, which indicated that segment's revenue fell from £28.4m in 2009 to £24.9m in 2010.

HarperCollins' absence from the earnings statement may be nothing more than a shift in News Corp.'s accounting practices, taking into account that the entire media department got bigger thanks to the Wall Street Journal and Dow Jones acquisition in 2009. But it's hard not to infer something stranger at work, made even more so by the fact that News Corp. wasn't shy about reporting actual facts and figures on MySpace, the also-ran social network that lost $70 million this quarter as compared to last year. Even COO Chase Carey, on the earnings call, didn't mince words, saying MySpace's "current losses are not acceptable or sustainable."

News Corp.'s Mixed Signals

As signals go, News Corp.'s are decidedly mixed, but two things emerge from the noise with alarming clarity: The company clearly views HarperCollins as mere afterthought, likely because a book publisher -- even one generating hundreds of millions of dollars in sales per quarter -- is a mature market, whose potential for growth is far too small for Wall Street to care about. The other is that hiding the financials from the public will only spur the rumor mill anew that HarperCollins could go on the block, so long as there's a willing buyer -- and Rupert Murdoch can stomach the prospect of selling for a lot less than he wants.

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