Harlequin buy gives News Corp a romantic vision for the future

NEWS Corp did not purchase book publisher Harlequin for eight times earnings only for its burgeoning sales in the romance genre.

THEY publish Mills & Boon, raunchy romance novels and women’s fiction, but News Corp did not purchase book publisher Harlequin Enterprises for eight times earnings purely for its burgeoning sales in the romance genre.

News Corp says the $C455 million ($447.1m) acquisition from Torstar Corporation, announced on Friday, fits seamlessly with its overall strategy of digitisation and globalisation.

Harlequin, which publishes in 31 languages, and sells to more than 100 international markets, has 40 per cent of US sales in digital format and reaches commun­ities where News Corp does not have a traditional presence.

In an interview hours after announcing the acquisition, News Corp chief executive Robert Thomson said Harlequin, which will operate as a division of News Corp subsidiary HarperCollins, has an empathetic understanding of the tastes, attitudes and consumption behaviours of people in some of the fastest growing ­regions in the world.

“What you’re getting for that price, for not only Harpers but for News Corp generally in terms of international expertise and spread of content in different languages, makes it quite a remarkable deal,’’ Thomson said.

“As you build the Harper­Collins franchise in other lang­uages, wouldn’t it be great to have on that website The Wall Street Journal in other languages?

“The structure and culture that you are creating, the expertise in these societies, is itself a platform for different types of content.”

Thomson said there were many possibilities to use Harlequin’s global and digital platform to reach new communities, in ­places such as Brazil, Turkey, India, Africa, Indonesia and Russia, with News Corp’s news content, books and other products. The deal, subject to regulatory approval, will allow News Corp, owner of The Australian, to access these new emerging markets.

“The content has to complement the audience. Business content is different from romance content, so that would be jarring, but take Turkey or Brazil for example when you have specialised content communities, whether it be in business books or politics or different types of fiction, you can imagine there’s a complementary (demand) for news feeds around that type of content and the two would bounce off each other.

“So the idea would be to upsell the person whose original intent was to buy a book into business English in Brazil. And if someone is studying business English through a Wall Street Journal platform, what other books could you sell that person?”

As a stand-alone business, Harlequin is also a strong purchase, with 110 titles released each month and more than 1300 ­authors signed to its books.

Literacy rates have greatly improved in many of the countries where Harlequin books have a strong presence, and some fans of romantic literature are purchasing up to 70 books a year from Harlequin, explaining its revenue of $C398m in 2013 and EBITDA of $C56m.

While Harlequin is headquartered in Toronto, Canada, it has offices in 17 countries and 95 per cent of its revenues are from outside of Canada. Currently, 99 per cent of HarperCollins’ books are published in English, and 22 per cent of sales are in digital format.

For Harlequin, 40 per cent of its revenue comes from books published in languages other than English and 40 per cent are in digital format.

“In two or five years’ time, one will be selling more books ideally, but the English percentage will be smaller and the global language percentage will be larger,’’ Thomson said.

“It’s a real opportunity to take advantage of existing expertise, not just for romance novels but for those who have a romantic vision for the future of publishing.”

With Harlequin further down the digital track than Harpers, there is expertise in this area that will be able to transfer between the companies. “Both will make advances in the way you deliver books and how you illustrate a digital book. The whole idea of a digital book is still evolving,’’ Thomson said.

The acquisition dovetails with the vision News Crop has articulated for its future. Thomson said the two themes News Corp emphasised at its launch were digitisation and globalisation.

“They are the two most profound trends of our time,’’ he said.

“You can see with Storyful, which has a global presence, and Harlequin, which is a part global and digital company, that they fit that profile and that perspective.

“We are often asked what’s your next acquisition target. We can’t say, but what you can explain is the broader objective remains the objective. Our strategy is based on an increasingly global and digital news corporation.”