News | Penguin Random House | Frankfurt am Main , 10/26/2023

‘We Sell More Books Than We Did Ten Years Ago’

In an interview at the Frankfurt Book Fair, Nihar Malaviya, CEO of Penguin Random House, talks about his first year as CEO, the state of the book industry as a whole and Penguin Random House in particular, and the opportunities and risks of artificial intelligence.

Nihar Malaviya, CEO of Penguin Random House

“There are many paths to success in book publishing,” says Nihar Malaviya, CEO of Penguin Random House, who is optimistic about the publishing industry’s future and sees Bertelsmann’s book division on course for growth, thanks in part to Bertelsmann’s “Boost” strategy. Malaviya officially has been at the helm of Penguin Random House, the world’s largest trade book publishing group, as CEO since mid-September, having previously served as its interim CEO since the beginning of the year. Malaviya, born in India and residing in the United States since the 1980s, joined Bertelsmann in 2001 as a participant in the Bertelsmann Entrepreneurs Program. In 2003, he moved to Random House, now Penguin Random House, where he took on successive management roles, and became widely respected for his creation of industry-first capabilities in areas such as supply chain, consumer insights, data science, and tech. At the Frankfurt Book Fair Nihar Malaviya talks about his first year as CEO, the state of the book industry as a whole and Penguin Random House in particular, and the opportunities and risks of artificial intelligence.

Mr. Malaviya, this is your first Frankfurt Book Fair as CEO of PRH. How does it feel?

It feels really good! Book fairs are very special places for us, because publishing is a business based on personal relationships. And Frankfurt is the biggest international book fair, so this is a very important event for all our publishers. You meet so many different people from the industry here–authors, literary agents, retailers–all in one place, and of course our colleagues from across our international businesses at Penguin Random House. Otherwise, I would have to fly around the globe and visit 20 different countries to do so! Frankfurt is simply a wonderful meeting point. In addition, the book fair is traditionally an important trading place for licensing rights. Penguin Random House owns the world rights to many of the books we publish, and here in Frankfurt, we sell these rights to publishers around the world.

What expectations did you bring with you to Frankfurt?

I came with the firm intention of meeting as many people as possible, especially from our own publishing houses. That is why we hosted a reception at our German stand for all our Penguin Random House colleagues who traveled to Frankfurt on the first evening of the fair so we could all gather and connect. But of course, the fair is also about the business of selling our books. So I’m taking this opportunity to talk to many of our retail partners and our agents to explore how we can strengthen our collaboration even further.

What were your first major decisions as CEO?

Before making any decisions, I took several months at the beginning of the year and went on a “listening” tour. I just listened, and collected the opinions of many people. First, of course, I talked to colleagues at Penguin Random House, not just top executives, but people from across the organization. And I listened to professionals from outside the publishing house, our trade partners and literary agents, to hear their opinions about our business and how we could become even better partners.

My first focus following the listening tour was on our U.S. business, which, after all, accounts for 60 percent of Penguin Random House’s total revenue. As a first measure, we reorganized the management and structure of our publishing groups to empower our publishers and provide greater freedom and autonomy, especially on the creative side of the business. Penguin Random House comprises more than 320 imprints worldwide, and it’s important to us that every individual publisher can publish their books exactly as they want to. Because one thing I firmly believe based on my many years at Penguin Random House and my many conversations with those both in and outside our company: There are many paths to success in publishing. And it is precisely this diversity of paths and perspectives that I would like to encourage and support within the company. For this reason, parts of Penguin Random House are now much more decentralized than they were a year ago.

And how is PRH doing today, almost ten months after you took office?

Penguin Random House is doing rather well. During the Covid pandemic, we and the industry as a whole saw a significant increase in sales and readership. Since the end of the pandemic, we’ve seen a slight decline in the market, basically a normalization. But this new level is still significantly higher than before the pandemic. We’ve managed to keep readership and sales at a high level. And we are very confident about the further development of the market, and about our growth. The other side of the coin is the sharp rise in costs in almost all areas of our business, whether due to strong inflation or the ever-increasing prices for paper and transport. That is why we are reviewing all our costs, and because we are a decentralized company, each publishing group, each country, is responding to this challenge in its own way and with its own time frame. In the U.S., for example, we already implemented most of our measures over the course of this summer, so we can now look forward and focus on further growth.

And how is new growth to be achieved?

Our growth strategy for the years ahead goes hand in hand with Bertelsmann’s “Boost” strategy, and we intend to focus on growth organically as well as through strategic acquisitions. From an acquisitions standpoint, we’ve already acquired a number of smaller publishers this year, such as Callisto Media in the U.S., Hardie Grant in the U.K., and Roca Editorial in Spain. In addition, we’ve invested in publishers such as Sourcebooks in the U.S., and DK invested in Rebel Girls. We’ve also bought content catalogs, such as the well-known children’s book series “The Boxcar Children” in the U.S., which comprises around 230 titles. We will continue to acquire small and mid-size publishers where it complements our existing portfolio, to achieve further growth.

Organically, we are partnering with our publishing groups around the world to continue to invest in content and talent to ensure we have a diversified publishing portfolio and can publish across categories.

On the one hand, growth is important for us from an economic point of view; it allows us to better promote our employees while also meeting the expectations of our shareholders. On the other hand, it helps us to fulfill our mission: to ignite a universal passion for reading by creating books for everyone. Every book we sell reaches at least one reader and brings them entertainment, information, or inspiration of some kind. Growth means publishing and selling more books, and thus reaching more readers. And for us, that is a very important motive for growth.

