Harlequin Enterprises Limited

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Harlequin Enterprises Limited

225 Duncan Mill Road, Fourth Floor
Toronto, Ontario M3B 3K9
Canada
Telephone: (416) 445-5860
Fax: (416) 448-7191
Web site: http://www.eharlequin.com

Wholly Owned Subsidiary of Torstar Corporation
Incorporated: 1949
Employees: 300
Sales: C$583 million (2001 est.)
NAIC: 511130 Book Publishers

Harlequin Enterprises Limited is the world’s largest publisher of romance fiction, a market segment reckoned to account for half of all mass market paperbacks purchased. Harlequin, which works with some 1,000 authors, produced 150 million books in 2001, or one every five seconds. It introduces 80 new titles a month that are translated into 25 languages for sale in 94 international markets. Harlequin’s mail-order division sends out one million books a month in North America.

The company redefined the romance category (the company prefers to view itself as “a leading global publisher of women’s fiction,” of which series romance forms a “major part”) by applying branding techniques to paperback novels and distributing them in supermarkets. Women, who spend more time reading than men, have always made up Harlequin’s traditional audience. A number have confessed to the influence of these novels on their career choices; many were inspired by the doctor-nurse romances of the 1950s to enter the medical profession; more recently, others, including Harlequin President Donna Hayes, have followed more modern heroines into the field of business.

Intrepid Origins

Richard Bonny castle, born in 1903, began his career as a lawyer but soon switched to a more intrepid existence as a fur trader for the Hudson Bay Company. After 20 years, he went to work for Winnipeg’s Advocate Printers, a branch of Toronto’s Bryant Press.

Harlequin was founded in 1949 as a way to keep the presses busy at his new place of employment by entering the burgeoning paperback business. Jack Palmer, head of Canadian operations for the influential Curtis Circulating (distributor for the Saturday Evening Post and Ladies’ Home Journal ); Doug Weld of Bryant Press; and Advocate Printers were the owners of the new enterprise. Palmer handled the marketing, Bonnycastle the production.

Harlequin’s first book, The Manatee, by U.S. author Nancy Bruff, was introduced in 1949 and sold for 50 cents. In the beginning, Harlequin typically acquired rights from other publishers, but a few original books were published as well, including a history of the British monarchy written by future Globe and Mail editor Richard J. Doyle. Westerns and mysteries, some quite sensationalistic, made up most of the output, however.

The first few years saw significant sales, but returns and taxes eradicated all profits. Bonnycastle received Palmer’s 25 percent interest in the company upon his death in the mid-1950s. With the business apparently facing ruin, Weld also gave his stock to Bonnycastle, who in turn transferred it to his invaluable secretary, Ruth Palmour. Another important woman in the operation was Bonnycastle’s wife, Mary, who began proofreading books at home as Harlequin’s first editor.

In the 1950s, Harlequin came to be identified with romances set in medical settings in particular. In the late 1950s, Harlequin began a relationship with a leading British publisher identified with the genre, Mills & Boon, Limited. It was romance novels that sold best, and the company began to focus on them exclusively in 1964.

Big Business in the 1970s

Richard Bonnycastle, Jr., son of the founder, is credited with turning the little press into a big business. He relocated Harlequin to Toronto in 1969. Two years later, when sales were C$7.9 million a year, he named Lawrence Heisey as Harlequin’s president.

Formerly a marketer for Procter & Gamble, Heisey is considered responsible for bringing paperbacks beyond bookstores and into supermarkets, drugstores, and other unorthodox outlets. Sales boomed as a result. In one promotion, Harlequin bundled free copies of The Honey Is Bitter with Ajax cleanser and Kotex feminine napkins. The novels themselves were standardized at 192 pages each—in order to minimize waste of printing paper and shelf space—and branded like commodities.

Harlequin acquired Mills & Boon in 1971. It had been established in London in 1908 by Gerald Mills and Charles Boon. Between the two world wars, the firm began to specialize in romantic fiction. Alan and John Boon, sons of the founder, developed the niche publisher into one of Britain’s most successful in the industry.

In late 1975, Toronto Star Ltd. (renamed Torstar Corporation in 1977) acquired a 52.5 percent interest in Harlequin Enterprises Ltd. for $30.6 million. Harlequin itself soon acquired a 50 percent interest in Cora Verlag, the West German publisher that translated its titles.

Harlequin accounted for 10 percent of paperback sales in North America in the late 1970s. Its proposed takeover of Los Angeles-based Pinnacle Books, Inc., another mass market paperback publisher, was blocked by the U.S. Justice Department on antitrust grounds, although Pinnacle specialized in thrillers, not romances.

