IDW Media Holdings, Inc. reported lower sales and profits in its fiscal Q3 ended July 31, 2017, while gearing up its Entertainment division behind three TV shows. Overall sales for the company were down 5% from the previous year period to $16.7 million for the quarter; expenses were up 9%, and net income was down 91% for the quarter, to $143,000, vs. a $1.6 million profit in the same quarter a year ago.
Publishing and Games sales were both down, by $751,000 and $311,000, respectively. Two main causes were cited for the reduction in publishing sales. First was “industry cyclical downward pressure driven by market leaders” (translation: Marvel’s not doing well and it’s hurting store traffic and our sales, see “Ouch! Comics Down Over 20% in Comic Stores in August”). And the second reason cited was disruption caused by the switch for book channel distribution from Diamond Book Distributors to Penguin Random House Publisher Services (which not only affected sales, but also brought back returns, for an explanation, see “ICv2 Interview: IDW Publishing President and COO Greg Goldstein, Part 1”).
The decline in game sales was due to a tough comparable period in 2016, which had a specialty game order, and timing of releases.
Driving higher expenses for the publishing division were greater use of domestic printers, higher printing costs, product mix, and increases in stock-based compensation.
The revenue declines and expense increases combined to produce a swing of $1.5 million in net profit for the division, from a $367,000 profit in the year ago quarter to a $1.1 million loss in the 2017 period.
The fact that IDW is a public company and small enough so that its comics and game publishing sales are visible provides a rare window into the business of publishing. The comic store market is struggling right now behind weak sales by the market leader, and that’s having an impact on smaller publishers that is unlikely to be limited to the one public company that reports its comics sales. While there are unique factors that applied only to IDW (its book distribution switch, changes in printing costs, and increases in non-cash compensation), there are also market forces at work that have an impact on all publishers.
The company pointed to positive trends for the division in the statement released with the financial report, with disruption to to the book channel disruption expected to give way to sales improvements, and stronger releases in the pipe for the next quarter.
IDW’s CTM division had a decline in sales and profits vs. the previous year period, but was still the most profitable division, with a $1.1 million profit for the quarter. Sales and profitability trends are expected to turn around in the next fiscal year, the company said.
On the IDW Entertainment side, sales were up due to higher fees for the second season of Wynonna Earp and timing of delivery of episodes. Costs were up as well, with a modest decline of $187,000 in net profit for the division.
But this is where IDW is really starting to make hay, with three TV series now in some stage of production. “The reviews and consumer demand for IDW Entertainment’s programs has been fantastic as evidenced by the fan support and renewal of Wynonna Earp for a third season, the renewal of Dirk Gently for a second season, and the current production of Locke and Key,” IDW CEO Ted Adams said in a statement released with the financials. Hulu ordered a pilot for Locke and Key, which is now casting (see “Late August Geek TV Roundup”), and IDW says it believes the series has “breakout potential.”