What about the cultural significance of a major publishing house like Penguin Random House?

Our economic goals and our cultural goals are completely aligned. In the countries where we publish books, the population is becoming increasingly diverse, not least due to migration. So it’s important that our employees reflect this diversity. Systemic change like this takes time, but we are making excellent progress thanks to the colleagues who are joining us and the Diversity, Equity & Inclusion initiatives we are implementing corporately and at the imprint level. Have we reached our goal here yet? Certainly not, but we are making strong progress and working on it every day.

In addition to our employees, the books we publish must also reflect the diversity of today’s societies. On the one hand, there are cultural reasons for this – we are a cultural institution after all – but on the other hand, it is also economically motivated. To reach new reader groups with different backgrounds, we have to publish books that appeal to these groups and that they can identify with.

This aligns with our commitment to freedom of expression, which is a big issue in the U.S. at the moment. Many of the books being banned are by authors from underrepresented and marginalized groups or deal with the issues of those communities. Many of the book bans are disproportionately impacting young people in communities where families rely on their local library or public school to access books. To remove books from school libraries is to deny children who are themselves from underrepresented groups easy access to books which they can identify with. That’s why we’ve taken a leadership role in the industry, spearheading a coalition of industry members like free expression organization PEN America, nonprofits like Little Free Library, and other book publishers to fight back against this kind of censorship through legal action and outreach, and by supporting concerned students, teachers, and librarians.

You yourself are an expert on topics such as data science and technology. How do you assess the opportunities and challenges of AI and generative AI for the book industry?

The most important aspect for us in this matter is first, to protect intellectual property and integrity of our authors and artists’ work. There are lawsuits underway, some of them involving authors of ours, to ensure copyright protection when content is used by generative AI. The other important legal aspect is whether content created using generative AI can also be copyrighted. In the U.S., the Copyright Office has denied this for now. It is unclear what the situation is with content created in a collaboration between humans and AI. But these issues will probably be resolved five years from now. We believe that in the end, it’s not about either human or artificial intelligence, but about humans using AI to do their jobs better, whether it’s creative work or an operational job.

At Penguin Random House, we’ve been working with artificial intelligence for more than a decade in different countries and different areas, primarily with machine learning, for example, to set the selling price of an e-book or to determine the starting print run of printed books. And wherever we have combined human activity and AI, it has led to better results.

Artificial intelligence is here to stay, probably with country-specific legal characteristics. The important thing now is for us to safely experiment and figure out how best to use generative AI to improve our work.

What role do bestsellers play in today’s publishing business?

Every publisher publishes a lot of new titles every year. We alone publish some 15,000 new books worldwide every year. For some of them, we have great expectations in advance, like “Spare,” Prince Harry’s memoir. But many books also surprise us. That’s one of the great joys of publishing. It’s also true of some bestsellers that sell even better than we originally anticipated. New social media channels such as TikTok, through which readers discover books, and online retail have meant that books now have a much longer lifespan. Books used to sell best immediately after publication, with most copies sold in the first three to four months. Now we are seeing a much longer sales period, especially for successful titles. For us, this means that our backlist is becoming increasingly important. Backlist sales figures are significantly higher than ten or 15 years ago. And the frontlist, i.e. the new releases, remain critical to develop future backlist.

How important are trends to Penguin Random House’s business?

The book industry is characterized by cyclical trends. For example, we saw a rise in popularity of Young Adult books, in the Harry Potter era and up to around 2015, just think of the “Twilight” series and “The Hunger Games.” From 2013 to 2019, there was a significant increase in nonfiction books. And since the time of the pandemic and even today, fiction titles have been in strong demand. And of course we want to grow in those strong categories. But fundamentally, we strive for growth in every genre, because as a diversified publishing group that publishes books in really every category, we believe that every genre has what it takes to be a bestseller. Our goal is to publish good, successful books in all genres and ensure we have presence in all categories.

What challenges does the book industry face today, and how can PRH meet these challenges?

In the short term, it’s a matter of dealing with the significant cost increases already described, i.e. finding the right balance between costs and growth. This is a challenge that requires a lot of hard work – but we have already accomplished much of it. In the long term, I’m very optimistic about the future of our industry. The great thing about the book industry is that we’ve been around for 500 years. In printed books, we have a product that has always survived the challenges of new times. Although books are now available in print, digital, and audiobook formats, the overwhelming majority of readers still choose the printed book. And despite all the offers that compete for people’s time, reading occupies a central role for so many people. At Penguin Random House and across the entire industry, we sell more books today than we did ten years ago.

And finally, what Penguin Random House bestsellers can readers look forward to in the months ahead?

There are so many great books that we publish in our different markets. For example, we are now launching the “Bluey” series of children’s books in Germany, a license from the BBC, which we have already published with great success in English- and Spanish-speaking countries. Another upcoming highlight, which we will be releasing in many languages and countries in November, is “Murtagh” by Christopher Paolini. This marks the author’s first return to the world of his successful “Eragon” novels in more than ten years. And of course, there is “Knife” by Salman Rushdie, which will be launching in all our countries in April next year. In it, the renowned writer tells of the attack on him in 2022 and how he has dealt with it. And in the English-speaking countries, we have just released an exciting book called “Be Useful: Seven Tools for Life” by Arnold Schwarzenegger. It’s about the valuable lessons he’s learned throughout his life: as a bodybuilder, as a Hollywood star, and as a politician. It’s a fascinating read about how to be successful in three completely different fields.