Mike Fleming

Anyone who doubts the potential of Sony Pictures Entertainment’s The Girl With The Dragon Tattoo need look no further than how the half-year earnings of Bertselmann and its Random House division were positively impacted by the sales of the Millennium novel trilogy by the late Stieg Larsson. Bertelsmann issued its half-year report this morning, and cited the performance by Random House as a big reason for its own record half-year results.  According to a letter sent company-wide by Random House chairman/CEO Markus Dohle, the publisher’s sales were up nearly 8%, and profit doubled to around $50 million on revenues close to $1 billion, despite a shaky economy.

The reason? Dohle singles out the sales of the Larsson trilogy, which Random House publishes in the U.S. and Germany. “Their cumulative 6.5 million-copy impact on our overall half-year figures is substantial, and Larsson’s print and digital sales continue to skyrocket,” Dohle writes in the memo. “Stieg Larsson is the first author ever to sell one million e-books on the Kindle. This additional e-book revenue and readership opportunity is just one of the many reasons we are so excited about our robust digital-publishing momentum.”

The e-book results for the half year are showing how important digital sales are becoming to the bottom line of all publishing houses. Dohle said worldwide digital sales are on course to exceed $100 million. The first half results were up 300% for Random House in the U.S. A majority of that is from the Amazon Kindle. Random House doesn’t yet sell content directly to Apple’s iBookstore for its iPad. While users can access Random House-published books through apps supplied by Barnes & Noble and Amazon, Random House hasn’t yet reached an accord with Apple.

Back to the Larsson trilogy, which is published in the U.S. by Random House division Alfred Knopf. Sony Pictures Entertainment this fall begins production in Sweden on the first installment, The Girl With The  Dragon Tattoo, with David Fincher directing, Scott Rudin producing, Daniel Craig starring as journalist Mikael Blomkvist and newcomer Rooney Mara playing computer hacker Lisbeth Salander. The film will be released December 21, 2011. Steve Zaillian, who adapted Dragon, is already in discussions to write the sequel, The Girl Who Played With Fire. There is also the Swedish film adaptation.

A spokesman for Random House said the Larsson trilogy shows no signs of slowing down, and SPE might well be looking at the same opening weekend audience as the last RH publishing phenomenon, Dan Brown’s The Da Vinci Code. Though Brown’s book sold far more as a single title than The Girl With The Dragon Tattoo, Random House’s half-year results had the benefit of reading audiences in the United States discovering in a compressed time period not only the paperback version of that book, but also the paperback of The Girl Who Played With Fire, and the hardcover The Girl Who Kicked The Hornet’s Nest.

The benefits from publisher-to-movie studio were reciprocal on The Da Vinci Code, which sold more than 1 million paperback copies after the movie opened and went on to gross $758 million worldwide. Random House might have a bigger sales spike when The Girl With The Dragon Tattoo movie gets released because the books will have been in the marketplace a shorter time than The Da Vinci Code, which had established itself as one of the biggest selling books of all time when the film got released.

Random House’s second half looks promising: it publishes the John Grisham thriller The Confession, George W. Bush’s Decision Points and Tony Blair’s A Journey, Lee Child’s next Jack Reacher thriller Worth Dying For and Jay-Z’s Decoded, and releases The Lost Symbol on paperback for the first time.

Below is Dohle’s internal letter:

MARKUS DOHLE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MEMBER OF THE EXECUTIVE BOARD OF BERTELSMANN AG
August 31, 2010

Dear Random House Colleagues,

I am pleased to share the terrific news this morning from our parent company: For the first six months of 2010, Bertelsmann reports record half-year fiscal results, and Random House is a significant contributor to them. On a companywide basis, Random House sales, even with a weak economy in most of our territories, jumped nearly 8% year on year worldwide, and we doubled our profit. Our performance was led by the U.S. division, which combined bestseller dominance with lower physical returns.

How did we achieve such a good start to our year? It’s because of our books and authors—and you, with the crucial role you’ve played in advancing the values and accomplishments indispensable to our success: Collaborative, cross-divisional solutions-oriented teamwork. Ongoing cost discipline. Our win-win marketing and service partnerships with our customers. Our nonstop efforts to make our industry’s best distribution supply chain even better. In these tough times, we can be truly proud of the creativity and hard work we have put into every sale of our authors’ books.

Of the hundreds of bestsellers we published by established and new Random House authors during the half year, three of them are a cultural and commercial phenomenon. We publish the Stieg Larsson trilogy solely in Germany and the United States, but their cumulative 6.5-million-copy impact on our overall half-year figures is substantial, and Larsson’s print and digital sales continue to skyrocket. Stieg Larsson is the first author ever to sell one million e-books on the Kindle. This additional e-book revenue and readership opportunity is just one of the many reasons we are so excited about our robust digital-publishing momentum.

In the past half year we have really embraced digital transition throughout our companies, replacing anxieties about the format with forward thinking and with well-executed action. For this fiscal year, Random House worldwide digital sales are well on course to exceed $100 million. As our e-book sales accelerate in North America, the U.K., and Germany—and will soon start up in Spain and Latin America—we are rapidly growing our e-book publishing programs, adding newly published titles and longtime Random House authors weekly, experimenting with apps and other innovative digital formats, and implementing new digital/online marketing approaches. Our divisional publishing and digital-development teams are working hand in hand toward the same united goals: to grow our print and digital market leadership as we grow the overall readership for our books.

Can we maintain, and even improve upon, our first-half sales and operating EBIT in the second half of this fiscal year? Still too early to tell. We continue to get a lot of mixed messages about consumer spending, which is uneven; consumer confidence, which is uncertain; and the economic recovery, which appears to be long and slow.

But even in a difficult economy, the fall is always our biggest selling season, and our list of upcoming potential megatitles is impressive. To name just a few: THE CONFESSION, John Grisham’s first fall legal thriller; A JOURNEY by Tony Blair; DECISION POINTS by George W. Bush; TORMENT, the follow-up to FALLEN, by fast-rising novelist Lauren Kate, which each of our international divisions will publish, with the largest Children’s initial printing since BRISINGR; new nonfiction in Germany from Richard David Precht and Keith Richards; LA CAÍDA DE LOS GIGANTES by Ken Follett for Random House Mondadori; KITCHEN by Nigella Lawson; BAREFOOT CONTESSA: HOW EASY IS THAT? by Ina Garten; Nora Ephron’s I REMEMBER NOTHING AND OTHER REFLECTIONS; WORTH DYING FOR by Lee Child; and DECODED by Jay-Z.

I look forward, together with all of you, to making 2010 a successful year, and to us effectively managing our digital transition. This will continue to demand a lot of hard work, but I know that we are on the right path toward achieving our goals.

Thank you for all you do for our great company.
Markus