MGMT 1120 Course Project InstructionsInstructions You will be comp.docx

MGMT 1120 Course Project InstructionsInstructions
You will be completing Parts 1 through 4 in small groups and
submitting a written report. The report will include an
introduction, a conclusion, and headings for each of the (4)
parts. One report will be submitted for each group.
To complete this project, you will be reading and analyzing the
following case, Harlequin Enterprises: Assessing e-books. For
more instructions regarding retrieving the case study, please go
to the end of this document.
Your group will act as consultants to the organization presented
in the case. To help this organization, you will 1) identify the
major problem/decision facing the organization, 2) complete
internal and external analyses that you have learned in the
course to make sure you understand and can apply important
information from the case that relates to solving this problem,
3) identify three feasible alternatives to solving the
problem/decision, 4) make a recommendation for how the
organization should solve the problem (or make their decision),
including an action plan that includes specific steps.
At the conclusion of the project, each student will submit his or
her own individual reflection for Part 5, on the same day that
the group project is due.
Here is a more detailed breakdown of each of the parts:
Part 1: Identify the problem that management needs to solve.
What priority decision needs to be made? Make sure you
describe the nature of the problem and why it is important; i.e.,
what impact will this decision have on the organization and
other stakeholders?
Part 2: Perform some analyses to help you determine what
factors are important for management to consider in making this
decision:
a. SWOT analysis
b. NPEST analysis
c. Porter’s 5-Force Analysis
d. Stakeholder analysis

For each of these analyses, present the analyses (use a table or
lists if this helps to make the information more clear). Then,
write a brief paragraph after each analysis summarizing the
highlights of that analysis that you think are most relevant to
this decision. You will need more information about this
particular industry or about environmental factors, so you will
have to do some research. You will need at least 5 (five)
sources (Wikipedia and the Dictionary do not count as sources.)
Part 3: Based on your analyses, identify 3 (three) possible
decisions you might make. In other words, what are three
reasonable alternatives that management might choose to pursue
to help solve this problem? (Don’t forget to consult Chapter 7
as you consider strategic options.)
For each of these three options, identify what you perceive to be
the pros and cons of pursuing that particular alternative. Use
the information you discovered in your analyses and course
concepts to guide you, and try to list as many as you can think
of. Resist the urge to make a decision too soon!!! Try to remain
objective as you consider each alternative.
Part 4: Make a decision and create an action plan for 1 (one) of
the options you discovered above. Which of the three options
that you identified seems to be the best way to solve the
issue/problem? (Different groups may make very different
recommendations!) Why do you believe this is true (defend your
choice)?
Develop a step-by-step action plan to carry out your decision.
Your action plan should include specific steps for each of the
four management functions: Planning, Leading, Organizing, and
Controlling. You will want to make sure that the organization
will be able to measure results and evaluate how the plan is
working down the road.
This concludes the portion of the assignment that you will be
working on as a group.
Part 5:Reflection (individual submissions)
A: Reflect on and answer the following questions regarding
this course project:

1. As you did the actual work of the project, what did you
discover about the plan you created at the beginning of the
project?
a. What did you plan for effectively?
b. What did you miss in your planning process?
c. If you could start over again, how would your project plan be
different?
2. What were your strengths as an individual team member?
What were your weaknesses?
3. How did your group handle situations that were “unplanned”?
Was your group teamwork effective or largely ineffective, and
why? How would you assess your individual contribution to the
sense of team?
4. Did you meet your group objectives for this project (in the
absence of knowing your final grade)? Did you meet your
personal objectives? Did you meet your planned targets?
B: Peer and Group Assessments + Contract Documents
1. Complete a self- and peer-assessment. Do not forget to
include an explanation for your ratings. Use evaluation form
titled “Peer Evaluation” in the Miscellaneous section of the
Project Instructions on Moodle.
2. The evaluation MUST be handed in with your report.
a. You can hand these in either in an envelope at the back of
your report or as part of an Appendix section at the end of your
report.
3. Your group MUST also complete and hand in a Team
Contract – template is in the Miscellaneous section on Moodle.
4. Lastly, each group member MUST complete a Time Log. A
template for the format is also in the Miscellaneous section on
Moodle. All Time Logs will have the following elements:
a. Tasks completed
b. Length of time to complete each task
c. When each task was completed
d. Total time spent on project by each project member
e. Signatures of each team member on each Time Log,
indicating everyone has agreed to each other’s Time Log

entries.
Your group must hand in both a paper and electronic version of
your project report. The report must be uploaded into the
“Upload Completed Project Here” drop box located in the
Course Project Drop Boxes section on Moodle. Both are due at
the same time.Formatting Requirements
Create this document following the format requirements as
outlined below. Make sure that you are citing any outside
sources properly (using in-text citations and a reference page).
You must submit your project parts using APA format, which
includes:
· 1-inch margins on all sides
· 12-point Times New Roman font
· Double spacing
· Indented paragraph style
· All outside sources – whether quoted, paraphrased, or
summarized – must be cited using both in-text citations and a
reference page.
· Word formatted headings are to be used, where appropriate.
· Page numbers
Appropriate parts of a report include:
· Title page, including: names of group members, name of the
case, date of submission, instructor’s name, course name and
section number;
· a table of contents;
· an executive summary;
· headings and subheadings throughout the body of the report
· an introduction and conclusion; and
· a reference page.
Your instructor will assist you with APA formatting and source
citation if you are not taking COMM1101 currently.
THE PROJECT (PAPER AND UPLOADED ELECTRONIC
VERSIONS) AND PEER EVALUATIONS ARE DUE ON
Thursday, December 04, 2014 before start of class. LATE
SUBMISSIONS WILL RECEIVE A DEDUCTION PENALTY
OF 10% PER CALENDAR DAY.

Marking Guide/Rubric (example only)
Content: Parts 1 – 4
· All parts are thoroughly completed; all questions are answered
in detail
· Answers demonstrate a good understanding of course content
through correct use of terminology, models, and concepts
· Answers are logical and well-thought-out based on evidence in
the case
· All parts of the paper are consistent with one another
· Drafts were handed in on time and final content shows
evidence of editing / change
Total /55
Content: Part 5 (Individual Submission)
· All questions are answered completely and thoughtfully
(indicating self-reflection)
· Time Log is included and signed off by other team members
Total /15
Formatting & Documentation
Formatting
· 1” margins, double-spaced, 12-pt Times New Roman font,
indented paragraph style, consistent headings and subheadings,
page numbers
· All required parts of the paper are included and properly
formatted: title page, executive summary, table of contents,
introduction, conclusion, and reference page
Documentation
· At least 5 (five) outside sources are used (No Wikipedia /
Dictionary)
· Sources are used properly; every source use has an in-text
citation and a corresponding reference page entry
· Reference page and in-text citations are formatted correctly

Total /15
Written Expression
· Attention has been paid to grammar, sentence structure,
spelling, and punctuation
· Content is presented professionally; there is evidence of
proofreading.
Total /15
Adjustment from peer evaluation
+/-
/100
TOTAL
/20
Instructions for Retrieving Case Study:
Greetings Students!
This message explains how to purchase materials needed for
your course.
Course: Principles of Management Fall 2014
Harlequin Enterprises: Assessing e-Books
Professor: R.A.S. McDonald
1. Go to the Ivey Publishing website at www.iveycases.com
2. Log in to your existing account or click “Register” to create a
new account and follow the prompts to complete the
registration. If registering, choose the “Student User” role.

