Ann asked industry analyst Sami Kassab to comment on the report. He points out that, unlike Elsevier, Wiley reports the "direct contribution to profit" of its divisions. In other words, Elsevier allocates indirect costs to its divisions before reporting their profit, but Wiley does not. This makes their divisions appear more profitable than they really are, and makes comparisons among publishers more difficult.
Sami estimates Wiley's "comparable profit margin is closer to 28-30%. Informa and Elsevier are on c. 35%." as against my estimate of 41%. Using Sam's estimate would make Wiley's net profit about $198M and the proportion of subscriptions that flow to the shareholders about 20%.
Two points should be made about this correction. It is only an $80M change in a $1500M number, or 5%, which is well within the margin of error. But, more importantly, it emphasizes that companies have many ways of massaging the picture their accounts paint of their operations. It is true that the way Wiley reports conveys less information than the way Elsevier and others do. But Elsevier and others can also obscure information, for example by adjusting the prices their divisions charge each other for services. Increasing the price makes the selling division look more and the buying division less profitable.
Sami also puts the academic publishing giants profitability in a broader perspective. He says:
"legal publishing (Westlaw and LexisNexis) operate on lower operating profit margins (c. 25-30% for West and 15-20% for LexisNexis), financial information (Reuters, Bloomberg) are on around 20%, educational publishing (i.e school textbooks and college textbooks) operates on c. 10-15% for school and 20-25% for college textbooks. Within Media, the marketing services industry (Omnicom, Interpublic, Publicis, WPP) generates 12-17%. Newspapers (when not dead) tend to generate 10-15% operating profit margins. TV Broadcasting is on 10-15%.
Google operates on similar operating profit margins at 30-35%. The only Media segment that I know off with higher margins is the Yellow Pages industry with 45-50% but rapidly declining."