In 1980, Harlequin Enterprises did acquire the mail-order division of the Miles Kimball Company, a Wisconsin company that had been in business since 1934. Torstar acquired Harlequin’s remaining shares in 1981, making it a wholly owned subsidiary.

Booming in the 1980s

Heisey was named chairman of Harlequin in 1982. David Galloway, an executive at Torstar and its future CEO, also held executive positions at Harlequin in the 1980s.

Harlequin did receive Justice Department approval to buy its largest rival, Silhouette Books, from Simon & Schuster Inc. in 1984. The acquisition returned Harlequin to undisputed leadership of the romance novel category in the United States, with a greater than 80 percent share of the $275 million a year market. Harlequin paid $10 million for Silhouette, plus an additional amount based on earnings. As part of the deal, Simon & Schuster again began distributing Harlequin books in the United States, an arrangement that had existed before 1979. Silhouette remained in existence as a separate imprint.

The early 1980s were boom years for the business. Publishers spent heavily to promote their wares, but many withdrew from the market when they failed to find profits. Harlequin’s unit sales consisted of 203 million books in 1985. By 1986, Harlequin Enterprises was selling 250 million novels a year. They were translated into 15 languages and sold in 99 countries.

Harlequin had produced an adaptation of Leopard in the Snow for television in the late 1970s. It was not considered a success. The company revisited the medium in the mid-1980s, lending its name, but not development capital, to a new production. A film version of Love with a Perfect Stranger premiered on Showtime/The Movie Channel in October 1986. It was produced by Yorkshire Television of Britain and Atlantic Video Ventures, a subsidiary of the Atlantic Entertainment Group.

The content of the stories reflected changes in women’s roles, and Harlequin introduced new series of books to capture different segments of the evolving female audience. Harlequin launched a new line of U.S.-based romances in 1983. The “Temptation” line, a more explicit series aimed at younger women, was introduced in 1984. A romantic suspense line was also unveiled. More assertive women and more sensitive men were the order of the day. Still, the 1980s were the decade of the (literally) bodice-ripping book covers. Zodiac-laced Starsign Romances came out in April 1991.

In 1989, Harlequin had revenues of C$327 million and an operating profit of C$56 million—a large chunk of parent company Torstar’s C$149 million operating profit. Most of the sales—191 million books in all—occurred outside Canada: the books were distributed in more than 100 countries and translated into 19 languages. It published more than 60 titles a month. Harlequin had a stable of 600 authors in North America, and another 350 who reported to the London office; most wrote part-time.

Going Global in the 1990s

Harlequin’s operating profit rose to C$64.4 million in 1990 while Torstar’s slipped to C$104 million. “Women around the world do not appear to know that we are in a recession,” Torstar President David Galloway told the Financial Post. Harlequin was then planning to launch a monthly magazine. Heisey retired as chairman in June of that year.

In 1992, Harlequin announced plans to buy Zebra Books, one of its more spirited competitors; however, the deal was not completed. Zebra was a mass market paperback publisher based in New York known for its innovative marketing techniques, such as putting foil and holograms on book covers. Founded in 1974, Zebra had annual sales of more than $40 million and published 400 titles a year in historical romance, true crime, action adventure, and Western lines.

In Britain and Australia, Harlequin titles were published under the Mills & Boon imprint. The company’s modus operandi in foreign markets was to team with an established partner, such as Germany’s Axel Springer Verlag, France’s Hachette, and Italy’s Mondadori. As the Iron Curtain began to come down, Eastern Europe was found wanting a romantic escape. Harlequin gave away thousands of books to East Germans visiting West Germany in 1990. It began sales to Czechoslovakia and Bulgaria in 1992; sales to Poland and Hungary soon followed.

Company Perspectives:

Harlequin creates entertaining and enriching experiences for women to enjoy, t share and to return to.

Japan, which bought 14 million books in 1992, was its fastest-growing market. Stories set in the Rockies were especially popular there. Harlequin soon worked out a distribution deal with German media giant Bertelsmann A.G. and Denmark’s Egmont to create a distribution system in Russia. After Taiwan agreed to international copyright standards in 1992, Harlequin was able to tackle the large existing bootleg problem there. The year 1992 was Harlequin’s best yet—205 million books were sold, for an operating profit of C$61.8 million on revenues of C$417.9 million.