3. Click on this link or copy into your browser:
https://www.iveycases.com/CoursepackView.aspx?id=5273
4. Click “Add to Cart”.
5. You may choose to order in either print or digital format.
· To order the material in digital format, check “digital
download” and click “OK”.
· To order a printed copy for delivery, enter the print quantity
required and click “OK”. Please note that shipping charges will
apply.
6. Go to the Shopping Cart (located at the top of the page),
click “Checkout”, and complete the checkout process.
7. When payment has been processed successfully, an Order
Confirmation will be emailed to you immediately and you will
see the Order Confirmation screen.
· If you ordered digital copies: Click “Download your Digital
Items” or go to “My Orders” to access the file.
· If you ordered printed copies: Your order will be printed and
shipped within 2 to 3 business days.
IMPORTANT: Access to downloadable files will expire 30 days
from the order date, so be sure to save a copy on your computer.
The downloadable file is a PDF document that can be opened
using Adobe Reader.This material is for your personal use only
and is not to be shared or distributed in any form.
I hope you find this a convenient way to get your required
course materials. If you have any questions: [email protected]
Thank you,
Mr. S.
For technical assistance, please contact Ivey Publishing during
business hours.
Ivey Publishing
Ivey Business School, Western University
(e) [email protected] | (f) 519-661-3882
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https://www.iveycases.com/
Digital Download Support:
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InstructionsInstructionsThe data in the table on the data sheet
contains the operational expenditure and the budget for a small
department.Use the data set on the Data-sheet and do the
following:(1)Format the title by using the Font and Alignment
groups on the ribbon.(2)Change the column widths so that all
the data is visisble.(3)Change the heading of Row 9 to Office
Sundry.(4)Calculate the total expenditure (in column I) for each
of the categories.(5)Calculate the balance left/overspent in
column J.(6)Repeat (4) and (5) for all the categories.(7)Change
the formatting of the amounts so that two decimal digits
show.(8)Calculate the total budget in row 11.(9)Use this
formula to calculate the total expenditure for each
month.(10)Enhance the spreadsheet by adding borders.(11)Use
'Conditional formatting' to indicate overspending.(12)Insert a
staked bar chart to indicate the monthly expenditure for each of
the categories.(13)Place the legend at the bottom of the
graph.(14)Add data labels.(15)Do not display the decimals in
the data labels(16)Remove those data labels where the amount
is 0.(17)Add a chart title.(18)Insert a callout to highlight the
overspending in Training.(19)Change the colour of the callout
to Red.(20)Copy the callout to Printing.Submit your completed
assignment on eFundi.
DataDepartment AOperational
CostsBudgetJanuaryFebruaryMarchAprilMayJuneStationary600
0.001349.18245.67135.803050.00854.3062.9011697.856697.85

Telephone7200.001150.001034.901237.00853.20954.70638.541
3068.345868.34Printing4800.00230.001584.001623.30135.0013
50.001693.2011415.506615.50Travel12000.00353.00458.90568.
00226.00648.00587.3014841.202841.10Office
Sundry2500.00201.801024.00268.70352.00411.00824.005581.5
03081.50Training12000.000.000.006700.000.006300.000.00250
00.0013000.00Refreshments3000.0035.80506.80381.54145.9053
2.00600.005202.042202.0447500.00OPERATIONAL COSTS
DATA TABLE
Budget StationaryTelephone Printing Travel Office
Sundry Training Refreshments 6000 7200 4800 12000
2500 12000 3000 47500 January
353.
StationaryTelephone Printing Travel Office Sundry
Training Refreshments 1349.18 1150 230 353 201.8
0 35.799999999999997 February Stationary
Telephone Printing Travel Office Sundry
Training Refreshments 245.67 1034.9000000000001
1584 458.9 1024 0 506.8 March Stationary
Telephone Printing Travel Office Sundry
Training Refreshments 135.80000000000001 1237
1623.3 568 268.7 6700 381.54 April
StationaryTelephone Printing Travel Office
Sundry Training Refreshments 3050 853.2 135 226
352 0 145.9 May StationaryTelephone
Printing Travel Office Sundry Training
Refreshments 854.3 954.7 1350 648 411 6300
532 June StationaryTelephone Printing Travel
Office Sundry Training Refreshments 62.9 638.54
1693.2 587.29999999999995 824 0 600
StationaryTelephone Printing Travel Office
Sundry Training Refreshments 11697.85 13068.34
11415.5 14841.199999999999 5581.5 25000
5202.0400000000009 StationaryTelephone
Printing Travel Office Sundry Training
Refreshments 6697.85 5868.34 6615.5 2841.1

3081.5 13000 2202.04
Overspending in Training
1.
Principles of Management
R.A.S. McDonald
MGMT 1120
Northern Alberta Institute of Technology
Table of Contents
Harlequin Enterprises: Assessing e-
Books.....................................................................................
..5
Principles of Management MGMT 1120
R.A.S. McDonald Northern Alberta Institute of Technology

2.
9B14M027
HARLEQUIN ENTERPRISES: ASSESSING E-BOOKS
Ken Mark wrote this case under the supervision of Professors
Rod White and Tony Frost solely to provide material for class
discussion. The authors do not intend to illustrate either
effective or ineffective handling of a managerial situation. The
authors may
have disguised certain names and other information to protect
confidentiality.
This publication may not be transmitted, photocopied, digitized
or otherwise reproduced in any form or by any means without
the
permission of the copyright holder. Reproduction of this
material is not covered under authorization by any reproduction
rights
organization. To order copies or request permission to
reproduce materials, contact Ivey Publishing, Ivey Business
School, Western
University, London, Ontario, Canada, N6G 0N1; (t)
519.661.3208; (e) [email protected]; www.iveycases.com.
Copyright © 2014, Richard Ivey School of Business

