Wednesday, October 15, 1997

10/15/97: ReedElsevier, Bertelsmann, Readers Digest, WoltersKluwer,

Reed Elsevier to Acquire Wolters Kluwe
Bertelsmann Reports Earnings
Yet Another Afternoon Newspaper Bites the Dust
Readers Digest Problems Continue
L.A. Daily News on the Selling Block
NYT Sells More Magazines
Britannica Online to Offer Free Content
International Data Corporation Reports Exploding Internet Activity
Breakthrough Will Bring Internet to The Home via Power Wires
School text books
Recent News:

Reed Elsevier to Acquire Wolters Kluwer
Reed and Wolters Kluwer announced Tuesday that they would merge creating an $8.1Bill global publisher concentrating on professional and trade journal publishing. Reed owns Lexis-Nexis, Reed Travel Group (including OAG) and is the largest worldwide publisher of academic journals. Wolters Kluwer dominates legal and tax publishing in Europe and is based in the Netherlands. In 1996 Reed Elsevier reported sales and income of $5.42Bill and $1.2Bill and Wolters Kluwer reported sales and net income of $2.7Bill and $429MM. Analysts suggest the combined company will be in a strong position to share the costs of moving to electronic publishing away from paper.

Bertelsmann Reports Earnings:
Sales increased year on year to $12.8Bill (4.2% increase) and net income was $582MM. Bertelsmann is the third of the large media firms after Time Warner and Disney but is much less geared - debt represents less that 5% of turnover versus TM and Disney of 97% and 62% respectively. Books (WW) constituted $4.1Bill in sales and were the second largest group after Music. Of this amount the US represented (only) $1Bill in sales. According to reports Bertelsmann is actively looking for a publishing acquisition in the US. (A number of companies have been mentioned and John Wileys chairman recently sent an internal memo to employees stating that Wiley was definitely not for sale). Due to their deal with AOL, Bertelsmann are the European on-line leader - they have a 50-50 partnership with AOL.

Yet Another Afternoon Newspaper Bites the Dust:
E.W. Scripps recently announced that it has been forced to discontinue a local afternoon newspaper The El Paso Herald-Post due to rapidly decreasing sales. Scripps publishes the Herald-Post, whose last edition goes out Saturday, in cooperation with Gannett Co., which owns the related daily The El Paso Times, and leads promotion and distribution for both newspapers. The El Paso Times will not be affected by this decision.
Cowles Business Media: MediaCentral 10/7/97

Readers Digest Problems Continue:
The Reader's Digest Association Inc. recently said that it expects to report a loss of $.05 to $.10 per share for its fiscal 1998 first quarter ended Sept. 30, lower than analysts' estimates. Reader's Digest also expects lower than expected revenues. The publisher cited lower than anticipated expected response to promotional mailings in most major markets. The financial report, to be released on Oct. 29, will include non-recurring charges of approximately $70 million. In the fourth quarter ended June 19, the company reported a net loss of $22.8 million or $.22 per share.
Cowles Business Media: MediaCentral 10/7/97

L.A. Daily News on the Selling Block:
Reuters reported that the merger and acquisition firm Dirks, Van Essen & Associates of Santa Fe, NM, has been retained to handle the sale of The Los Angeles Daily News which was acquired in 1985 for $176 million from the Tribune Co. Observers expect the sale can fetch as much as $200 million to $250 million.

The daily has a circulation of 203,000 weekdays and 218,000 on Sundays. Prospective buyers include Rupert Murdoch's News Corp., Denver Post parent MediaNews Group, Orange County Register parent Freedom Communications and Toronto-based publisher Thomson Corp.
Cowles Business Media: MediaDaily 10/6/97

NYT Sells More Magazines:
The New York Times Co. will sell six sports magazines to Miller Publishing. The titles involved are Tennis, Tennis Buyer's Guide, Cruising World, Sailing World, Snow Country and Snow Country Business. The transaction is expected to be completed by year end. The Los Angeles-based purchaser is a partnership between private equity investment firm of Freeman Spogli & Co. Inc. and Robert L. Miller, the group's president and a former Time Inc. executive.

On-line/New Media News:

Britannica Online to Offer Free Content
Encyclopedia Britannica Inc., whose core online product is subscription-based Web service Britannica Online, launched the latest in its series of Spotlights, its free quarterly Web sites dedicated to a particular, timely topic. In honor of the Nobel awards this month, the Nobel Prize Web site illuminates in text and multimedia clips of past winners and the innovations and efforts singled out to receive the world's most prestigious awards.

Through the free in-depth coverage of historical and current issues, EB hopes to lure subscribers to Britannica Online (, which presently claims 10,000 users. The big deterrent, company research found, was the relatively high cost for Web-based material, for which until just weeks ago an annual subscription cost $150 or $12.50 per month. In response on On Sept. 15, the service slashed its prices to $8.50 per month and has seen subscription rates rise by 10%.
Cowles Business Media: MediaCentral 10/7/97

International Data Corporation Reports Exploding Internet Activity:
Research presented at the recent Internet 98 Conference in Burlingame, Calif. by IDC, a Framingham, Mass. Based market research firm, indicates there are currently 53.2MM Internet users worldwide with 44.2MM of those using the World Wide Web. (About 9MM people use e-mail but not the Web.)

At the current rate of growth, IDC projects that there will be 60MM Internet users and 50MM World Wide Web users by Dec. 31 which represents an increase of more than 26MM Internet users and 22.4MM World Wide Web users since 1996.

According to the study more than $10Bil in goods and services are expected to be purchased on the WWW by the end of 1997. IDC estimated that 2/3 of this amount was generated by corporations using the Internet as an effective method for ordering and paying for products and services. (Companies like Cisco Systems and GE use the internet extensively for this purpose). There may be close to 1MM Internet transactions occurring each day on the Internet. ( for more information).

Breakthrough Will Bring Internet to The Home via Power Wires:
The London Times reported recently that two companies, Northern Telecom and Norweb Communications, have found the "holy grail" of telecommunications ­ the ability to send vast amounts of data along power lines without its being distorted by interference. In future, every home in the country (UK) could be connected to the Internet in this way, providing increasing competition for telephone companies, especially BT.

Norweb intends to offer a commercial trial to 2,000 homes in the North West next spring. The two companies said yesterday that their service could offer an Internet connection 20 to 30 times faster than commonly available through today's telephone modems and that the cost would be lower by up to 50 per cent.

BT said last night it did not believe its business would be effected. Strong content, BT said, was the key to success on the Internet.

Did You Know....

Texas, facing the potential cost of $1.6Bill for school text books over the next six years is reviewing the possibility of buying laptop computers with CD ROM drives as an alternative to printed texts. The cost of acquiring texts for the 2000-2001 (two year period) is expected to roughly double what the cost was for 1996-1997 ($360MM vs. $600MM). Trials are currently underway in some MA school districts using computers rather than texts and information via inter/intranet is transmitted to each laptop via infra-red nodes in the ceiling of each classroom. Naturally, the computers are designed to be pretty hardy.

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