In 1993, Alliance Communications, a leading Canadian TV production and distribution company, acquired the international TV and video rights to Harlequin’s 16,000 titles. CBS was the first to broadcast the resulting productions, beginning with “Treacherous Beauties” in late September 1994. CBS had recently been outbid for NFL football rights by Fox, and was shifting its Sunday afternoon efforts toward a female audience.

Revenue was C$485 million in 1995. Harlequin was selling about 180 million books a year in the mid-1990s. However, romance sales were not meeting expectations in new markets such as China and Eastern Europe. The company had already added an entirely new line of business in what it expected to be a growth market.

The Children’s Supplementary Educational Publishing (CSEP) division was created in 1993, inspired by Harlequin CEO Brian Hickey’s difficulty in finding materials to help his son at school. Three years later, Harlequin acquired Tom Snyder Productions Inc., a leading producer of educational materials for schools, for $24 million. Other acquisitions in this area included Los Angeles-based Frank Schaffer Publications Inc., Warren Publishing House of Washington state, and New Hampshire’s Delta Education. CSEP had revenues of C$55 million in 1996, mostly from teacher’s stores, and had 500 employees. Torstar sold this division off in late 1998.

New Lines for the New Millennium

After two years of planning, Harlequin released a new line of “inspirational romances” in September 1998 under the Steeple Hill imprint. These were aimed at the Christian or “traditional values” reader, a fast-growing niche audience. The contents reflected a longing to return to simpler times, said Harlequin Vice-President of Public Relations Katherine Orr. By the end of the 1990s, Harlequin had 13 distinct product lines differentiated by, according to Orr, the “level of sensuality.”

Harlequin partnered with Women.com when it first established an online presence with two web sites, Romance.net and eHarlequin.com. However, in late 2000, it broke off its relationship with San Francisco-based Women.com in order to host its web sites at the Toronto offices of Onyx Software Corp. Romance.net, a simple online sales site launched in 1996, was replaced by eHarlequin.com, a community-oriented, membership-based site for women, in the spring of 2000. Local sites based on the eHarlequin concept were launched for Australia, France, Germany, Holland, Italy, Japan, Spain, and the United Kingdom in 2001. In early 2002, eHarlequin.com merged with the Direct Marketing division to form the Direct-to-Consumer Group.

Donna Hayes became Harlequin’s first female president and publisher in the spring of 2001. An honors English literature and communications graduate of McGill University with customer service experience at Doubleday Canada, Hayes was also the first Harlequin president to have made publishing the basis for an entire career. Her own entry into business was inspired by a Harlequin romance she read in seventh grade. She first joined Harlequin in 1985, working on the company’s book clubs, which account for one-third of sales.

A spinoff of the Temptation series, the Blaze line that debuted in August 2001, stepped up the sensuality factor. In the fall, Harlequin brought out a line of books under the Red Dress Ink imprint. These, inspired by the success of Bridget Jones’s Diary (Penguin Putnam) and others, followed the adventures of young urban women looking for love. Unlike all the Harlequin books that preceded them, these world-wise dramas left open the possibility of the heroine not finding lasting love at the end. In Japan, a soap opera based on the Harlequin novel Turning Red by Erica Spindler was in the works.

Principal Subsidiaries

Harlequin Australia; Harlequin France (50%); Harlequin Germany; Harlequin Greece; Harlequin Holland; Harlequin Hungary; Harlequin Italy; Harlequin Japan; Harlequin Mills & Boon U.K.; Harlequin Poland; Harlequin Scandinavia; Harlequin Spain.

Principal Divisions

Creativity Division; Direct-to-Consumer Group; Overseas; Retail—North America.

Principal Operating Units

Gold Eagle; Harlequin; MIRA; Silhouette; Steeple Hill; Red Dress Ink; Worldwide Mystery.

Key Dates:

1908:: Mills & Boon is founded in London.
1949:: Harlequin is founded in Winnipeg.
1972:: Harlequin acquires Mills & Boon.
1975:: Torstar Corporation acquires majority interest in Harlequin.
1979:: Harlequin cancels U.S. distribution deal with Simon & Schuster.
1981:: Torstar acquires Harlequin’s remaining shares.
1984:: Harlequin buys rival Silhouette from Simon & Schuster, restores former U.S. distribution arrangement.
1990:: Harlequin gives away thousands of books to East Germans visiting West Germany.
1993:: Children’s Supplementary Education Publishing (CSEP) division is created.
1994:: CBS airs Harlequin’s Treacherous Beauties.
1996:: Harlequin establishes an Internet presence with Romance.net.
2000:: eHarlequin.com replaces Romance.net.
2001:: Donna Hayes becomes Harlequin’s first female president and publisher.