Foundation Version: 2014-06-26
INTRODUCTION
Simeen Mohsen, vice-president of strategy at Harlequin
Enterprises, returned to her office, closed the door
and reflected upon her conversation with the company’s new
chief executive officer (CEO) and publisher,
Craig Swinwood. It was November 2013, and Mohsen had been
with Harlequin for just over a year, after
having completed her MBA at Harvard and spending seven
years in various positions at Time Inc. During
her early tenure at Harlequin, Mohsen had assisted various
business units with strategy issues, mostly
involving ways to adapt to the rise of e-books.
Craig Swinwood had recently been appointed Harlequin’s CEO
and publisher, and one of his initial agenda
items was to pull together the members of his top management
team to brainstorm about the big issues
affecting the company. Swinwood asked Mohsen to prepare a
presentation, saying, “I’d like you to briefly
size up the current environment, including what’s happening
with e-books, and then outline what you see
as the most significant strategic challenges and opportunities
for Harlequin. We don’t expect you to have
all the answers, but if you can help the team to focus on the
right questions, that would take us a long
way.”
Based in Toronto, Canada, Harlequin was part of Torstar
Corporation,1 a broad-based media company that
published more than 120 newspapers, including the Toronto
Star; it also operated dozens of digital

businesses. In 2012, book publishing revenues of $426,483,000
accounted for just over 29 per cent of
Torstar’s total revenue and over 37 per cent of EBITDA.
Mohsen knew that, from 2008 to 2012, the e-book category had
rapidly grown in value from 0.5 per cent to
21.6 per cent of all trade book sales in the United States.2 But
Harlequin specialized in publishing for
women and enjoyed a solid position as the global leader in
series romance fiction (SRF), having dominated
the SRF segment of the publishing industry for over 40 years.
In 1993, Harlequin had expanded into the
women’s single-title segment. As shown in Exhibit 1, the most
recent data indicated that e-book
penetration in the romance fiction genre (in the United States,
as well as other developed countries)
1 www.torstar.com/index.cfm, accessed December 2, 2013.
2 BookStats Extrapolated data, as provided by Harlequin.
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9B14M027
exceeded 50 per cent of unit sales, more than any other category
(see Exhibit 1). In this respect, Harlequin
stood at the leading edge of the e-book trend.
Mohsen sat down and contemplated her situation. She had a lot
of information about the book industry in
general and about e-books specifically. The difficulty lay in
finding a way to make sense of it all and to
then persuasively communicate her findings to the senior
management team. That particular task
represented a big challenge but also a big opportunity.
HARLEQUIN ENTERPRISES LIMITED
With more than 95 per cent of its sales coming from outside
Canada, Harlequin enjoyed a decades-old
reputation as one of the world’s top publishers of books for
women. Founded in 1949, Harlequin began
applying its revolutionary approach to publishing — a
packaged, consumer-goods strategy — in 1968,
shortly after acquiring the publishing business of U.K.-based
Mills & Boon. With a growth rate of 25 per
cent per year during the 1970s, Harlequin became the world’s
largest publisher of women’s series romance
fiction (SRF), with a profitability rate that stood out as the envy
of the publishing industry. During this
same timeframe, Torstar, a newspaper publisher, acquired all of
Harlequin Enterprises Limited.

For the next three decades, Harlequin expanded its highly
profitable series romance fiction, fending off
many new entrants, including Simon & Schuster’s Silhouette
series romance fiction imprint. (Harlequin
acquired Silhouette in 1984.) As shown Table 1, the growth of
Harlequin’s very successful original SRF
business model slowed during the 1980s, when North American
markets were saturated and international
markets were fully exploited; but margins remained strong.
Every month, 100 titles were published in
North America, with a subset of these published in 100
international markets in over 30 languages.
Around the world, the Harlequin name became synonymous with
romance novels.
Table 1: Harlequin Revenues and Operating Profits
(in thousands of Canadian dollars at 2013 exchange rates)
Source: Company records.
Harlequin’s Foundation: Series Romance Fiction
Each paperback-series romance book was part of an identifiable
branded product line that consistently,
reliably and conveniently delivered the expected benefit to the
consumer. The look, size and length of each
book in a given series was the same. Harlequin books were
printed in a small-sized format (105 mm × 168
mm), suitable to fit in distribution racks located in mass-market
stores, supermarkets and drugstores. Page
lengths for books in a given series were limited to between 192
and 256 pages, the format a loyal reader

would be accustomed to. Cover designs differed somewhat but
complemented each particular theme.
Year 1986 1987 1988 1989 1990 1991
Revenue ($ thousands) 255,000 282,000 294,000 295,000
311,000 320,000
EBITDA 39,400 41,800 46,300 58,500 54,900 53,100
Depreciation & Amortization 3,000 3,000 3,000 3,000
3,000 3,000
Operating Profit 36,400 38,800 43,300 55,500 51,900
50,100
Margin % 14.3% 13.8% 14.7% 18.8% 16.7% 15.7%
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Page 3 9B14M027
The typical Harlequin series customer was female, around 40,

married and educated. Over half of
Harlequin’s series customers read for at least three hours per
week. These readers were loyal to the
Harlequin brand, with 80 per cent of them indicating that they
would buy Harlequin books again during the
next year. Harlequin advertised its offerings in print magazines
and on websites.
Series books usually focused on a particular theme and attracted
readers who were looking for a consistent
reading experience. Each new book in a series served as an
addition to a clearly defined and clearly
branded product line. Harlequin had up to 20 different series-
romance fiction brands, such as American
Romance, Blaze, Desire, Heartwarming, Intrigue and Historical,
each with its own particular theme. For
example, American Romance offered readers this theme: “You
love small towns and cowboys! Harlequin
American Romance stories are heartwarming contemporary tales
of everyday women finding love,
becoming part of a family or community — or maybe starting a
family of her own.” In contrast, Harlequin
Desire’s product offered a different kind of positioning: “You
want to leave behind the everyday!
Harlequin Desire stories feature sexy, romantic heroes who have
it all: wealth, status, incredible good
looks … everything but the right woman. Add some secrets,
maybe a scandal, and start turning pages!”
Over the years, the number of different SRF product lines had
proliferated from two during the 1970s —
Harlequin Romance and Presents — to the 18 currently
available. Each different series product line
offered between two and eight new titles per month, for a total
of around 90 new titles published each
month.

The Harlequin author-editor team played a critical role in
ensuring the series products demonstrated
consistency and quality and reliably met readers’ expectations.
Working in acquisition centres in Toronto,
New York and London, Harlequin’s editors reviewed as many as
30,000 unsolicited manuscripts annually
and worked closely with a group of over 1,300 authors to
develop and publish the company’s titles. The
author-editor teams strove to incorporate the appropriate level
of realism, fantasy, sensuality and — most
importantly — consistency into each title for a particular series.
The editor served as equal parts creative
consultant, coach and curator, with a mandate to identify good
writers, nurture them and develop them
through their careers as Harlequin SRF authors.
Ensuring a steady flow of high-quality product was
instrumental, especially since Harlequin’s franchise
had been built on series-romance fiction. Series authors
received a standard royalty of 6 per cent to 10 per
cent of the retail cover price. Advertising campaigns supporting
each series focused on the brand promise
to the reader, not on individual authors. Harlequin’s author-
editor relationships remained strong, so much
so that many series authors became enthusiastic about
maintaining a long-term relationship with a trusted
editor as they pursued their break-out mainstream single-title
book. If these authors achieved single-title
success, it was hoped they would remain loyal to Harlequin.
Traditional bookstores did not serve as the principal distribution
channel for print series romance fiction.
Rather, SRF books were available for sale at supermarkets,
drugstores and mass merchandisers, and these
locations accounted for 70 per cent of Harlequin’s North
American retail sales (not including sales through

retailers such as Amazon.com). Harlequin maintained a
distribution presence of about 250,000 points of
sale around the world.
The typical SRF book sold at a suggested retail list price of
$5.99, less than the $7.99+ price for single-title
paperback novels. The suggested selling prices for the print
books and e-books were identical; however,
retailers generally sold books at less than the suggested price
(e.g., Walmart discounted all its print books).
Newly released popular e-books were often heavily discounted,
a practice pioneered by Amazon. Print
series romance novels were delivered to retail stores on a
standing-order distribution basis: retailers would
commit a certain amount of facings for Harlequin products, and
Harlequin (working with its distributors) Fo
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Page 4 9B14M027
would employ order regulation logarithms to optimize the mix

and number of titles delivered to the
retailer. Harlequin (or its distributor) would then automatically
ship the preset number of copies to the
store on a regular basis. Every four weeks, unsold books were
returned to Harlequin for credit.
Another channel for Harlequin’s books came from its own
Harlequin Reader Service Book Club (Reader
Service), which allowed readers to receive regular deliveries to
their homes. Books sold through Reader
Service predominately consisted of series products, although
select Harlequin single-titles were also
available. For Harlequin, about 30 per cent of its North
American sales of physical books derived from its
book club, for which Harlequin received a greater margin than
that from the retail channel, and this higher
margin made the Reader Service business very profitable.
However, because of increased mailing and
acquisition costs and the declining availability of mailing lists,
sales through this channel had begun to
decline.
Avid Harlequin readers who owned an e-reader no longer had to
order print copies for delivery to their
homes. Instead, they could download Harlequin e-books directly
from Harlequin’s site or from an e-retailer
like Amazon. Exhibit 2 illustrates the Harlequin and Amazon
webpages for the same SRF title.
Amazon.com sold Harlequin books, both print and e-book
versions, at a discount to the suggested retail
price, and in many cases, it was cheaper for readers to buy
Harlequin books from Amazon.com than from
the Harlequin.com Reader Service. In an attempt to retain its
loyal readers, Harlequin offered “bonus
bucks” — one free bonus buck per book ordered — that could
be redeemed on the Harlequin website for

books and gifts. To entice new customers to its Reader Service,
Harlequin provided its customers with
special sign-up offers (i.e., two free books and two mystery
gifts valued at about $10).
Harlequin MIRA and Single-Title Publishing
With the maturing of the series romance business, Harlequin
branched out into single-title publishing
during the early 1990s with its MIRA imprint — “the brightest
stars in women’s fiction.” As shown in
Table 2, this product expansion resulted in significant sales
growth throughout the 1990s.
In the book-publishing industry, bestseller single-title books
usually featured a prominent author, such as
Danielle Steele or Stephen King, who was paid a large advance
for each book. The first printing of a
single-title book was usually produced in hardcover — a
premium format — and was priced between $15
and $30 at retail. After the initial sales period, single titles
were released in a cheaper, softcover format,
retailing for $7 to $12 to appeal to a larger audience. Single-
title books were longer in length (e.g., 100,000
to 400,000 words) compared with a series romance book length
of 75,000 words. Naturally, single-title
book sizes were longer: from 250 to 400 pages versus a norm of

192 to 256 pages for series romance.
Traditional publishing of single-title printed books constituted a
higher risk venture compared to SRF. A
business case had to be produced for each single-title under
consideration for publication, taking into
Year 1991 1992 1993 1994 1995 1996 1997 1998 1999
362,000 389,000 386,000 401,000 425,000
EBITDA 53,100 55,900 56,600 58,300 58,400 63,300
64,800 66,600 58,100
4,000 4,000 4,000 4,000 4,000
59,300 60,800 62,600 54,100
Margin % 15.7% 15.3% 14.7% 14.9% 15.0% 15.2% 15.8%
15.6% 12.7%
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9B14M027
account the author’s reputation, the subject matter and the
writing quality. The objective of such cases was
to estimate how well the single title would sell and how much
should be spent on the author’s advance and
on promoting the book. Further, estimates for the number of
books to be printed and the expected return
rate made up a critical part of the information provided.
Single-title book publishing involved significant investments in
infrastructure and working capital. An
ecosystem of editors — curators of talent — had to be built up.
Authors were identified, developed and
nurtured, and their output edited. Manuscripts ready for
publishing were analyzed for their marketing
angles, and a suitable marketing plan had to be built around
each launch. Developing expertise in single-
title publishing required Harlequin’s editorial team to identify
best-selling authors within its stable of series
authors as well as others from outside the Harlequin author
base. While successful series authors could
expect to sell as many as 100,000 copies per book, single-title
copies were expected to sell many more.
Single-title authors’ royalty contracts were individually
negotiated and typically included an advance
payment that could amount to several hundred thousand dollars
or more. Other publishers were known to
sign established authors for up to a multi-book contract with
large multimillion-dollar advances.
Front list (first printing), back list (subsequent reprinting) and
international sales estimates were drawn up.

Advance copies were sent to book reviewers, retail buyers at
bookstores such as Barnes & Noble, mass
merchandisers such as Walmart and convenience store chains.
The books were printed, distributed and
displayed for a set amount of time. In terms of distribution,
single-title books required a shift in focus
away from supermarket and drugstores to traditional retail
bookstores. At physical retail stores, single titles
were displayed for six to 12 months, and once they had been
made available online, titles remained
available indefinitely. In addition, standing-order distribution,
a hallmark of Harlequin’s series romance
business model, was not used in the single-title business which
relied on orders generated by the sales
force for single titles. Because of author advances,
prepublication promotion and fixed costs of printing,
break-even volumes were significant. Any unsold books were
returned to the publisher for full credit, and
if the publisher failed to sell enough books, the losses could be
substantial.
In the book-publishing industry, the unit economics for a
typical hardcover title were as follows: US$27.99
at retail price, 49 per cent of which would be the publisher’s
share; manufacturing costs of US$1.92; the
cost of returned books at US$1.17; royalty payments at
US$4.20; and distribution or freight costs at
US$0.76.3
When single-title books became successful, they could have a
large impact on a publisher’s earnings. To
offer some perspective, Random House sold a total of 750
million books in 2012. “Fifty Shades of Grey,”
“Fifty Shades Darker” and “Fifty Shades Freed,” a trilogy of
single titles written by E. L. James, sold a
combined 70 million copies between March and December 2012,

boosting Random House’s 2012
operating earnings by 75 per cent to €325 million.4 The
suggested retail price of each book was $26.95 for
hardcover, $15.95 for trade paperback and $9.99 for the e-book.
A news article estimated that James
earned $50 million from the first 20 million books sold.5 The
success of this trilogy indicated an untapped
demand for mainstream erotic romance novels.
During the 1990s, Harlequin had entered the single-title
business with the MIRA imprint, which focused
on mainstream women’s fiction. Subsequently, other single-
title imprints were added, including Harlequin
HQN (“outstanding mainstream romance fiction”); Harlequin
LUNA (“compelling, female-focused
3 http://glossi.com/Goodereader/31339-good-e-reader-
magazine-july-2013, accessed December 2, 2013.
4 www.theguardian.com/media/2013/mar/26/fifty-shades-
random-house-record-profi, accessed December 2, 2013.
5 www.hollywoodreporter.com/news/fifty-shades-grey-author-
earns-50-million-346614, accessed December 2, 2013.
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9
Page 6 9B14M027
fantasy” set in “other worlds”); Harlequin Kimani Press
(“romance stories featuring sophisticated, soulful
and sensual African-American and multicultural heroes”); and
Harlequin Teen (“fresh, authentic teen
fiction featuring extraordinary stories”). Harlequin also
developed a co-branded romance imprint with
Cosmopolitan (owned by Hearst Communications) called
“Cosmo Red Hot Reads from Harlequin.”
Broadening its reach beyond women’s fiction, Harlequin also
began to publish non-fiction in areas such as
self-help, health/diet/fitness, relationships, narrative and
aspirational content. By 2012, Harlequin had
achieved considerable single-title success, with 92 titles
enjoying a total of 366 weeks on the New York
Times bestseller lists and four of those titles achieving the
coveted No. 1 position.
The line separating single titles and series books had become
increasingly blurred. In an attempt to
generate more revenues, some books that were categorized as
“single title” began to take on aspects of a
series. A prominent early example of this trend included the
James Bond series of books, first written by
Ian Fleming in the 1950s. After Fleming’s death, a number of
authors were commissioned to write follow-
on Bond novels, with the result that the Bond book franchise
evolved to include other titles such as “Young

Bond” and “The Moneypenny Diaries.”
Going the other way, some authors of romance series fiction,
like Nora Roberts with her 180 New York
Times bestsellers, had transitioned away from series writing and
went on to become very successful single-
title authors. Also, the establishment of online bookstores and
the emergence of e-books were pushing the
series and single-title businesses closer together. For example,
a customer could visit the Harlequin
website and download a Harlequin Romance e-book (series
product), or they could click through to a
different page on the same website and purchase a Harlequin
HQN e-book (single-title product). The
distinctions between series and single-title businesses that had
been meaningful for printed books, which
had different formats and different retail distribution channels,
gradually became less meaningful for
Internet-distributed books and e-books.
E-books grew dramatically to become a significant part of
Harlequin’s business, with the bulk of
Harlequin’s e-book sales coming from digital versions of its
print books. By mid-2013, e-books, as a
percentage of Harlequin’s revenues, ran slightly above the
industry in North America and moderately
higher than the industry in the rest of the world.
Harlequin also had two digital-first imprints. Unlike traditional
imprints, where books would be released
initially in hardcover or softcover and later as e-books, digital-
first imprints released books in digital
format first. Carina Press (“where no great story goes untold”)
was able to publish manuscripts that fell
outside of the genres of Harlequin’s other imprints. This
division broadened Harlequin’s ability to cater

to emerging authors and smaller niche markets. Carina Press
made extensive use of social media,
including Twitter, Facebook and the Carina Press blog. Escape
Publishing (“an imprint without
restrictions”) was published by Harlequin Enterprises Australia.
Escape published more risqué sub-
genres that did not fall within Harlequin’s established brands.
While promising, digital-first sales made
up only a small part of Harlequin’s revenue.
PUBLISHING INDUSTRY AND E-BOOKS
In the United States, retail sales of trade books — both physical
and e-books — reached $13.4 billion in
2012, spanning a broad range of genres including Romance,
Mystery, Horror, to Comics & Graphic
Novels. Some book publishers focused on single-title imprints
or series novels, while others functioned as
Internet-only publishers and self-publishers. But while the
value of physical books sold in the United
States was declining (see Exhibit 3 for U.S. bookstore sales for
the past 10 years and Exhibit 4 for the Fo
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9B14M027
comparative value of total trade books sold in the United
States), U.S. e-book sales had risen from a
minuscule $60.7 million in 2008 to a substantial $2.9 billion by
2012. Globally, e-book unit sales had
reached 859 million units in 2012, up eight-fold from 104
million units in 2010 (see Exhibit 5). Table 3
provides market share by book format.
Table 3: U.S. market share by book format in 2012
Format Share (units)
Trade paperback 30%
Hardcover 27%
E-book 22%
Mass-market 12%
Other bindings 7%
Audio book 2%
Source: U.S. Census Bureau,
www.census.gov/econ/currentdata/dbsearch?program=MRTS&st
artYear=2010&endYear=
2013&categories=451211&dataType=SM&geoLevel=US&notAd
justed=1&submit=GET+DATA
Book publishers, such as HarperCollins, Hachette, Simon &
Schuster, Penguin Random House, Macmillan
and Harlequin, generated $14.4 billion in revenues in 2012 in

the United States. Of this figure, $7.5 billion
came from sales to physical retail outlets (down 7 per cent from
the previous year), and $6.9 billion came
from sales of print and e-books through online retailers (up 21
per cent from the previous year).6 As
shown in Exhibit 6 Harlequin was smaller than the largest
publishers, but with its focus on women, it also
had more consistent and higher margins.
The Internet revolution continued to dramatically transform the
book business. Founded in 1995, Amazon
originally functioned as a distributor of physical books ordered
over the Internet, challenging the
traditional bricks-and-mortar book retailers (i.e., the local mom-
and-pop shops, as well as the big-box
national book retailers like Barnes & Noble and Chapters).
Following the aggressive introduction of its
Kindle e-reader in 2007 and the development of a large library
of electronic books, Amazon emerged as
the major player in the e-book segment. In an effort to
compete, traditional retailers like Barnes & Noble
deployed online e-book distribution (B&N.com), and some
publishers (including Harlequin) sold the books
they published through their own website, both as downloadable
e-books and as print books. Even so, as
shown in Exhibit 7, Amazon continued to dominate book
distribution in the United States and Canada.
The situation was further complicated because, as well as being
the biggest distributor for both physical
books and e-books, Amazon.com had its own publishing
imprints, including Montlake Romance®,7 a
direct competitor for Harlequin.
The electronic book, enabled by e-book readers, was reshaping
the landscape of the book publishing
industry. Electronic formats like Adobe’s PDF, ePub,8 and the

proprietary KF8 format used by Kindle®
had enabled the production of electronic documents, including
books. Introduced in 1993, Adobe’s
Portable Document Format (PDF)9 was one of the first
electronic formats. However, few people were
prepared to read books on computers, so the expansion of the
electronic book business awaited the
development and widespread adoption of dedicated portable e-
book readers and then tablets.
6 www.nytimes.com/2013/05/15/business/media/e-book-sales-a-
boon-to-publishers-in-2012.html?_r=0, accessed December
2, 2013.
7 www.apub.com/imprint-detail?imprint=6; accessed December
2, 2013.
8 A popular open source publishing format employed by
Harlequin for its e-book distribution.
9 PDF was a proprietary format until 2008 when Adobe granted
royalty free access to all its PDF patents.
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Page 8 9B14M027
Currently, a wide variety of different e-reader options existed,
each one providing different reading
experiences. In the dedicated e-reader category, Amazon’s
Kindle product (introduced in November 2007)
offered an electronic-paper display, a high-resolution
monochrome screen that was not backlit. It had a
long battery life — a week’s worth — and books could be
downloaded to it wirelessly. Amazon’s more-
recently introduced Kindle Fire featured a full colour, backlit,
anti-glare screen, and was designed to
compete with Apple’s high-resolution “retina display” line of
iPads (first introduced in April 2010) and
other tablet devices capable of displaying e-books.
Amazon reported that its customers purchased 3.3 times as
many books after buying a Kindle. To establish
its proprietary Kindle as the dominant e-reader platform,
Amazon often priced e-books below their cost.
For example, an e-book with a suggested retail price of $25
would cost Amazon about $12.50 from the
publisher, but Amazon might sell it for $9.99. Several large
publishers had attempted to replace this so-
called wholesale-pricing model with an agency model that
would prevent Amazon from discounting their
books. Recently, under pressure from the U.S. Department of
Justice, these publishers abandoned the
attempt to control the retail price of their books.
The number of e-readers and tablets sold had risen rapidly in

the past few years, with an estimated installed
base, in 2012, of 28.2 million e-reader devices and 75 million
tablet devices,10 and the proportion of tablets
was expected to increase even further. Data from mid-2012
suggested that readers used a variety of
different e-reader and tablet brands to read e-books, with
Amazon’s Kindle and Kindle Fire being the most
popular (see Exhibit 5). Some observers believed, however,
that readers would increasingly gravitate
towards reading their e-books on tablets, using brands such as
Apple, Samsung, ASUS and others.
Digital Rights Management (DRM)
One problem impeding the distribution of e-books was piracy –
or, put more politely, the sharing of digital
media. After witnessing what had happened to the music
business during the first decade of the 21st
century, when copyrighted songs (in standardized MP3 format)
were made widely available “free” through
peer-to-peer file-sharing sites like Napster and uTorrent,
publishers worried about a repeat performance in
the book business as it moved toward digital distribution.
Consequently, until digital rights management
(DRM) concerns could be addressed, many publishers remained
cautious of the way their books were
made digitally available. DRM was technically complicated and
encompassed topics such as viewing
platforms, intellectual property protection and what it meant to
“own” digital content.
Even in the face of these problems, the transition to e-books
was certainly well underway. As the wave
took hold, publishers — and, indeed, individual authors, who
used self-publishing websites and sharing

networks — could reach millions of potential readers, cutting
out the physical printed product and radically
transforming the distribution process. For readers, owning an e-
reading device gave them to access content
whenever they liked, as long as an Internet connection was
present. E-readers also provided a way to carry
multiple books without having the physical bulk of the printed
product, and it afforded more privacy when
reading books.
10 Scott Devitt, Andrew Ruud, Nishant Verma, “Amazon.com,”
Morgan Stanley Research North America, February 13, 2013,
p. 4.
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9B14M027
Economics of E-Books
As shown in Exhibit 8, printed book and e-books had
dramatically different economics. When e-books
were first introduced hardcover bestsellers with a cover price of
$27.99 in print generally had the same
suggested retail price for the e-book version, although retailers
often discounted both. To encourage
adoption of its Kindle e-reader Amazon sold many titles below
their wholesale cost. Some publishers
lowered their e-book cover prices relative to their print price for
the same book when they attempted to
implement the agency model. With the agency model the
publisher established the selling price and the e-
tailer negotiated for a set percentage of that price (usually 30
per cent). Even though the agency model was
eventually disallowed by the Department of Justice many
publishers continued with the practice of
suggesting a lower retail price for the e-book format of the same
book. Harlequin had never adopted the
agency model although the company did suggest lower (10 per
cent to 15 per cent) retail cover prices for
the same title in e-book format.
For legacy reasons authors’ royalties on print books were a
percentage of the cover (suggested retail) price
– for single titles the percentage varied dramatically by author
but was generally in the 8 per cent to 15 per
cent range; for series the percentage was a more standard 8 per
cent to 10 per cent. For e-books authors’
royalties were a percentage of the publishers’ net receipts (i.e.,

wholesale revenue); generally between 20
per cent and 25 per cent.
With e-books, publishers had no printing costs, no returns, and
no distribution or freight expenses to worry
about. However, publishers still had fixed costs for author
management, editing, marketing and digital
warehousing. E-books eliminated the need to estimate print runs
per title, thereby eliminating the problem
of lost revenues resulting from stock-outs of print copies, or,
conversely, of being overstocked and
returning unsold copies for full credit. Because of the radically
different costs and risks involved, many
traditional publishers, including Harlequin, developed digital-
only offerings; that is, imprints available as
e-books only. Because the economics of the two types of
publishing were so different, e-books held the
potential to radically realign the industry.
Distribution of E-Books
Amazon was a major player in the distribution of both printed
books and e-books, accounting for 29 per
cent of the entire industry’s sales in the first quarter of 2013.
But, as shown in Exhibit 9, Amazon stood
out as the dominant distributor of e-books.
In part, Amazon’s dominance in e-book sales was attributable to
its dominance in e-readers, with about
50 per cent of the installed base. Barnes & Noble, with its
Nook e-reader, also stood as a noteworthy
player in e-books, with just over 20 per cent of sales and about
15 per cent of e-readers. Walmart,
once a dominant bookseller due to its many points of sale, was
not a factor in the e-book market. Sony

and Kobo offered e-bookstore websites largely in an attempt to
support their e-readers, but they were
very small players. The rest of the market was largely
fragmented, with no single player accounting
for more than one per cent of the industry’s sales. From its
very inception, Amazon had caused
problems for traditional book publishers, most notably by
pricing books well below the cover
(suggested retail-selling) price.
The consolidation of distribution power in the hands of a
powerful player, Amazon, had sparked
industry consolidation amongst the traditional publishers, most
recently with Penguin and Random
House merging their operations in an attempt to build scale.
Some publishers had also attempted to
develop alternative channels for the distribution of e-books by
working with Apple’s iBooks; however
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9B14M027
this effort, with its agency pricing model, ran afoul of
regulators in 2012 when the U.S. Department of
Justice secured a court ruling that found Apple had colluded
with the five major publishers
(HarperCollins, Hachette, Simon & Schuster, Penguin Random
House, and Macmillan) to organize a
price-fixing scheme.
Several recent startups were experimenting with the Netflix
subscription/streaming model for the
distribution of e-books.11 Sproutkin was targeted at the
children’s market ($24.99 per month),12 as
was Amazon Kindle Free-Time ($4.99 per month with and
Amazon Prime subscription).13 Other start-
ups like Oyster14 offered broader libraries and an “all-you-can-
read” model; for a monthly subscription
fee the customer had access to the entire library. Because these
services had to pay the publisher the
full wholesale price of each book streamed to their customers
the economic viability of this model was
questioned by some observers. These services also competed
with public libraries that purchased
copies of e-books and lent them (electronically one at a time) to
their members, often at little or no
cost.
The e-book phenomenon affected not only the downstream
distribution part of the business but also the
publisher’s relationships with their authors. No longer did an
author need to convince a publisher to
print and publish their book. Of course, vanity presses had
always existed, where the author paid for

the production and printing of their own book, but while vanity
press authors achieved the goal of
seeing their work in print, rarely did these self-published books
sell enough copies to recoup the setup
and production costs. With the digital revolution, self-
publishing became economical, easy and
increasingly popular. It provided a publishing pathway that did
not require a traditional publisher. The
barriers to becoming a published e-book author were minimal.
Self-Publishing and E-Publishing
Web-based providers, like Lulu.com15 and Createspace16
(owned by Amazon), provided authors with
different self-publishing services to create, lay out and format a
digital version of their book. Once created,
the book could be distributed in digital format on sites like
Kindle Direct Publishing17 and Smashwords.
These sites usually did not charge for listing the book, but they
did take a portion of the selling price, and
they did charge for value-added services (e.g., cover art,
editing, etc.). Most of these “publishers” had
print-on-demand capability and could provide buyers with either
digital or print versions. Print books cost
$13.99 and up per book, and e-books sold in the $.99 to $5.99
range.18
While self-publishing allowed anyone to become published, it
created a problem for prospective
consumers: that is, how to identify a quality book consistent
with their reading interests. Separating the
wheat from the chaff posed a monumental problem when there
was so much chaff. To address this
problem, sites that distributed self-published books allowed
readers to add online recommendations,

ratings and reviews of the books they had read. Authors could
also pay a fee to submit their work for
11 www.publishingtechnology.com/2013/03/five-contenders-
for-the-netflix-for-books-crown-line-up/
12 www.sproutkin.com/
13
www.amazon.com/gp/help/customer/display.html?nodeId=20124
0110
14 www.oysterbooks.com/
15 www.lulu.com/, accessed December 2, 2013.
16 www.createspace.com/, accessed December 2, 2013.
17 https://kdp.amazon.com/self-publishing/, accessed December
2, 2013.
18 D. Carnov, “Self-publishing a book: 25 things you need to
know,” CNET Review, June 13, 2013, accessed December 2,
2013
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14

9B14M027
third-party reviews.19 In an attempt to gain some recognition,
many self-published authors promoted their
own book on social networks and in the blog-o-sphere.
Self-publishing remained in its infancy, truly self-published e-
books currently accounted for only 1.1 per
cent of new book units and 0.7 per cent of new book
revenues.20 Stephen King, the well-known and
prolific horror story author, tried self-publishing a few of his
books but reverted to using a traditional
publisher. Although accomplished authors did not necessarily
need the editorial or promotional value-add
that was provided by traditional publishers, they did need a
traditional publisher to harness a broad
physical distribution network and point-of-sale prominence for
the print version for their latest book.
Traditional publishers also helped to garner positive reviews
and create “buzz.” Importantly, authors also
receive advances on royalties from publishers.
E-book sales had increased across all genres, especially
romance fiction. However, some recent
research had suggested that e-books’ popularity might be
slowing — after several years of rapid rises
— perhaps because there was still a majority of readers of all
ages who preferred a physical copy of a
book.
E-BOOKS AND HARLEQUIN’S FUTURE
As Mohsen completed her review of e-books, she turned her

attention to Harlequin’s recent performance.
As shown in Table 4, Harlequin’s overall sales had remained
essentially flat since 2000; however, there
had been a significant shift from series to single-title. In 2000,
series writing represented more than 80 per
cent of unit sales and 75 per cent of Harlequin’s revenues.
Revenues from its single-title business had
doubled from 2000 to 2012. By 2012, single titles accounted
for roughly 40 per cent of units and almost
45 per cent of revenues.
Exhibit10 compares Harlequin’s business models for its book
series offerings, its single-title books, and its
e-books. Harlequin was aware that a significant transition had
occurred in its physical book businesses as
digital formats had gained momentum, and Mohsen pondered
what opportunities and threats e-books posed
for Harlequin’s business. Could this trend help to reinvigorate
the series business? How would it change
Harlequin’s relationship with authors and with distributors,
especially Amazon? Was “digital first” a
strategy that Harlequin should pursue more aggressively?
Would e-books reach a tipping point, making
self-publishing attractive to established authors? Mohsen
focused on these questions as she thought about
her upcoming presentation to Harlequin’s management team.

19 www.publishersweekly.com/pw/diy/, accessed December 2,
2013.
20 Bowker data from 2011.
Year 2000 2002 2004 2006 2008 2009 2010 2011 2012
437,000 440,000 450,000 450,000 422,000
EBITDA 60,000 76,800 59,500 55,000 67,400 76,300
80,000 84,400 76,800
5,000 4,000 4,000 3,700 4,100
71,900 76,000 80,700 72,700
Margin % 12.4% 16.0% 12.9% 11.6% 14.3% 16.3% 16.9%
17.9% 17.2%
The Ivey Business School gratefully acknowledges the generous
support of Pierre Lapointe in the
development of this case.
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15
Page 12 9B14M027
EXHIBIT 1: E-BOOK PENETRATION BY GENRE (U.S. –
ADULT FICTION GENRE)
Source: Bowler Q4 2012 custom report prepared for Harlequin.
(top bar)
(bottom bar)
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Page 13 9B14M027
EXHIBIT 2: HARLEQUIN AND AMAZON E-BOOK
WEBPAGES
Source: Company files.
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9B14M027
EXHIBIT 2 (CONTINUED)
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Page 15 9B14M027

EXHIBIT 3: U.S. BOOKSTORE SALES*
* Note: these figures are for total sales in U.S. bookstores and
may include sales of items other than books (for example
home décor, gifts, toys, stationery).
Source:
www.census.gov/econ/currentdata/dbsearch?program=MRTS&st
artYear=2010&endYear=2013&categories=
451211&dataType=SM&geoLevel=US&notAdjusted=1&submit
=GET+DATA; accessed December 2, 2013
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19

9B14M027
EXHIBIT 4: U.S. TRADE BOOK AND E-BOOK SALES
(VALUE)
Note: “Ext.” is Extrapolated data from BookStats.
EXHIBIT 5: ESTIMATED SHARE OF E-BOOK READINGS,
BY DEVICE
Source: Bowker Market Research as quoted in
www.publishersweekly.com/pw/by-
topic/digital/devices/article/54705-kindle-
share-of-e-book-reading-at-55.html.
e Re ade rs Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012
Desktop/Laptop PC Only 10% 10% 5% 6% 6%
Sony Ebook Reader 2 2 1 1 1
Kindle by Amazon 48 47 44 39 37
Kindle Fire 0 0 9 16 18

iPod/iPod Touch/MP3
Device
3 3 2 2 2
Smart Phone 0 0 3 3 3
iPhone 5 4 3 3 3
Nook/NookColor by B&N 15 17 14 14 14
iPad 8 10 9 12 12
Other Device 7 7 8 4 4
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20
Page 17 9B14M027
EXHIBIT 6: COMPARISON OF MAJOR BOOK PUBLISHERS
(reported in U.S.$ millions;

except Harlequin, which is reported in millions of Canadian $ at
2013 exchange rates)
2008 2009 2010 2011 2012
Random House
Revenues 2,414 2,476 2,410 2,256 2,817
eBooks as % of revenues 0.1% 0.9% 7.5% 16.0% 22.0%
eBook sales in $MM 2.9 22.6 180.8 361.6 619.7
EBITDA 192 197 228 239 427
% of revenues 8.0% 8.0% 9.5% 10.6% 15.2%
Pe nguin
Revenues 1,316 1,608 1,636 1,623 1,694
eBooks as % of revenues 0.5% 2.3% 6.0% 12.0% 17.0%
eBook sales in $MM 6.6 37.0 98.2 194.8 287.9
EBITDA 157 159 188 192 184
% of revenues 12.0% 9.9% 11.5% 11.8% 10.9%
Harpe rCollins
Revenues 1,390 1,140 1,270 1,202 1,190
eBooks as % of revenues NA NA NA 11.0% 15.0%
eBook sales in $MM NA NA NA 132.2 178.5
EBITDA 160 17 106 93 86
% of revenues 11.5% 1.5% 8.3% 7.7% 7.2%
Simon & Schuster
Revenues 858 794 791 787 790
e-Books as % of revenue na na na 17% 23%
EBITDA 88 50 68 92 89

% of revenues 10.3% 6.3% 8.6% 11.7% 11.3%
Harlequin
Revenues 437 440 450 450 422
EBITDA 67 76 80 84 77
% of revenues 15.4% 17.3% 17.8% 18.8% 18.2%
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Page 18 9B14M027
EXHIBIT 7: TOTAL U.S. BOOK MARKET SHARE BY
RETAILER, FIRST HALF OF 2012
Amazon 27%
Barnes & Noble (and B&N.com) 16%
Audio e-book websites 6%

Other e-commerce 6%
Independent bookstores 6%
Resale and thrift 5%
Walmart 4%
Warehouse clubs (e.g., Costco) 3%
Target 2%
Books-a-million 1%
Supermarket and grocery 1%
All other channels 23%
Source: http://publishingunleashed.com/2013/01/11/book-vs-
ebook-sales/.
EXHIBIT 8: COMPARATIVE ECONOMICS PRINT VERSUS
E-BOOK
Major Single Title
Hard Cover - print e-Book
Cover Price (suggested retail) $27.99 $18.99*
Publisher’s Share 49% 70%
Publisher’s Revenue (wholesale
price) $13.72 100% $13.30 100%
Manufacturing Cost ($1.92) 14% minimal
Cost of Returns ($1.37) 10% 0
Author Royalty ($4.20)+ 30% ($3.33)^ 25%
Distribution ($0.76) 5.5% 0
Contribution to fixed costs $5.47 40% $8.40 75%

Source: Case writer estimates based upon
http://glossi.com/Goodereader/31339-good-e-reader-magazine-
july-2013
Series Romance Fiction
Paperback eBook
Retail Price (suggested) $5.25 $4.99
Publisher’s Share 50% 50%
Publisher’s Revenue
(wholesale price)
$2.63 100% $2.50 100%
Manufacturing Cost ($0.45) 17% minimal
Cost of Returns ($0.55) 21% 0
Royalty ($0.53)+ 20% ($0.60)
^ 20%
Distribution (variable) ($0.20) 8% 0
Contribution to fixed costs $0.90 34% $2.40 80%
* Typical of agency model pricing.
+ author royalties based upon percentage of (suggested) retail
cover price.
^ author royalties based upon percentage of net receipts to
publisher (i.e., wholesale price).
Source: Case writer’s estimates.
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Page 19 9B14M027
EXHIBIT 9: U.S. E-BOOK SALES BY SELLER, FIRST HALF
OF 2012
Seller Share URL
Amazon 62% http://www.amazon.com/books
Barnes & Noble 22% http://www.barnesandnoble.com/
Apple iBooks 10% accessible through iBooks app
Sony 2% https://ebookstore.sony.com/
Kobo 1% http://store.kobobooks.com/
Google and others ~3%
Source: http://publishingunleashed.com/2013/01/11/book-vs-
ebook-sales/, accessed December 2, 2013.

EXHIBIT 10: COMPARING HARLEQUIN’S SERIES, SINGLE
TITLE AND E-BOOKS BUSINESS
MODELS
Source: Case writer’s estimates.
Se rie s Single -title e Books
Editorial
Emphasizes
consistency within
established
guidelines
Requires separate
judgment on potential
consumer demand for
each manuscript
More leeway to accept
books outside of
established guidelines
due to a wide variety of
imprints
Rights
Uses standardized
contract
Can be a complex
process, involving
subrights, hard/soft

deals, advances and
tying up authors for
future books
Digital royalties are
higher
Author
Management
Less dependent on
specific authors
Vulnerable to key authors
changing publisher
Very vulnerable to key
authors changing
publisher, if key authors
believe they can self-
distribute
Production
Uses consistent
format with focus
on efficiency
Emphasizes package,
size and format — cost
control secondary; can
be published first in hard
or soft cover depending
on popularity of author
Only restrictions are
issues specific to

eReader formats (colour
or no colour, for example)
Marketing
Builds the
imprint/series
Builds each title/author
May rely more on online
reviews to drive sales
Supermarkets,
drugstores, mass
merchandisers, big-
box bookstores.
Bookstores (all types) Online bookstores
Large direct mail
Book clubs and mass
merchandisers
Direct to consumer over
websites
Selling
Emphasizes
servicing, rack
placement, and
order regulation
Cover, in-store
placement, critical
reviews, special
promotional tactics (e.g.,

author signings)
Online reviews in
additional to offline
advertising
Order
Regulation/
Information
Systems
Utilizes very
sophisticated
shipping and
returns handling
procedures
Historically has not
received much attention,
and hence, is not as
sophisticated
No restrictions on number
of copies
Distribution
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23
NOTICE REGARDING COPYRIGHT
This custom course package contains intellectual property that
is protected by copyright law. It is illegal
to copy the material within this package without the written
consent of the holder(s) of the copyright.
This material has been copied under licence from Access
Copyright or the copyright owner. Resale or
further copying of anything in this package is strictly
prohibited.
Unless otherwise stated, Copyright © Richard Ivey School of
Business Foundation.
www.iveycases.com
Principles of ManagementHarlequin Enterprises: Assessing e-
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